[Federal Register Volume 78, Number 209 (Tuesday, October 29, 2013)]
[Rules and Regulations]
[Pages 64389-64394]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2013-25580]
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Rules and Regulations
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Federal Register / Vol. 78, No. 209 / Tuesday, October 29, 2013 /
Rules and Regulations
[[Page 64389]]
BUREAU OF CONSUMER FINANCIAL PROTECTION
12 CFR Chapter X
[Docket No. CFPB-2012-0046]
Policy To Encourage Trial Disclosure Programs; Information
Collection
AGENCY: Bureau of Consumer Financial Protection.
ACTION: Notice of policy.
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SUMMARY: The Bureau of Consumer Financial Protection (Bureau) is
issuing its Policy to Encourage Trial Disclosure Programs (Policy),
which is intended to carry out the Bureau's authority under of the
Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010
(Dodd-Frank Act).
DATES: The Policy is effective on October 29, 2013.
FOR FURTHER INFORMATION CONTACT: For additional information about the
Policy, contact Will Wade-Gery, Division of Research, Markets and
Regulations, Consumer Financial Protection Bureau, at (202) 435-7700.
SUPPLEMENTARY INFORMATION:
I. Overview
In subsection 1032(e) of the Dodd-Frank Act, 12 U.S.C. 5532(e),
Congress gave the Bureau authority to provide certain legal protections
to companies to conduct trial disclosure programs. This authority can
be used to help further the Bureau's statutory objective, stated in
subsection 1021(b)(5) of the Act, to ``facilitate access and
innovation'' in the ``markets for consumer financial products and
services.''
In line with this authority, the Bureau is publishing the Policy
that is laid out in full in the final section of this Notice. Under its
terms, if the Bureau approves a specific trial, then, for the duration
of an agreed testing period, the Bureau will deem a testing company's
disclosure, to the extent that it is used in accordance with the terms
and conditions approved by the Bureau, to be in compliance with, or
hold it exempt from, applicable federal disclosure requirements. The
Bureau believes that there may be significant opportunities to enhance
consumer protection by facilitating innovation in financial products
and services and enabling companies to research informative, cost-
effective disclosures. The Bureau also recognizes that in-market
testing, involving companies and consumers in real world situations,
may offer particularly valuable information with which to improve
disclosure rules and model forms.
II. Overview of Public Comments
On December 17, 2012, the Bureau published a notice inviting the
general public and other Federal agencies to comment on any aspect of
its proposed Policy to Encourage Trial Disclosure Programs (the
Proposed Policy).\1\ The Bureau received eighteen formal comments on
the Proposed Policy. Industry trade associations and other industry
groups submitted nine comment letters. Financial services providers
submitted three comment letters. There were three comment letters from
consumer groups. Individuals also submitted a further three comments.
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\1\ 77 FR 74625 (Dec. 17, 2012).
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All commenters supported the stated goals of the Proposed Policy.
Most comments asked for clarification or further detailing around
specific parts of the Proposed Policy. Some urged changes to the
Proposed Policy either to create more incentives for the regulated
community to participate in trial disclosure programs or to provide for
additional consumer protections in approved tests. One comment opposed
implementation of the Proposed Policy, at least in its current form;
this commenter also disputed the Bureau's legal authority for certain
aspects of the Proposed Policy.
III. Summary of Comments, Bureau Response, and Resulting Policy Changes
This section provides a summary of the comments received by subject
matter. It also summarizes the Bureau's assessment of the comments by
subject matter and, where applicable, describes the resulting changes
that the Bureau is making in the final Policy. With some specific
exceptions, the Bureau has not made changes to the substance of the
Policy. In response to certain comments, however, it has revised the
Policy to provide additional clarity and elaboration around a number of
specific points.
A. Legal Authority
As noted in the Proposed Policy, Section 1032(e) of the Dodd-Frank
Act gives the Bureau authority to permit trial programs that are
designed to ``improve upon'' existing disclosures. One consumer group
contended that the Proposed Policy exceeds the Bureau's legal authority
in two respects: (1) By not requiring trial disclosure programs to meet
the criteria for model forms prescribed by the Bureau under Section
5532(b) of the Act, 12 U.S.C. 5532(b); and (2) by potentially
permitting trial disclosure programs that are designed to test cost
savings alone. The Bureau believes both contentions lack legal merit.
