Consumer bureau proposes ‘disclosure sandbox’ to encourage test programs

Participants in a new “disclosure sandbox” proposed by the federal consumer financial protection bureau will receive waivers from usual federal disclosure requirements and self-report material changes in consumer complaint patterns to the bureau, according to a notice to be published Monday in the Federal Register.

This program, created by the Bureau of Consumer Financial Protection (BCFP, formerly known as CFPB), is a revamp of the bureau’s trial disclosure program policy originally rolled out in 2012, and revised over time, under bureau authority provided by the 2010 Dodd-Frank Wall Street Reform and Consumer Protection Act (Dodd-Frank).

Dodd-Frank, the bureau notes, permits the bureau to conduct trial disclosure programs to further the bureau’s purpose: “to ensure that all consumers have access to markets for consumer financial products and services and that markets for consumer financial products and services are fair, transparent, and competitive.”

The bureau is seeking to make the program more attractive to applicants; no trial disclosure program has been approved in nearly five years under current policy, the bureau says. The goals of the policy changes are:

(1) reducing the application burden and review time frame;

(2) increasing guidance regarding the testing time frame;

(3) specifying procedures for extensions of successful trial disclosure programs; and

(4) providing for coordination with existing or future programs offered by other regulators designed to facilitate innovation.

Waivers of federal disclosure requirements are possible for disclosures that improve upon existing requirements based upon cost-effectiveness, delivery mechanism, or consumer understanding.

Under the proposed, revised policy, the waiver would be coupled with a requirement that waiver recipients report adverse changes; these could lead to a whole or partial revocation of the waiver. Specifically, companies will be required to report “material changes in customer service inquiries, complaint patterns, default rates, or other information that should be investigated by the Bureau to determine if the trial disclosures may be causing a material, adverse, impact on consumer understanding.”

BCFP says the revised policy streamlines the application process and “substantially” reduces factors to be considered. It also says it intends to grant or deny a formal, complete application for a trial disclosure waiver within 60 days of submission. Additionally, the bureau says it expects that a two-year testing period will be appropriate in most cases.

New sections have also been added on waiver extensions for successful trail disclosure programs; and on bureau coordination with other regulators (federal, state or international) offering similar programs designed to facilitate innovation that benefits consumers.

The notice says that where trial disclosures are successful – that is, if they improve upon existing requirements – the bureau “will endeavor to amend disclosure rules accordingly and to permit the use of validated trial disclosures until such amendment is effective.”

The policy is out for a 30-day comment period.

Policy to Encourage Trial Disclosure Programs