The CFPB said in May it would de-emphasize its product development sandbox and no-action letter policy, which the bureau said “proved to be ineffective.” 

Rather than continue to forge protective agreements with individual companies, the CFPB established an Office of Competition and Innovation, which will hold “incubation events” such as sprints, hackathons, tabletop exercises and war games to help entrepreneurs and tech specialists troubleshoot barriers to innovation and share their frustrations with regulators, the bureau said.

Payactiv is not the first company to ask the CFPB to terminate its protective agreement early. Alternative lender Upstart in May asked the bureau to shorten its no-action letter’s term from 24 months to 18 — effectively ending it immediately. The CFPB agreed.

In the same vein, Thursday’s action ends Payactiv’s sandbox order at the 18-month mark. The order, which took effect in December 2020, initially gave Payactiv a two-year safe harbor from liability under the Truth in Lending Act (TILA) and Regulation Z in exchange for good faith compliance with the order’s terms.

In its statement Thursday, the CFPB said it had received requests for clarification over an advisory opinion it issued concerning earned wage access products like the ones Payactiv offers. The CFPB said it intends to give more guidance soon regarding how the definition of “credit” can be applied under TILA and Regulation Z.

The CFPB has also been careful to delineate sandbox agreements from product endorsement. In its order terminating Upstart’s no-action letter, the bureau noted it “has never endorsed Upstart’s model.” 

“There is a risk that the public could misconstrue the [no-action letter] to suggest that the CFPB concluded Upstart’s model complies with the [Equal Credit Opportunity Act],” the bureau wrote in its order, adding that such an assessment would require more analysis.

By Dan Ennis on July 1, 2022
Original link