Section 5532(b)(1) authorizes the Bureau to issue model forms that
``may be used at the option of a covered person.'' Section 5532(b)(2)
sets forth three ``minimum'' features such model forms must possess.
These provisions do not limit the trial disclosures that the Bureau may
approve under Section 5532(e). In that provision, Congress gave the
Bureau authority to permit testing of disclosures that violate
disclosure requirements imposed directly on covered persons by the
Bureau. There is no textual or other reason to think that Congress
intended the Bureau's authority under Section 5532(e) to be
circumscribed by Section 5532(b).
Indeed, adding the Section 5532(b)(2) criteria to the Policy
arguably would frustrate Congress' purposes in enacting Section
5532(e). Thus, a proposal to change a delivery mechanism, as opposed to
the content of the disclosure, would not track against the criteria for
a model form. Yet there is nothing in Section 1032(e) to suggest that
Congress intended to exclude changed delivery mechanisms from the list
of potential improvements. As a matter of policy, however, to the
extent a proposal includes revised disclosures, the Bureau believes
those should meet the stated 1032(b)(2) criteria of plain language,
clear format and design, and
[[Page 64390]]
succinctness. The Policy has been revised to make that point.
The Bureau also sees no legal or policy reason to eliminate cost-
effectiveness as a sufficient criterion for an ``improved'' disclosure.
In the Bureau's view, a trial disclosure that is intended to maintain
the same level of consumer understanding but in a more cost effective
manner counts as an improved disclosure. Under the Policy, however, the
Bureau will not approve any trial disclosure that it believes will
weaken consumer understanding of valuable information that is the focus
of a regulatory obligation. That outcome is not one that the Policy is
intended to enable, and the Bureau has revised the Policy to make that
clear.
B. Approval Process
Most comments concerned the approval process for trial disclosure
programs. Comments focused on the areas identified below.
1. Cost-Sharing
Several trade associations and financial services companies
questioned whether, in light of the costs involved in designing and
implementing trial disclosure programs, companies will have sufficient
incentive to use the Policy. For the most part, however, these
commenters did not urge more streamlined application or participation
procedures. Instead, they requested a clear indication from the Bureau
that several covered persons--potentially facilitated by a trade
organization--may properly spread the costs of participation among
themselves, thereby improving the incentive to participate. Some trade
associations noted that absent such collaboration, industry
participants would lack the resources to conduct a trial program.
The Bureau would welcome collaboration and cost-sharing, and it has
clarified the final Policy to this effect. To help ensure adequate
protection for consumers, however, the Bureau must know the identity of
each specific in-market tester before approving that entity's
participation. As a result, the Bureau will not give final approval to
any proposed trial disclosure unless the entities involved are
specifically identified. At the same time, however, the Bureau sees no
reason why a single trial disclosure program may not properly be
proposed and implemented by more than one covered person. In fact, as
both industry and consumer commenters noted, multi-party tests may
offer more robust and reliable results. By the same token, the Policy
should not be read to prevent a trade association--or indeed any other
entity, including non-profit groups or third-party vendors--from
helping to facilitate cost-spreading.
In addition, the Policy does not rule out the possibility of the
Bureau conditionally approving a particular disclosure for testing
without at that point requiring the specific identity of all
participants. In this kind of staggered approval arrangement, there
would be a follow-on process for specific testers to secure approval to
use the disclosure. But even if the Bureau were to stage approval in
this manner, the Policy would still not permit a particular tester to
claim the benefit of a waiver unless the Bureau ultimately approves it
by name as a test participant.
2. Development Costs
Citing the costs of developing a proposal and implementing a trial
disclosure program, several commenters urged the Bureau to permit
covered persons to contact the Bureau to discuss a proposal before they
submit complete applications. This initial contact could help companies
avoid the costs of developing proposals that are unlikely to meet with
the Bureau's approval, whether because of the merits of the proposal or
because the Bureau is close to approving a duplicative proposal. The
Policy is not intended to limit this kind of initial contact. The
present Policy is one component part of the Bureau's Project Catalyst
initiative, which invites companies to bring innovation-related
concerns to the Bureau's attention at [email protected].
Disclosure innovators, therefore, may use that point of contact to
request a preliminary discussion of a potential trial disclosure
proposal.
