By Charles D. Gullickson

On October 8, 2014, the Consumer Financial Protection Bureau published a proposed policy on the issuance of no-action letters. Under the policy the CFPB may issue NALs “to specific applicants in instances involving innovative financial products or services that promise substantial consumer benefit where there is substantial uncertainty” about how the CFPB may apply governing laws or regulations. Comments on the proposed policy are due by December 15, 2014.

On the surface the proposed policy seems analogous to private letter rulings that are issued by the IRS and no action letters issued by the Securities and Exchange Commission. The IRS from time to time issues private letter rulings when a taxpayer is uncertain about the tax consequences of a particular transaction. Similarly, the SEC from time to time issues no action letters to indicate that the SEC will take no action with respect to the requestor based on facts and circumstances described in the letter.

The proposed CFPB policy may well be revised when the formal comment period closes in December, but as initially proposed it raises several questions about its utility. First, the proposed policy itself says that NALs will be issued by the CFPB “only rarely and on the basis of exceptional circumstances ….” Second, the proposed policy states that “[a]t the present time” CFPB staff does not “anticipate no-action treatment of UDAAP matters,” which is unfortunate given that issues concerning unfair, deceptive, or abusive acts or practices remain some of the most uncertain in consumer finance law.

The proposed policy is also somewhat ambivalent on whether an NAL is intended to provide legal guidance to the requesting party. On the one hand, a requesting party must demonstrate why an NAL “is necessary and appropriate to remove substantial legal uncertainty” and must describe how the applicability of specific provisions of law or regulation “is substantially uncertain,” but on the other hand, in a footnote, the proposed policy expressly states that an NAL “is not intended to, nor should be construed to …constitute an interpretation of law….” Also, the interpretation expressly provides that an NAL, even if issued by the CFPB, will not be binding on the Bureau, which is a significant difference from private letter rulings issued by the IRS or no action letters issued by the SEC (which are binding on the agency as to that particular requesting party and the specified facts and circumstances).

Finally, the utility of the CFPB’s proposed policy may be undermined by uncertainty as to whether even an initial request for an NAL may become a public document. The policy expressly provides that an NAL issued by the Bureau will be published on its website while a decision to deny a request for an NAL may or may not be published on the Bureau’s website, in its discretion. With respect to requests for an NAL, the proposed policy simply states that such requests, and data submitted by the requested party in connection therewith, will be governed by the CFPB’s rule concerning disclosure of records and information. Thus, such requests and data generally would be available to the public under the federal Freedom of Information Act unless the requesting party can demonstrate that the subject information is exempt from a FOIA disclosure.

In summary, the policy on NALs currently proposed by the CFPB creates uncertainty as to whether an NAL is intended to constitute an interpretation of law, expressly provides that an NAL even if issued by the CFPB is not binding on the Bureau, and leaves the requesting party open to the possibility that a request for an NAL, even if it is denied or later withdrawn, will be available to the public. Given these features of the proposed policy, one might legitimately ask why anyone would use it.

Davenport, Evans, Hurwitz & Smith, LLP, located in Sioux Falls, South Dakota, is one of the State’s largest law firms. The firm’s attorneys provide business and litigation counsel to individuals and corporate clients in a variety of practice areas. For more information about Davenport Evans, visit