1 Billing Code: 48 10
- AM
- P BUREAU OF CONSUMER FINANCIAL PROTECTION 12 CFR Chapter X Policy to Encourage Trial Disclosure Programs ; Information Collection [Docket No. CFPB
- 2012
- 004 6 ] AGENCY : Bureau of Consumer Financial Protection. ACT ION: Notice of policy

. SUMMARY: The Bureau of Consumer Financial Protection ( Bureau ) is issuing its Policy to Encourage Trial Disclosure Programs (Policy) , which is intended to carry ou t the Bureau’s authority under subs ection 1032(e) of the Dodd

- Frank W all Street Reform and Consumer Protection Act of 2010 (Dodd

- Frank Act )

. DATES : The Policy will be effective from the date of official publication in the Federal Register. FOR FURTHER INFORMATION CONTACT: For additional information about the Policy,
cont act 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 t he
Bure au 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 subs ec tion 1021(b)(5) of the Dodd

- Frank Act, to “ f acilitate access and innovation” in the2 “ markets for consumer f inancial products and services.” 1
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, i f the Bureau approves a spec ific trial disclosure
program , then, for the duration of an agreed testing period, the Bureau will exempt the approved company’s trial disclosure from

— or will deem it to be in compliance with

— applicable federal disclosure requirements , to the extent that i t is used in accordance with the specific terms and conditions approved by the Bureau

. The Bureau believes that there may be significant opportunities to enhance consumer protection by facilitating innovation in financial products and services and enablin g companies to research informative, cost

- effective disclosures. The Bureau also recognize s that in

- market testing, involving companies and consumers in real world situations, may offer useful information with which to improve disclosure rules and model
f

orms. 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 ( Proposed Policy). 2 Th e Bureau received e ighteen formal comments on the Proposed P olicy. Industry trade associations and other industry groups submitted nine comment letters

. Financi al services providers submitted three comment letters. There were three comment letters from consumer groups . In dividuals also submitted a further three comments. All commenters supported the stated goals of the Proposed Policy. Most comments asked for cl arification or further detail around specific parts of the Proposed Policy. Some urged

1 12 U.S.C. 5511(b)(5).3 ch anges 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 pro tections in approved tests. One comment opposed implementation of the Proposed P olicy, 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 comm ents 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 substa nce of the Policy. I n response to certain comments, however, it has revised the Policy to provide additional clarity and elaboration

aroun d a number of specific points. A. Legal Authority
As noted in the Proposed Policy, subs ection 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 respe cts: (1) by not requiring tri al disclosure programs to meet the criteria for model forms prescribed by the Bureau under subs ection 1032 (b) of the Dodd

- Frank Act, 12 U.S.C. 5532(b); and (2) by potentially permitting trial disclos ure programs that are desig ned to test cost savings alone. The Bureau believes both contention s lack legal merit.
S ubs ection 10 32(b)(1) authorizes the Bureau to issue model forms that “may be used at

2 77 FR 74625 (Dec. 17, 2012).4 the option o f a covered person ” when the Bureau uses its authority under Sectio n 1132 to require disclosures to ensure that the costs, risks, and benefits of particular consumer financial products and services are adequately disclosed both initially and over the term of the product or service. S ubs ection 10 32(b)(2) sets forth three “minimum” features concerning format and language that such model forms must possess. These provisions do not limit the trial disclosures that the Bur eau may app rove under subs ection 10 32(e). In that provision, Congress gave the Bureau authority to permi t testing of disclosures that violate disclosure requirements imposed directly on covered persons under subsection 1032(a) or other sources of federal consumer financial law

. From the face of the stature, therefore, there is no reason to think that Congre ss intended the Bur eau’s authority under subs ection 10 32(e) t o be circumscribed by subs ection
10 32(b). 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) crite ria of plain language, clear format and design, and succinctness. 3 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 count s as an improved disclosure. Under the Policy, however, the Bureau will not approve any trial disclosure that it believes will weaken consumer understanding of useful information that is the focus of a regulatory or statutory obligation

. That outcome is not one that the Policy is intended to enable, and the Bureau has revised the Policy to make that clear.