3. Iterative Testing
Several commenters, including industry and consumer group
commenters, suggested that the Policy accommodate iterative testing of
disclosures. The Bureau acknowledges that in some cases, iterative
testing, using relatively small test populations, may help refine and
improve disclosure concepts. Instead of a single, larger test, of a
preset disclosure, this kind of approach involves a sequence of smaller
tests that enable ongoing improvements to a test disclosure concept.
Both forms of testing may serve well in different contexts, and the
Bureau intends for the Policy to support both approaches.
In cases where iterative testing is appropriate, therefore, the
Bureau will follow a staggered approach to waiver approval. At an
initial stage, an iterative proposal should follow all the normal terms
of the Policy, with the exception that it may not include all forms of
the disclosure to be tested, to the extent that these are unknown at
the point of initial submission. Any such proposal should explain why
iterative testing is the more effective means of proceeding with
respect to the particular disclosure. If the Bureau approves the
program, an initial waiver will then cover the first test disclosure,
and the Bureau will commit in the Terms and Conditions document
governing that waiver to consider later iterations of the test
disclosure for follow-on waivers on a defined fast-track basis. The
Policy thereby enables iterative testing, where it is appropriate,
while also ensuring that each tested disclosure is specifically
authorized.
4. Additional Safeguards
Notice and Comment
Several consumer groups asked that the Policy require that all
proposed disclosures be subject to full notice and comment. In
contrast, a financial service provider cautioned that such a procedure
would dissuade companies from proposing trial disclosure programs
because it would add considerable time and expense to the process. In
the Bureau's assessment, requiring notice and comment for each proposed
disclosure would conflict with Congress's instruction to issue
standards and procedures ``designed to encourage covered persons to
conduct trial disclosure programs.'' (12 U.S.C. 5532(e)(2).) The Bureau
believes that it is highly unlikely that covered persons would be
willing to subject proposals to full notice and comment, not least
because of the extended time period involved. In addition, a test
disclosure does not represent a proposed Bureau rule. Test results
could help the Bureau to put forward proposed rule changes, but full
notice and comment would then apply at that point.
Other Safeguards
Consumer groups also proposed that tests be approved only when
there is no statutory liability associated with the disclosure process.
In addition, they proposed that no in-market tests proceed until after
``lab-based'' qualitative testing of each proposed disclosure.
The Bureau does not agree that tests should be limited to
disclosures for which non-compliance carries no statutory liability.
Section 1032(e) authorizes the Bureau to apply a time-limited safe
harbor with respect to disclosure requirements under ``a rule or an
enumerated consumer law.'' \2\ It does not limit this authority to
statutes
[[Page 64391]]
(or rules) that impose no liability. In addition, while statutory
liability may well indicate that a disclosure is intended to prevent
severe consumer harm, as the commenters reasonably contend, that does
not argue against testing for disclosure improvement. The more
important the role of disclosure in preventing harm, the more important
it is to improve disclosures as much as possible. If 1032(e) were used
only where disclosure does not matter to consumer welfare, its purpose
would go unrealized.
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\2\ 12 U.S.C. 5532(e)(2); see also n.17 infra.
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The Bureau agrees with commenters that qualitative testing will
often be a useful means of showing that a disclosure is worth testing.
That is not a compelling reason, however, to make qualitative testing
an absolute requirement for test approval. The approval process calls
for reasonable grounds to expect the revised disclosures to represent
an improvement. In many cases, those grounds will consist--at least in
part--of qualitative test results. But that need not always be the
case. Other grounds could certainly supply a sufficient basis for
expecting improved outcomes. Similar disclosures may have been used and
shown to be effective for related consumer financial products, or prior
research may offer reasonable grounds to believe the revised disclosure
will be an improvement.
5. Guidance on Bureau Disclosure Priorities
Some commenters asked the Bureau to identity priority areas for
potential tests. The Bureau does not rule out taking this step at some
point in the future. In considering ways to improve disclosure policy,
the Bureau may in the future identify one or more areas as particularly
appropriate for testing.
C. Legal Protection
1. Waiver Scope
Several trade associations and industry participants asked the
Bureau to clarify the scope of the safe harbor that will be provided to
approved participants. In particular, they asked whether the waivers
would shield participants from (i) private litigation by consumers and
(ii) enforcement or other proceedings by other regulators.
