CFPB Issues Notices on "Sandbox Approvals" and PACE Loans
Commentary by Steven Lofchie
The CFPB issued (i) a new policy statement on the Compliance Assistance Sandbox, and (ii) a finding of no significant environmental impact regarding the CFPB's proposed rule on residential Property Assessed Clean Energy ("PACE") financing.
Compliance Assistance Sandbox ("CAS") Policy. Under the new CAS policy, companies can apply for "sandbox approvals," which provide temporary safe harbors from liability under Section 1021 of the Consumer Financial Protection Act. These approvals are conditional: firms must demonstrate the product's consumer benefits, avoid exploiting regulatory gaps and disclose key data to the CFPB. The policy prohibits advertising approvals as endorsements and ensures competitors can apply for similar relief to prevent market distortions. Approvals expire after two years unless extended or modified.
Property Assessed Clean Energy ("PACE") Loan Environmental Rule. The CFPB issued a finding of no significant environmental impact on its proposed rule on residential PACE financing. (See related coverage.) The CFPB determined that the proposed regulation of lenders to ensure borrowers' ability to repay would not significantly impact the environment. Although the rule may reduce the number of PACE loans issued, the CFPB found the environmental consequences, such as potential decreases in renewable energy projects, to be minimal.
The Sandbox policy is applicable on January 10, 2025. The PACE finding is available on January 10, 2025.
Commentary
The CFPB is adopting policies that will apply going forward, right before a new Administration takes office. Why not just leave the approvals in a ready-to-sign state, and let the new Administration decide whether to adopt or tinker?