3 A proposal to change a delivery mechanism, as opposed to the substantive content of a disclosure, would not track against the criteria for a model form.5 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 impleme nting trial disclosure programs , companies will have sufficient incentive to propose trial disclosure programs under the Policy. For the most part, however, these commenters did not urge more streamlined appli cation or participation procedures. Instead , they requested a clear indication from the Bureau that several covered
persons

— poten tially facil itated by a trade organization

— may properly spread the costs of participation among themselves, thereby improving the incentive to participate. Some trade associations n oted 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 fi nal 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 t o 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 pers on. 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 ,6 including non - profit gr oups 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 identit y 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 n ot 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 comm e nters urged the Bureau to permit covered persons to contact the Bureau to discuss a proposal before they submit complete proposal s. This initial contact could help companies avoid the costs of developing proposals that are unlikely to meet with the Burea u’ s approval for one or more reasons (for example, because the Bureau is close to approving a duplicative proposal )

. The Po licy is not intended to limit this kind of initial contact. T he present Policy is one component part of the Bureau’s Project Cataly st initiative, which invites companies to bring innovation

- related concerns to the Bureau’s attention at ProjectCatalyst@cfpb.gov . 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 th at in some cases, iterative testing, using relatively small test populations, may help refine and improve7 disclosure concepts. Instead of a single, larger test, of a preset disclosure , this kind of approach involves a sequence of smaller tests that en able 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, a n 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 e xplain why iterative testing is the more effective means of proceeding with respect to the particular disclosure. If the Bureau approves the program, a n initial waiver will then cover the first test disclosure , and the Bureau will commit in the Terms and Conditions document 4 governing that waiver to consider later iterations of the test disclosure for follow

- on waiver s on a defined fast

- track basis. The Policy thereby enables iterativ e 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 f ull notice and comment. In contrast, a financial service provider cautioned that such a procedure would discourage companies from proposing trial disclosure programs because it would add considerable time and expense to the process. In t he Bureau’s asses sment, requiring notice and comment for each proposed disclosure would conflict with Congress’s instruction to

4 See Section C of the Policy.8 issue standards and procedures “ designed to encourage covered persons to conduct trial disclosure programs. ” 5 The Bureau believes that it is hig hly 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, at which point full notice and comment would be required

. Other Safeguards
C onsumer groups also proposed that tests be approved only when there is no statutory liability associa ted with the disclosure pro cess. In addition, they proposed that no in

- market tests proceed until after the industry tester(s) carried out “lab

- based” qualitative testing of each proposed disclosure

. The Bureau does not agree that tests should be limited to disclosures for which no n compliance carries no statutory liability. S ubs ection 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. ” 6 It does not limit this authority to statutes (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 improveme nt. T he more important the role of disclosure in preventing harm, the more important it is to improve disclosures as much as possible. The Bureau agrees with comment ers that “lab

- based” qualitative testing will often be a useful means of showing that a di sclosure is worth testing through larger

- scale, quantitative in

-

5 12 U.S.C. 5532(e)(2).9 market testing

. That is not a compelling reason , however, to make such testing an absolute requirement for approval. The approval process calls for reasonable grounds to expect the proposed disclosures to represent an i mprovement. In many cases, those grounds will consist

— at least in part

— of “lab

- based” qualitative test results. But that need not always be the case. Other grounds could supply a sufficient basis for expecting improved outco mes. S imilar 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 proposed disclosure will be an improvement.
4 . Guidance on Bureau Disclosure Prior ities 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 particu larly appropriate for testing

. C. Legal Protection 1. Waiv er Scope Several trade associations and industry partic ipants asked the Bureau to clarify the scope of the safe harbor that will be provided to approved participants. In par ti cular, they asked whether the waivers would shield participants from (i) private litigation by consumers and (ii) enforcement or other proceedings by other regulat ors. The Bureau recognizes that subs ection 1032(e) will not provide the incentive to test n ew disclosures that Congress intended unless the scope of any approved waivers is clear. E ntities

6 12 U.S.C. 5532(e)(2); see also n.20 infra

.10 that the Bureau approves for a waiver

— so long as their conduct accords with the terms of approval

— should not face private liabi lity exposure for violating th ose 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 s 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

consu mer laws” for which the Bureau has rulemaking authority. When a Bureau

- issued waiver is in effect with respect to such a statutory or regulatory disclosure requirement , there is no predicate for an enforcement or supervisory action by such a regulator tha t is both : (1) based on statutory or regulatory provisions w ithin the scope of that waiver , and (2) against a company with an approved program in compliance with the waiver’s terms. It is true that other federal regulators may, in certain circumstances, i ssue rules that overlap with the Bureau’s rules