The Bureau recognizes that Section 1032(e) will not provide the
incentive to test new disclosures that Congress intended unless the
scope of any approved waivers is clear. Entities that the Bureau
approves for a waiver--so long as their conduct accords with the terms
of approval--should not face private liability exposure for violating
those provisions of a federal disclosure statute or rule that the
Bureau identifies as being within the scope of the waiver. Because such
a waiver deems the trial disclosure to be in compliance with or exempt
it from the provisions identified by the Bureau, there is no basis
under those provisions for a private suit based on the company's use of
the disclosure. The same rationale applies to other federal and state
regulators even if they have enforcement or supervisory authority as to
the ``enumerated consumer laws'' for which the Bureau has rulemaking
authority. When a Bureau-issued waiver is in effect, there can be no
predicate for an enforcement or supervisory action by such a regulator
that is both based on statutory or regulatory provisions that are
within the scope of the waiver and against a company with an approved
program in compliance with the terms of the wavier.
It is true that certain other federal regulators may, in certain
circumstances, issue rules that overlap with the Bureau's rules. (See,
e.g., 12 U.S.C. 5581(b)(5))(D).) When considering a waiver, therefore,
the Bureau will confer, as appropriate, with other federal regulators.
Similarly, although the Bureau lacks authority to waive state
disclosure requirements, the Bureau will endeavor to work with state
regulators, as appropriate, to secure their support for a particular
trial disclosure program. The Bureau also encourages participants to
confer with other federal and state regulators where a proposed
disclosure implicates requirements administered by such regulators. In
addition, submissions may properly indicate whether other regulators
have indicated support or opposition to the proposal.
2. Affirmative Bureau Statements
Finally, several commenters asked the Bureau to state that
disclosures approved under the Policy are not deceptive. The Bureau
does not intend to approve test disclosures that it considers
deceptive. As a result, the Bureau anticipates being able to make this
kind of statement when it publishes notice of a waiver. In either case,
however, the Bureau's determination would be provisional. Unless and
until otherwise indicated, the Bureau's statement or waiver would apply
only to disclosures that an approved party made under the terms of that
particular approved trial disclosure program.
3. Waiver Revocation
The Proposed Policy specified that if the Bureau decides to revoke
or partially revoke a waiver for failure to follow the waiver's terms,
it: (i) Will do so in writing, specifying the reason or reasons for its
action; and (ii) may offer an opportunity to correct any such failure
before revoking a waiver. Several commenters found these procedural
protections insufficient and requested that they be enhanced in various
ways.
The Bureau acknowledges that entities may reasonably request some
opportunity to dispute grounds for a potential revocation. Before
determining to issue a revocation, therefore, the Bureau will notify
the company of its grounds for its potential revocation, and permit the
company an opportunity to respond, consistent with the terms of this
Policy. The Policy has been clarified to this effect.
D. Public Disclosure
Commenters raised two public disclosure concerns.
1. Consumer Awareness of Tests
Citing protocols for conducting research on human subjects,
consumer groups urged that consumers be given the chance to opt out of
test participation. They also requested that test disclosures be
clearly identified as such. One industry submission suggested that the
Bureau inform consumers after the fact of their participation in a
test.
The Bureau does not agree that standard practice argues for
requiring consumer consent in this context. In-market testing of
consumer behavior and reactions to new products or new ways of
delivering services is a constant of modern life. Companies routinely
carry out such tests using their customer base, without consumer
consent or awareness. The fact that companies must share test results
with the Bureau does not compel a different outcome here. As the
statute makes clear, 1032(e) tests are still conducted by covered
persons.
Furthermore, there is very good reason not to identify test
disclosures at the time of delivery. As one commenter observed,
disclosures only work to the extent consumers read them. A critical
test of any disclosure's effectiveness, therefore, is whether consumers
decide to read it in any given case. As a result, if consumers are told
that a disclosure is for a test, it will no longer be possible to test
for the most basic and controlling component of disclosure
effectiveness. Moreover, requiring such disclosure would be in tension
with Congress's recognition in section 1032 that public disclosure of
programs may appropriately be limited in order to
[[Page 64392]]
encourage the conduct of ``effective'' tests.\3\
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\3\ 12 U.S.C. 5532(e)(3).
