There will likely be changes coming to the Consumer Financial Protection Bureau, as we highlighted in our year-end CFPB review, however, we expect to see continued use of the Regulatory sandbox. The unit launched in late 2019, as a channel for creditors to pre-screen their innovations. Expect to see more action from the Compliance Assistance Sandbox as we get further into 2021, and credit card issuers and industry vendors create innovations that surround recovery, risk, and product expansion. The following are four approved requests affecting credit during 2020, from almost a dozen applications.
Synchrony Bank: The Connecticut based credit card firm is a top provider of private label credit cards (PLCC). The firm recently launched an industry first secured PLCC card. This innovation has to do with the use of a dual feature (DFCC) card that operates as secured credit card. It is structured to shift into a traditional credit card when certain terms are met. As we face the COVID crisis, this is likely to be a winner.
PayActiv: The firm provides early payroll access based on “factored future received wage payments (FFRWP) to accelerate payment delivery in advance of actual salary distribution. As an example, if you work in a restaurant, payday is two weeks away, you might have early access to those funds as the pipeline awaits the paydate. This is a novel approach at a time when every payday counts for some people.
Build Commonwealth: This firm required clarity on the impact of Reg E on an employee savings program, which is an important, subtle nuance. The CFPB state: “The Bureau has considered and grants Commonwealth’s Application, and accordingly issues this CAST Template pursuant to the Bureau’s Policy on the Compliance Assistance Sandbox (Policy).”
Bank of America: This top credit card issuer wanted to ensure compliance for an upcoming product launch. According to the submission, “Balance Assist was designed for Bank of America checking account customers with the goals of (i) providing an affordable banking solution for short term liquidity needs; (ii) providing a streamlined digital only small-dollar credit product; and (iii) expanding consumer access to credit. Consistent with the way Bank of America has developed other consumer products, Balance Assist was developed with input from consumer advocates, other third parties, and our National Community Advisory Council (“Council”).
Consumer credit is constantly innovating and the CFPB’s Compliance Assistance is a good way to keep lenders ahead of product development issues, prior to rollout. As 2020 continues, the will likely be increased industry use.
Overview provided by Brian Riley, Director, Credit Advisory Service at Mercator Advisory Group