. 7 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 Bure au will endeavor to work with state regulators , as appropriate, to secure their support fo r a part icular trial disclosure program. The Bureau also
encourages participants to confer with other federal and state regulators where a proposed disclosure implic ates requirements administered by such regulators. In addition, submissions

7 See, e.g. , 12 U.S.C. 5581(b)(5))(D) (requiring the Bureau and the Federal Trade Commission to negotiate an agreement with respect to rulemaking by each agency, in light of the overlap between the Bureau’s rulemaki ng authority under Section 1031 of the Dodd

- Frank Ac t , 12 U.S.C. 5531, and the Federal Trade Commission’s rulemaking authority under section 18(a)(1)B) of the Federal Trade Commission Act).11 may properly indicate whether other regulators have indicated support or opposition to the proposal. 2. Affirmative Bureau Statements Finally, several commenters asked the Bur eau to state that disclosures approved under the Policy are not deceptive. The Bureau does not intend to ap prove 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

. Any such Bureau statement, however, would be provisional.
Un less and un til otherwise indicated, the Bureau’s statement would apply only to disclosures that

an approved party made under t he terms of that particular approved trial disc losure program

. 3. Waiver Revocation The Proposed Policy specified that if the Bureau decides to revoke or partially revoke a waiver f or failure to follow the waiver’ s terms, it (i) will do so in writing , specifying the reason

or re asons for its action; an d (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.
T he Bureau acknowledges that entities may reaso nably 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

co mpany an opportunity to res pond, consistent with the terms of this Policy. The Policy has been clarified to this effect.
D . Public Disclosure Commenters raised two public disclosure concerns.12 1. Consumer Awareness of Tests C iting protocols for conducting research on human subje cts, c onsumer groups urged that consumers be given the chance t o 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. Although an opt

- in process for trial participation would serve to protect certain consumer interests, the Bureau does not expect the trial disclosure program to work as Congress intended if the Policy required test disclosure s to be identified as such at the time of delivery

. As one commenter observed, d isclosures 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, i f consumers are told that a disclosure is for a test, it may no longer be possible to test for the most basic and controlling component of disclosure effectiveness. In the Bureau’s assessment, therefore, a categorical policy requiring con sumer notice and consent for trial disclosure programs would tend to undermine the purpose of subsection 1032(e). Such a categorical policy would also be in tension with Congre ss’s recognition in s ubs ection 1032(e) that public disclosure of programs may a ppropriately be limited in order to encourage the conduct of “effective” tests. 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 t o receive a test disclosure

. 8 This type of notification , potentially supplemented by an opt

- out

8 Indirect notice that consumers may receive a test disclosure will already be provided by the Bureau’s website pu blication of approved test disclosures. See Section D of the Policy.13 option, would create equivalency between the two groups. At the same time, however, it would limit effective testing in many cases. All consumers would be al erted to the fact of disclosure testing , and t heir 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 policy 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 te s ts, however, the Bu reau encourages them to do so . Furthermore, t o mitigate privacy risks to consumers, the Bureau is clarifying the Policy to state that the Bureau does not intend to seek or obtain any personally identifiable financial information of con sumers in test results that are shared with the Bureau. 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. 9 In the Bureau’s assessment, requi ring 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. T esting companies will ultimately need to permit public use of test results if those results are to enable regulatory c hange. In addition, the Policy specifies that one of the factors that the Bureau will

9 See 12 U.S.C. 5532(e)(3).14 consider in deciding which applications to approve is the extent to which the company intends to
p ermit public disclosure of test results. I ncentive s to public disclosure, therefore, are built into the nature and structure of the program. Particularly against that background, additional categorical rules could reduce the incentive to propose potentia lly valuable trial disclosure
programs. Moreover, the absence of a categorical rule does not preclude the Bureau from

se eking a particular level of disclosure in connection with any particular proposal.
F . Other Considerations Commenters also requested clarificatio n on a number of discrete issues