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The Bureau has considered requiring companies to alert consumers
that they are in a test population--regardless of whether the consumers
are in a control group or in the group to receive a test disclosure.\4\
This type of notification, potentially supplemented by an opt-out
option, would create equivalency between the two groups. At the same
time, however, it would prevent effective testing in many cases. All
consumers would be alerted to the fact of disclosure testing, and their
conduct upon receiving disclosures would likely change as a result. In
the Bureau's assessment, the benefit of this direct notice, weighed
against the cost of preventing effective testing and associated
disclosure improvements, does not warrant a categorical rule requiring
direct disclosure of testing to test populations. To the extent that
companies can find ways to provide notice or an opt-out option that do
not risk the effectiveness of potential tests, however, the Bureau
encourages them to do so.
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\4\ Indirect notice that consumers may receive a test disclosure
will already be provided by the Bureau's Web site publication of
approved test disclosures.
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2. Disclosure of Test Results
Several consumer groups urged that all test results be made public.
After careful consideration, the Bureau has decided not to revise the
Proposed Policy to this effect. Congress has directed that public
disclosure be limited as necessary to encourage covered persons to
conduct effective tests. (See 12 U.S.C. 5532(e)(3).) In the Bureau's
assessment, requiring testing companies to commit, a priori, to
complete public disclosure of test results may unproductively
discourage valuable potential programs that stand to benefit consumers.
Some of the information provided to the Bureau may comprise trade
secrets or other confidential business information. Testing companies
will ultimately need to permit public use of test results if those
results are to enable regulatory change. An incentive to public
disclosure, therefore, is built into the structure of the program.
Particularly against that background, additional categorical rules
could reduce the incentive to propose potentially valuable trial
disclosure programs. In addition, the absence of a categorical rule
does not preclude the Bureau from seeking a particular level of
disclosure in connection with any particular proposal.
E. Other Considerations
Commenters also requested clarification on a number of discrete
issues.
1. Delivery Form
The Bureau confirms that disclosure improvements may properly
consist of revised forms of delivery, not simply changes to the content
of disclosures. This was already covered at footnote 7 of the Proposed
Policy. It is now reflected in the eligibility criteria listed in
Section A of the final Policy.
2. Electronic Submission
Submissions for approval can be made via electronic means.
Submitters can use the Project Catalyst email address. The Policy has
been revised accordingly.
3. Bureau Monitoring of Consumer Harm
Several consumer groups requested that the Bureau monitor tests for
potential harm to consumers. The Proposed Policy already called for
proposals to include plans to mitigate any harm identified. To further
address the concern raised, however, the Bureau has amended the
eligibility criteria to include both an identification of any risks of
consumer harm that may be associated with the proposed program and a
description of how the program mitigates any such risks.
IV. Final Policy
The text of the final Policy is as follows.
Consumers need timely and understandable information to make the
financial decisions that they believe are best for themselves and their
families. Much federal consumer protection law, therefore, rests on the
assumption that accurate and effective disclosures will help Americans
understand the costs, benefits, and risks of different consumer
financial products and services. In Section 1032 of the Dodd-Frank Wall
Street Reform and Consumer Protection Act (Dodd-Frank Act), Congress
gave the Consumer Financial Protection Bureau (Bureau) authority to
develop rules to ensure that consumers receive such disclosures, as
well as model forms to help companies comply with those rules.\5\
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\5\ See 12 U.S.C. 5532(a)-(d).
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In subsection 1032(e) of the Dodd-Frank Act, Congress also gave the
Bureau authority to approve ``trial disclosure programs.'' \6\ This
authority can be used to help further the Bureau's statutory objective,
stated in subsection 1021(b)(5) of the Dodd-Frank Act, to ``facilitate
access and innovation'' in the ``markets for consumer financial
products and services.'' In particular, Congress empowered the Bureau
to provide a legal ``safe harbor'' to companies testing revised
disclosures. For disclosure trials it approves, therefore, the Bureau
will, for a defined period, ``deem'' a participating company ``to be in
compliance with,'' or ``exempt'' from identified federal disclosure
requirements.\7\ The Bureau believes that there may be significant
opportunities to enhance consumer protection by facilitating innovation
in financial products and services through enabling responsible
companies to research informative, cost-effective disclosures in test
programs. We also recognize that ``in-market'' testing, involving
companies and consumers in real world situations, may offer
particularly valuable information with which to improve disclosure
rules and model forms.
