The CFPB issued a no-action letter to Bank of America stating that the agency would not take enforcement action against the bank in connection with a small-dollar lending program. Specifically, the CFPB stated that it would not take action under Sections 1031 ("Prohibiting Unfair, Deceptive, or Abusive Acts or Practices") and 1036 ("Prohibited Acts") of Dodd-Frank.

According to the Bank of America no-action letter request, the bank's small-dollar credit product ("Balance Assist") is structured as a fixed-term, amortizing small-dollar installment loan to be paid back over three months. The Balance Assist program would offer loans in increments of $100 up to $500, with a $5 flat administrative fee, regardless of the amount borrowed, and with no other administrative fees charged. Bank of America specified that the Balance Assist product would be offered only to consumers with Bank of America checking accounts with inflows exceeding a predetermined threshold. Further, the Bank will perform a credit review of potential borrowers and can reject those with a poor credit history.

Commentary Rachel Rodman

The CFPB's no-action letter is important for two reasons. First, the Bureau has issued relatively few no-action letters, and thus any guidance the agency provides through the program is significant. Second, the Bureau is blessing a short-term, small-dollar credit product from a large bank, suggesting that the Bureau believes large financial institutions have a role to play in providing consumers an alternative to high-cost forms of credit, such as payday loans.

Commentary Steven Lofchie

The CFPB's letter provides that the no-action position is available only to Bank of America and not to any other persons. This is consistent with the view expressed recently by Chair Heath P. Tarbert of the CFTC that a regulatory agency's no-action position should be specific to an individual entity.

The policy basis for this approach to no-action positions is not obvious. As a general matter, the law should be the same for everyone. Here is a suggestion: perhaps anyone else relying on the letter should be required to publicly disclose its identity, which would allow the regulator to further evaluate the wisdom or success of the no-action letter. If the purpose of the exclusivity is to compensate the initial recipient for its work in obtaining the letter, which is reasonable, then that exclusivity period might be time-capped in light of the general presumption that the law should treat everyone equally.

 

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