. 1. Deliv ery Form The Bureau confirms that disclosure improvements may properly consist of revised forms of delivery, not simply changes to the content of disclosures. This wa s already covered at footnote 7 o f the Proposed Policy. It is now reflected in the eligibility criteria listed in Section A of the final Policy. 2. Electro nic Submission Submissions for approval c an be made via electronic means. Submitters can use the Project Catalyst email address. Th e 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. T he Proposed Policy already called for proposals to include plans to mitigate an y harm identified. To further address the concern raised, however, the Bureau has amended the eligibility criteria listed in Section A of the Policy to include both an identification of any risks of consumer harm that may be associated with the proposed p rogram and a description of how15 the program mitigates any such risks.
IV. Final Policy The te xt of the final Policy is as follows

. Consumers need timely and understandable information to make the financial decisions that they believe are best for themselve s 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 com panies comply with those rules. 10
I n subsection 1032(e) of the Dodd

- Frank Act, Congress also gave the Bureau authority to
approve “trial disclosure programs.” 11 This authority can be used to help further the Bureau’ s statutory objective, st ated in subs ec tion 1021(b)(5) of the Dodd

- Frank Act, to “ f acilitate access and innovation” in the “ markets for consumer f inancial products and services.” In particular, Congress empowered the Bureau to provide a legal “safe harbor” to companies testing re vised 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 ” it from identified federal disclosure req uirements

. 12 The Bureau believes that th ere may be significant

10 See 12 U.S.C. 5532(a)

- (d). 11 12 U.S.C. 5532(e). 12 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 limited16 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. So long as appro priate consumer protections are in place, the Bureau also recognize s that “in

- market” testing, involving companies and consumers in real worl d situations, may offer useful information with which to improve d isclosure rules and model forms. Accordingly, the Bureau is issuing its P olicy on trial disclosure programs. 13 Our intent is for the P olicy to encourage banks, thrifts, credit unions, and other financial services companies
to innovate by proposing and conducting such programs , consistent with the protect ions for consumers that are described in this Policy. 14 The information that companies generate by such programs may then help the Bureau to establish more effective disclosure rules and practices. 15
The P olicy has four sections:

• Section A describes which proposed programs will be considered eligible for a temporary waiver;

period of time

– is hereinafter referred to as the authority to issue “waivers” for approved programs. 13 The Bureau may permit a covered person or covered persons to conduct a trial d isclosure program “subject to specified standards and procedures.” 12 U.S.C. 5532(e)(1). 14 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 an y 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 right s, however, are based on the approval notice, and not on the present policy guidance. 15 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 informs17 • 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 proc edures for issuing waivers; and

• S ection 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 informatio n 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 fo r this collection is 3170

- XXXX. It expires on MM/DD/YYYY. 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 so urces, 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 el igibility for a temporar y waiver, as described in this P olicy. 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 the Bureau at : the Consumer Financial Protection Bureau (Attention: PRA Office), 1700 G Street NW, Washington, DC 20552, or by email to CFPB_Public_PRA@cfpb .gov .

follow

- on rulemaking, the Bureau would follow the standard rulemaking process, which affords18 A. Eligibility To be considered eligible for a waiver, a proposal should:
1. Identify the testing company or companies; 16
2. Describe the new disclosures or delivery methods that are to be tested ; 17
3

. Describe how these changes are expected to impro ve upon existing disclosures, 18 particularly with respect to consumer use, consumer understanding , and/or cost

effectiveness ; 19

the public the opportunity of submitting comments on a proposed regulation. 16 The Bureau will accept proposals that involve testing by more than one company. Each testing c ompany 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 su bject 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 eligibil ity requirements for approval and should be approved for the applicable testing program under the terms of this Policy. 17 So long as otherwise consistent with the minimum eligibility standards, a proposal could include modifications to an existing model fo rm or other disclosures , changed delivery mechanisms, replacement of a model form or existing disclosure requirements w ith new disclosure s 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. W hen proposals consist of revised disclosure content

— as opposed to revised or streamlined delivery mechanism s

— that conte nt should be in plain language, reflect a clear format and design, and succinct ly explain the information being communicated