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\6\ 12 U.S.C. 5532(e).
\7\ 12 U.S.C. 5532(e)(2). For convenience, this statutory
authority to deem companies in compliance with or to exempt them
from disclosure requirements--in each case for a limited period of
time--is hereinafter referred to as the authority to issue
``waivers'' for approved programs.
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Accordingly, the Bureau is issuing its Policy on trial disclosure
programs.\8\ Our intent is for the Policy to encourage banks, thrifts,
credit unions, and other financial services companies to innovate by
proposing and conducting such programs, consistent with the protections
for consumers that are described in this Policy.\9\ The information
that companies generate by such programs may then help the Bureau to
establish more effective disclosure rules and practices.\10\
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\8\ The Bureau may permit a covered person or covered persons to
conduct a trial disclosure program ``subject to specified standards
and procedures.'' 12 U.S.C. 5532(e)(1).
\9\ The Policy is not intended to nor should it be construed to:
(1) Restrict or limit in any way the CFPB's discretion in exercising
its authorities; (2) constitute an interpretation of law; or (3)
create or confer upon any covered person (including one who is the
subject of CFPB supervisory, investigation or enforcement activity)
or consumer, any substantive or procedural rights or defenses that
are enforceable in any manner. Of course, if the Bureau approves a
waiver in connection with a trial disclosure program, the terms of
its approval will specify certain legal rights granted to the
recipient or recipients of the waiver with respect to that program.
Those rights, however, are based on the approval notice, and not on
the present policy guidance.
\10\ The Policy should not be viewed as substituting for the
normal process of rulemaking. In the event that information learned
from trial disclosure programs triggers or otherwise informs follow-
on rulemaking, the Bureau would follow the standard rulemaking
process, which affords the public the opportunity of submitting
comments on a proposed regulation.
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The policy has four sections:
[[Page 64393]]
Section A describes which proposed programs will be
considered eligible for a temporary waiver;
Section B lists factors the Bureau will consider in
deciding which eligible programs to approve for such a waiver;
Section C describes the Bureau's procedures for issuing
waivers; and
Section D describes how we will disclose information about
these programs.
Paperwork Reduction Act
According to the Paperwork Reduction Act of 1995, an agency may not
conduct or sponsor, and a person is not required to respond to a
collection of information unless it displays a valid OMB control
number. The information that should be submitted to demonstrate
eligibility, as described further in Section A below, has been deemed
to be a collection of information for these purposes. The OMB control
number for this collection is 3170-0039. It expires on 09/30/2016. The
time required to complete this information collection is estimated to
average between 2 and 10 hours per response, including the time for
reviewing any instructions, searching existing data sources, gathering
and maintaining the data needed, and completing and reviewing the
collection of information. The obligation to respond to this collection
of information is required to obtain a benefit to the extent that the
information is to establish eligibility for a temporary waiver, as
described in this policy. Comments regarding this collection of
information, including the estimated response time, suggestions for
improving the usefulness of the information, or suggestions for
reducing the burden to respond to this collection should be submitted
to Bureau at the Consumer Financial Protection Bureau (Attention: PRA
Office), 1700 G Street NW., Washington, DC 20552, or by email to [email protected].
A. Eligibility
To be considered eligible for a waiver, a proposal should:
1. Identify the testing company or companies; \11\
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\11\ The Bureau will accept proposals that involve testing by
more than one company. Each testing company must be approved by name
and must be a signatory to specific waiver terms, as described
further in Section C below. Although not every testing company need
be identified in an initial application, no company can test subject
to a waiver unless and until it has obtained--and become a signatory
to--specific Bureau approval to test a given disclosure. The Bureau
will not provide that approval unless it is satisfied, in its sole
discretion, that a company has met all eligibility requirements for
approval and should be approved for the applicable testing program
under the terms of this Policy.
