In the six months since the TRID rules went into effect, most of the industry has been heads down working to ensure compliance and adapt their internal work processes. Most lenders and vendors have had to focus all available resources on accommodating the new requirements. While to a great extent the Know Before You Owe initiative has succeeded in improving things for consumers, by necessity, much of the technology development and innovation has been oriented towards helping lenders and settlement service providers meet their obligations. Much work still remains to be done on that front but now the consumer experience is getting more attention by the lenders, technology vendors and the CFPB.
The TRID rules are very prescriptive when it comes to forms, timelines and transparency. But many of the details about how consumers interact with the lender and the loan documents are not explicitly spelled out in the current regulations. This leaves lots of room for technology vendors and lenders to be creative in making the consumer experience as easy and positive as possible. However, there seems to be reluctance by some in the industry to push the boundaries too far out of concern that future regulations could render innovative solutions non-compliant.
Recognizing this reluctance, the CFPB launched Project Catalyst, designed to foster consumer-friendly innovation by engaging with the “innovator community.” As part of the project, the agency recently announced a new policy intended to reduce potential regulatory uncertainty for new products that “promise substantial consumer benefits” but are ahead of the regulatory curve and aren't addressed under current rules. Under the new policy, vendors can apply to the CFPB for a No-action Letter (NAL). The NAL is a statement by the CFPB that the CFPB staff has “reviewed the company’s application and [has] no present intention to recommend enforcement or supervisory action with respect to the particular aspects of the company’s product…” The NAL is only available for products in development, not products or services in production or “hypothetical.”
The new policy is far from a blanket endorsement of a new product. The NAL isn't binding on any court or agency (even the CFPB) and it can be revoked at any time. However, it does provide a little reassurance to vendors and lenders that the innovation isn’t out of line with the CFPB’s current intentions. Now lenders can have greater confidence in vendor solutions and the value they drive for their consumers. In a statement, CFPB Director Richard Cordray said, “We want to foster a consumer financial marketplace where companies develop safe, innovative products and approaches that can help make people’s lives better.” The CFPB’s No-Action Letters are also projected to help emerging technologies break into the marketplace. These “evolving technologies,” as the agency notes, “are driving constant change in today’s consumer financial marketplace,” delivering cost savings, enhanced compliance and convenience.
Even though the CFPB anticipates that very few NALs will be granted, the new policy gives vendors the opportunity to open the channels of communication with the regulatory community. eLynx has long recognized the value of working closely not only with its customers in the lender community, but also with regulators. This approach not only helps ensure that our current products and roadmap are in line with CFPB intentions, it also helps inform the regulators about innovative approaches that can be applied to help them further their goals. As a case in point, we participated in last year’s eClosing pilot sponsored by the CFPB. That collaboration gave us a better understanding of the CFPB’s intentions and expectations with respect to eClosings. At the same time, it exposed them to eLynx’s innovative technology and approaches that could be the foundation for future best practices or regulations related to eClosings. The ultimate beneficiary of our collaboration and the eClosing pilot will be the consumer.
The CFPB’s No-Action Letter Policy is a positive step that could help minimize concerns of some vendors and lenders in the market. We think the most positive part of the policy is the indication that the CFPB is willing and eager to work with the technology vendors and lenders to help drive innovation that will improve the consumer experience.