Just prior to Memorial Day weekend, the Consumer Financial Protection Bureau on May 22 announced two No-Action Letter Templates that will impact small-dollar lending and mortgage modifications. CEI financial policy expert John Berlau explains how the changes will benefit consumers and lenders:
The CFPB’s no-action letters issued on May 22 are a win for both innovative firms and consumers, as they will enable new financial products and services to help Americans through troubled times.
The no-action letter encouraging banks and credit unions to compete with payday lenders in providing small-dollar loans helps level the playing field by easing regulatory barriers for all lenders and empowering consumers with good information to make decisions.
The letter setting up a framework for mortgage servicers to provide individualized mortgage modifications will result in much-needed relief for struggling homeowners. Together, these letters further the CFPB’s “sandbox” policies to encourage innovation in providing consumers financial choices.
As we have written previously, agency no-action letters don’t take the place of formal rulemaking to modernize outdated regulations, but they do provide more certainty to market players that they won’t be punished for attempting to bring innovative products to consumers while making good-faith efforts to comply with current rules. That kind of certainty is just what consumers and entrepreneurs need during these volatile times.