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2. Describe the new disclosures or delivery methods that are to be
tested; \12\
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\12\ So long as otherwise consistent with the minimum
eligibility standards, a proposal could include modifications to an
existing model form or other disclosures, changed delivery
mechanisms, replacement of a model form or existing disclosure
requirements with new disclosure or forms, and/or the elimination of
select disclosure requirements. All proposals should include a copy
of the trial disclosures to be tested, a description of what they
would replace, and a clear statement of how they would be provided
to consumers. When proposals consist of revised disclosure content--
as opposed to revised or streamlined delivery mechanisms--that
content should be in plain language, reflect a clear format and
design, and be succinct.
If a proposal is for iterative testing, it should include
copies of all forms of the disclosure that are known at the time of
initial submission. It should explain why iterative testing is the
more effective means of proceeding with respect to the particular
disclosure concept. In addition, it should include a proposal for a
streamlined approval process for different iterations of the
disclosure. Again, no disclosure can be subject to a waiver under
Section 1032(e) unless the specific tester has been approved to test
that specific disclosure.
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3. Describe how these changes are expected to improve upon existing
disclosures,\13\ particularly with respect to consumer use, consumer
understanding, and/or cost-effectiveness; \14\
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\13\ The relevant existing disclosures are those made in
accordance with disclosure rules issued either under the authority
of Section 1032 or to implement an enumerated statute. See 12 U.S.C.
5532(e)(1).
\14\ Trial disclosures should be ``designed to improve upon''
existing disclosures. 12 U.S.C. 5532(e)(1). Intended improvements
may go to consumer use and understanding of the relevant product or
service and/or to the cost-effectiveness of disclosures. The Bureau
anticipates approving trial disclosure programs that are intended to
improve both consumer use and understanding, and cost-effectiveness.
Although the Bureau considers cost-effectiveness an appropriate
metric of disclosure improvement, it will not approve a trial
disclosure that it believes will weaken consumer understanding of
valuable information that is the focus of a regulatory obligation,
no matter the cost savings obtained.
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4. Provide a reasonable basis for expecting these improvements, and
metrics for testing whether such improvements are realized;
5. 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;
6. Identify any risks of consumer harm that may be associated with
the proposed program, describe how the program mitigates such risks,
and explain the testing procedures that will be used to assess for
potential consumer harm during the course of the test;
7. Identify with particularity which provisions of current rules or
enumerated consumer laws are to be temporarily waived in connection
with the trial disclosure program; \15\
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\15\ Under subsection 1032(e)(2), the Bureau has authority to
waive ``a requirement of a rule or an enumerated consumer law,'' as
that term is defined in the Dodd-Frank Act. See 12 U.S.C. 5481(12).
As used in subsection 1032(e)(2), the term ``rule'' includes: (i)
Rules implementing an enumerated consumer law; and (ii) rules
implementing the Consumer Financial Protection Act of 2010,
including rules promulgated by the Bureau under its authority to
prevent unfair, abusive, or deceptive acts or practices, or to
enable full, accurate and effective disclosure.
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8. Identify any third-party vendors to be used in connection with
the proposed program and describe their proposed role;
9. Contain a commitment to and schedule for sharing test result
data \16\ with the Bureau;
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\16\ The proposal should commit to sharing test result data with
the Bureau within a reasonable period following the end of the
program. In addition, it should contain either (1) a commitment to
sharing with the Bureau interim data on test results during the
course of the program, or (2) an explanation for why such interim
data cannot reasonably be provided.
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10. Acknowledge that the Bureau may revoke any approved waiver if
the program violates the terms and conditions under which the Bureau
approves the program; and
11. Explain how the testing company will address disclosure
requirements for the test population at the conclusion of the test
period.
All proposals should be submitted via email to
[email protected].\17\ Submitted proposals may be withdrawn at
any time.
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\17\ The email subject line should begin ``Trial Disclosure
Program.'' The present Policy is one component part of the Bureau's
Project Catalyst initiative, which invites companies to bring
innovation-related concerns to the Bureau's attention at
[email protected]. Disclosure innovators may use the same
Project Catalyst point of contact to request a preliminary
discussion of a potential trial disclosure proposal. There are no
formal submission requirements to request such a preliminary
discussion.
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B. Approval of Proposals for Waivers
To decide whether to approve a proposed program for a waiver,\18\
the Bureau will consider a variety of factors, including:
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\18\ The decision whether to approve a proposed program for a
waiver will be within the Bureau's sole discretion. The Bureau will
review reasonable requests to reconsider its position on programs
for which it has not approved a waiver.
