On September 14, 2017, the Consumer Financial Protection Bureau (the “CFPB”) issued its first no-action letter (the “No-Action Letter”) concerning the operations of Upstart Network, Inc. (“Upstart”), a FinTech lender that utilizes alternative data in assessing the creditworthiness of prospective customers. While Upstart’s No-Action Letter has narrow applicability, it may serve as a tool for other FinTech lenders in implementing innovative products and services and establishing relationships with banks.
The financial services industry is changing. With innovative technology and business models, FinTech companies have brought an interesting and complex issue center stage. Namely, how will the CFPB seek to regulate these FinTech companies and their innovative operations within the context of rigid consumer financial protection laws. Although the answer is not yet clear, it appears that the CFPB is trying to better understand how FinTech companies operate.
In October 2016, the CFPB issued its final No-Action Letter Policy (the “NAL Policy”). The NAL Policy permits institutions to submit a request to the CFPB to issue a statement that the CFPB has no present intention to recommend initiation of an enforcement or supervisory action against the applicant with respect to a particular product or service’s compliance with specifically identified regulatory requirements. For example, an applicant may seek to obtain assurance from the CFPB that the applicant’s form disclosure otherwise complies with the Truth in Lending Act and Regulation Z.
Continue Reading CFPB’s First No-Action Letter: FinTech Lenders and Banks Take Note