MBA Asks Bureau to Improve Trial Disclosure Program
The Mortgage Bankers Association urged the Consumer Financial Protection Bureau to improve its trial disclosure program, particularly to encourage more companies and trade associations (such as MBA) to undertake trial disclosures in partnership with the Bureau.
The letter comes in response to proposed changes by the Bureau. MBA Senior Vice President for Residential Policy and Member Engagement Pete Mills said MBA has long-advocated that the Bureau seek modernization of existing regulations in light of the rising tide of financial innovation. “The Bureau’s effort to create a ‘Disclosure Sandbox’ through revision of its TDP Policy is a welcome step towards encouraging innovation that will result in increased consumer understanding of financial products,” he wrote.
Additionally, MBA encouraged the improvement of the Bureau’s No-Action Letter Policy. “The previous NAL Policy and TDP Policy were far too restrictive and heavily caveated to encourage participation,” MBA said. “This was duly reflected in the low number of participants. The proposed revision of the TDP Policy is an encouraging step towards addressing those issues.”
MBA said it supports the Bureau’s goal to reduce the application burden, clarify timing requirements and facilitate coordination to increase the functionality of the TDP.
“Increased clarity in the application procedures and a commitment to responsiveness satisfies industry concerns over investing valuable time and resources without knowledge of the result,” MBA said. “The Bureau’s stated willingness to maintain an open dialogue with applicants provides transparency that was missing with the original TDP. Additionally, successful applicants can build continued success through extensions from the Bureau. In addition to these revisions, the Bureau should endeavor to provide a commitment that it will exercise its authority to revise disclosure rules in light of a successful trial disclosure program. The investments made by participants that create a successful disclosure eventually warrant the opportunity for broader market adoption.”
MBA said it is “most important” that the Bureau provide protection from liability when industry engages in the TDP and takes on substantial risk. “Responsible experimentation under the regulatory framework is untenable without the assurance of limits on liability for participants,” the letter said. “The Bureau’s determination that ‘no basis exists…for a private suit based on [a] company’s use of [an approved] trial disclosure’ is a critical component to this program. Entities cannot reasonably be expected to invest in innovative programs without such protection, and the Bureau’s decision to help manage risk will fuel greater involvement with the TDP.”
Complementary to regulatory coordination is industry coordination, MBA said, particularly with disclosures that have the potential for broad benefits but confer little proprietary business advantage. “A single entity is capable of providing an innovative disclosure, but whether that product is viable within the industry–and thus the larger population of consumers–can best be determined by the participation and feedback of other stakeholders,” MBA said. “MBA and other trade associations can play a crucial role in helping establish industry-wide norms and standards while encouraging a level playing field for all participants. The Bureau’s proposal to accept applications from trade associations on behalf of its members is thus a valuable route for innovation. Indeed, MBA has already received enthusiastic responses from some members about our participation in this program.”
To further achieve the goals outlined in the policy, MBA said the Bureau could also consider additional clarifications to certain provisions. Most importantly, the Bureau should clarify that the legal safe harbor extends to an agent of a TDP participant. Additionally, MBA said the Bureau should clarify its intent to consider new delivery mechanisms for disclosures.
MBA added that details regarding revocation of a waiver also require further clarification. “The Bureau’s approach at the outset is positive, but this is an issue that should have clearly defined processes within the policy rather than be relegated to a footnote,” the letter said. “The processes outlined in the policy provide a good initial framework and should be formalized within the policy itself. Also, the effect and process of a revocation should be detailed. Revocation of a waiver should not create or confer liability on the participant and all activities conducted pursuant to the waiver should be deemed in compliance, regardless of a later revocation. Further, any revocation should provide a reasonable grace period to ensure a good-faith participant has sufficient opportunity to cease the trial disclosure program.”
MBA also recommended the Bureau consider making an application form available on its website. “Potential participants would be better equipped to forecast their involvement with a concrete mechanism for application,” the letter said.
