CFPB grants ‘no action’ letter to Bank of America on small-dollar lending; eyes future options for payday-loan disclosures

A “no action letter” (NAL) giving Bank of America supervisory cover for its planned approach to small-dollar lending was granted Thursday, according to a release by the consumer financial protection agency.

The Consumer Financial Protection Bureau (CFPB) said it also issued, for a 30-day comment period, a notice of its intent to conduct testing of options for a potential bureau-designed payday-loan disclosure.

Regarding the NAL for Bank of America, the bureau said that NALs provide “increased regulatory certainty that the bureau will not bring a supervisory or enforcement action against a company for providing a product or service under certain facts and circumstances.” The bank’s NAL application is based on the NAL template issued by the CFPB May 22 in response to an application from the Bank Policy Institute. “The Bureau approved the NAL Template to further competition in the small-dollar lending space, which fosters access to credit while including important protections for consumers who seek small-dollar loan products,” the bureau said.

The notice for comment regarding payday-loan disclosures, issued under the Paperwork Reduction Act (PRA), relates to the bureau’s research efforts to identify information that could be disclosed to consumers during the payday loan process to help them make better-informed decisions, the bureau said.

“The testing of different consumer disclosures supports the Bureau’s commitment to ensuring that consumers have the information they need to understand the small dollar products available to them so they can make the choices that are best for them and their personal circumstances,” it said.

The notice, with comments due 30 days after its publication in the Federal Register, states that the CFPB has hired a contractor to conduct one-on-one consumer interviews with participants to evaluate and refine potential options for a bureau-designed payday loan disclosure. The bureau seeks to build upon previous academic research on payday disclosures “and create disclosures that present key information clearly and effectively,” it said.

The bureau said it may use results of the testing, estimated to conclude in September 2021, in deciding whether to move forward with a future rulemaking related to payday loan disclosures.

Consumer Financial Protection Bureau Issues No Action Letter to Facilitate Consumer Access to Small-Dollar Loans