On October 29, 2013, the Consumer Financial Protection Bureau ("CFPB") published in the Federal Register its Policy to Encourage Trial Disclosure Programs ("Policy"). Section 1032(e) of the Wall Street Reform and Consumer Protection Act of 2010 ("Dodd-Frank Act") authorizes the CPFB to provide certain legal safe harbors to companies that conduct trial disclosure programs. The CFPB is now inviting trial disclosure program proposals from companies subject to federal consumer financial law. Under the Policy, if the CFPB approves a company's proposed trial disclosure program, the company would receive a waiver from applicable federal disclosure requirements in connection with the tested disclosures. The CFPB stated that its intent is to encourage banks, thrifts, credit unions and other financial services companies to innovate by proposing and conducting trial disclosure programs.

The Policy contains four sections detailing the procedures a company must follow in order to obtain a waiver: Eligibility, Approval of Proposals for Waivers, Waiver Procedures for Approved Programs and CFPB Disclosure of Information Regarding Trial Disclosure Programs.

Eligibility

In order for a company to qualify for a waiver, the company must submit a proposal detailing the trial disclosure program contemplated by the company. The Policy lists eleven requirements for such proposal. Notable requirements include the identification, with particularity, of which provisions of current rules are requested to be waived in connection with the trial disclosure program, and a commitment to sharing test result data with the CPFB within a reasonable period following the end of the program. The proposal should also:

  • Describe the new disclosures or delivery methods that are to be tested;
  • Describe how the changes are expected to improve upon existing disclosures;
  • Provide a reasonable basis for expecting those improvements, and metrics for testing whether such improvements are realized;
  • Identify the duration of the test and the size, location and nature of the consumer population involved in the test, and explain why that duration and scope are reasonably necessary for sound testing; and
  • Identify any risks of consumer harm that may be associated with the proposed program, describe how the program would mitigate such risks, and explain the testing procedures that will be used to assess for potential consumer harm during the course of the test.

Approval of Proposals for Waivers

The Policy provides seven factors that the CFPB will consider in deciding whether to approve a proposal for a waiver. Two factors relate to the benefits of the proposed trial disclosure program to the CFPB in developing consumer protection model forms and disclosures. Other factors include:

  • The extent to which the program would anticipate, control for, and mitigate risks to consumers;
  • The strength and record of the company's compliance management system relative to the size, nature, and complexity of the company's consumer business;
  • How effectively and efficiently the program will test for potential improvements to consumer understanding;
  • The extent to which the existing data and other evidence indicate that the proposed changes will realize the intended improvements; and
  • The extent to which the company intends to permit public disclosure of test results.

In addition, the CFPB may also consider the scope and nature of other trial disclosure programs and other resources available to CFPB. The Policy also provides for an appeal process for companies that were denied waivers based on their initial proposal.

Waiver Procedures for Approved Programs

Upon approval of a trial disclosure program proposal, the CFPB will require the company to enter into an agreement detailing the specific waiver terms and conditions. Among other conditions, the agreement will specify the rules and provisions from which the company will receive waivers and the temporary duration for which the waivers will exist.

CFPB Disclosure of Information Regarding Trial Disclosure Programs

Notices of all approved trial disclosure programs will be published on the CFPB website. The notice will identify the company conducting the program, summarize the changed disclosures and their intended purpose, summarize the scope of the waiver and the CFPB's reasons for granting it, and state that the waiver only applies to the testing company in accordance with the approved terms of use. Any further public disclosure regarding approved trial programs will be governed by the CFPB's Rule on Disclosure Records and Information and the Trial Disclosure Waiver: Terms and Conditions entered into with the participating company.

Companies interested in submitting a trial disclosure program should carefully evaluate the costs and benefits of doing so. Developing a trial disclosure program, drafting a successful proposal and devoting resources to the collection, evaluation and sharing of test data may prove prohibitive for some companies. All companies, however, would likely benefit from a waiver from the many new, and increasingly complex, federal consumer financial disclosure regulations. The CFPB stated in the Policy's adopting release that a waiver should shield participating companies from private consumer litigation and enforcement actions in connection with the provisions of federal disclosure statutes or rules within the scope of a particular waiver. Further, the CFPB stated that, under circumstances where other federal or state regulators issue rules that overlap with CFPB rules, the CFPB will confer with regulators when considering a waiver and work to secure support for that particular trial disclosure program.

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