• CFPB Issues First No Action Letter to FinTech Provider
  • November 9, 2017 | Authors: Michele Bresnick Walsh; Robert A. Gaumont; Marjorie A. Corwin; Christopher R. Rahl; Andrew Keith Wichmann
  • Law Firm: Gordon Feinblatt LLC - Baltimore Office
  • Late last year, the Consumer Financial Protection Bureau (CFPB) finalized a process to permit fintech providers and other financial services companies to request input from the CFPB concerning whether a proposed business model or practice would be permissible. The CFPB no action letter initiative is designed to foster innovation so that companies exploring new financial products/services or new delivery methods for financial products/services can get some assurance that the CFPB will not find the proposed conduct objectionable. The first no action letter issued by the CFPB involves an online lending platform for consumers that uses alternative data to determine creditworthiness (along with data supplied by the nationwide consumer reporting agencies). The no action letter confirms that the CFPB does not intend to take enforcement action against the requesting party under the Equal Credit Opportunity Act or its implementing regulation, Regulation B. The no action letter is based only on the facts presented by the requesting party and the use of alternative data as presented by the requesting party in its automated loan decision process. The no action letter expires three years after its issue date (unless the requesting party seeks and obtains a renewal of the no action determination). The no action letter was issued with some strings. It requires the requesting party to provide periodic reports to the CFPB concerning the company’s loan applications, how loans are approved/denied, and how the use of alternative data impacts consumer access to credit. While the no action letter provides some assurance to the requesting party that it is operating in accordance with applicable law (in the eyes of the CFPB), the CFPB’s reporting requirements may make other fintech providers hesitant to initiate similar requests. For more information concerning this topic, please contact Christopher Rahl.