. If a proposal is for iterative testing, it should incl ude copies of all forms of the disclosure that are known at the time of ini tial 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 ca n be subject to a waiver under subs ection 1032(e) unless the specific tester has been approved to test that specific disclosure. 18 The relevant existing disclosures are those made in accordance with disclosure rul es issued either under the authority of Section 1032 or to implement an enumerated statute

. See 12 U.S.C. 5532(e ) (1)

. 19 Trial disclosures should be “designed to improve upon” existing discl osures. 12 U.S.C. 5532(e)(1). Intended improvements may go to co nsumer use and understanding of the relevant19 4

. Provide a reasonable basis f or 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; 20
8

. Identify any third

- party vendors to be used in connection with the proposed
program a nd describe their proposed role;

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

- effectiv eness. Although t he 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 useful information that is the focus of a regulatory or statutory obligation , no matter the cost savings expected

. 20 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) ; 1 2 U.S.C. 5481 (notes). 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 un der its authority to prevent unfair, abusive, or deceptive acts or practices, or to enable full, accurate and effective disclosure.20 9

. Contain a commitment to and schedule for sharing test result data 21 with the Bureau; 22
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 t he 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 ProjectCatalyst@cfpb.gov

. 23 Submitted proposals may be withdrawn at any time.

B. App roval of Proposals for Waivers To decide whether to approve a proposed program for a waiver, the Bureau will consider a variety of factors, including:
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;

21 The Bureau will not seek any test result data that include consumers’ personally identifiable financial information. 22 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 cour se of the program, or (2) an explanation for why such interim data cannot reasonably be provided. 23 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 ProjectCatalyst@cfpb.gov . Disclosure innovators may use the same Project Catalyst point of contact to request a preliminar y discussion21 2

. The extent to which the program may help the Bureau develop more cost

effective disclosure rules or policies;
3

. The extent to which t he program anticipates, controls for , and mitigates risks to

consumers; 24
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 effici ently the program will test for potential improvements
to consumer use, 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 consider ation the scope and nature of programs currently underway as well as the Bureau’s available resources. The decision whether to approve a proposed program for a waiver will be within the Bureau’s sole discretion. 25 There is no maximum time period of review . In addition, a lack of notice from the Bureau will not constitute approval of a waiver request.

of a potential trial disclosure proposal. There are no formal submission requirements to request such a preliminary discussion. 24 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.22 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 spec ific terms and conditions of its approval. 26 Waivers will require companies to certify, and document or otherwise demonstrate to the Bureau, their compliance with the se approved terms and conditions. If a company does not follow the terms and conditions o f the waiver, the Bureau may revoke the waiver in whole or in part

. 27 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 method ( s ) to be used by that company or companies under the terms of the waiver ; 3. Specify the provisions of the rule ( s ) and enumerated consumer law(s) that the Bureau will waive during the test period for the testing company or companies ; 4

. Specify the temporary duration of the waiver ;

25 The Bureau will review reasonable requests to reconsider its position on programs for which it has not approved a waiver. 26 If the Bureau determines not to approve a proposed trial program, it wi ll inform the company of its determination. 27 Before determining to issue a revocation, the Bureau will not ify the affected company (or companies) of the grounds for revocation, and permit an opportun ity to respond. If the Bureau nonetheless determines th at 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 or23 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 ter ms of the waiver, and/or public disclosure

.

D. Bureau Disclosure of Information Regarding Trial Programs The Bureau will publish notice on its website of any trial disclosure program that it approves for a waiver. The notice will: (i) identify the comp any 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 ; a nd (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 I nformation

. 28 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. 29 To the extent the Bureau wishes to disclose information regarding trial programs to an ext ent not required by the Rule , the terms of such disclosure will be included in the 1032(e) Trial Disclosure Waiver: Terms and Condit ions document. Consistent with applicable law and its own rules, the Bureau will not seek to disclose any test data that wo uld conflict with consumers’ privacy interests.

partially revokes a waiver for failure to follow the waiver’s terms, it will do so in wri ting and it will specify the reason or reasons for its action. 28 See 12 CFR 1070 et seq
.24 Dated :

_____ , 201 3

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__________________________________ Leandra English , Deputy Chief of Staff, Bureau of Consumer Financial Protection

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29 See 12 C F R 1070.14.