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1. The extent to which the program may help the Bureau develop
disclosure rules or policies that better enable consumers to understand
the costs, benefits, and risks associated with consumer financial
products or services;
2. The extent to which the program may help the Bureau develop more
cost-effective disclosure rules or policies;
[[Page 64394]]
3. The extent to which the program anticipates, controls for, and
mitigates risks to consumers; \19\
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\19\ This includes the extent to which a proposal contains
reasonable contingency plans for addressing unanticipated consumer
harms that arise during the duration of the test.
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4. The strength and record of the company's compliance management
system relative to the size, nature, and complexity of the company's
consumer business;
5. How effectively and efficiently the program will test for
potential improvements to consumer understanding and/or the cost-
effectiveness of disclosures, and how narrowly the program is tailored
to the testing objectives;
6. The extent to which existing data or other evidence indicate
that the proposed changes will realize the intended improvements; and
7. The extent to which the company intends to permit public
disclosure of test results.
In reviewing and approving applications, the Bureau will also take
into consideration the scope and nature of programs currently underway
as well as the Bureau's available resources.
C. Waiver Procedures for Approved Programs
When the Bureau approves a waiver, it will provide the company or
companies that receive the waiver with the specific terms and
conditions of its approval.\20\ Waivers will require companies to
certify, and document or otherwise demonstrate to the Bureau, their
compliance with these approved terms and conditions. If a company does
not follow the terms and conditions of the waiver, the Bureau may
revoke the waiver in whole or in part.\21\
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\20\ If the Bureau determines not to approve a proposed trial
program, it will inform the company of its determination.
\21\ Before determining to issue a revocation, the Bureau will
notify the affected company (or companies) of the grounds for
revocation, and permit an opportunity to respond. If the Bureau
nonetheless determines that the company failed to follow the terms
of the waiver, it may offer an opportunity to correct any such
failure before revoking the waiver. If the Bureau revokes or
partially revokes a waiver for failure to follow the waiver's terms,
it will do so in writing and it will specify the reason or reasons
for its action.
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Waiver terms and conditions will be in writing in an integrated
document entitled ``1032(e) Trial Disclosure Waiver: Terms and
Conditions.'' This document will be signed by the Director of the
Bureau or by his or her designee, and by an officer of each company
approved for a waiver in connection with the program.
In addition, the document will:
1. Identify the company or companies that are receiving a waiver;
2. Specify the new disclosure(s) or delivery methods to be used by
that company or companies under the terms of the waiver;
3. Specify the rules and statutory provisions that the Bureau will
waive during the test period for the testing company or companies;
4. Specify the temporary duration of the waiver;
5. Describe and delineate the test population(s); and
6. Specify any other conditions on the effectiveness of the waiver,
such as the terms of testing, data sharing, certification of compliance
with the terms of the waiver, and/or public disclosure.
D. Bureau Disclosure of Information Regarding Trial Programs
The Bureau will publish notice on its Web site of any trial
disclosure program that it approves for a waiver. The notice will: (i)
Identify the company or companies conducting the trial disclosure
program; (ii) summarize the changed disclosures to be used, their
intended purpose, and the duration of their intended use; (iii)
summarize the scope of the waiver and the Bureau's reasons for granting
it; and (iv) state that the waiver only applies to the testing company
or companies in accordance with the approved terms of use.
Public disclosure of any other information regarding trial programs
is governed by the Bureau's Rule on Disclosure of Records and
Information.\22\ For example, the rule requires the Bureau to make
available records requested by the public unless they are subject to a
FOIA exemption or exclusion.\23\ To the extent the Bureau wishes to
disclose information regarding trial programs, the terms of such
disclosure will be included in the 1032(e) Trial Disclosure Waiver:
Terms and Conditions document. Consistent with applicable law and its
own rules, the Bureau will not seek to disclose any test data that
would conflict with consumers' privacy interests.
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\22\ See 12 CFR 1070 et seq.
\23\ See 12 CFR 1070.14.
Dated: October 23, 2013.
Christopher D'Angelo,
Chief of Staff, Bureau of Consumer Financial Protection.
[FR Doc. 2013-25580 Filed 10-28-13; 8:45 am]
BILLING CODE 4810-AM-P