The CFPB recently issued a No Action Letter (NAL) to a national bank relating to a proposed consumer small-dollar credit product. The letter was issued under the Bureau’s revised NAL Policy, which was updated in September 2019. The NAL Policy was put into place to “provide increased regulatory certainty that the Bureau will not bring a supervisory or enforcement action against a company for providing a product or service under certain facts and circumstance.”
The national bank applied for the No-Action Letter using the template that was issued by the Bureau in May 2020. The small-dollar credit product described in the NAL is a fixed term, amortizing small-dollar installment loan. The product offers a fixed payment structure, with minimum payments, and a three-month term. It offers credit in $100 increments, up to $500. The product will have a flat $5 fee, with no late payment fees or pre-payment fees and the APR cannot exceed 36%. The loan will have to be fully repaid before a consumer can apply for a second loan and the consumers’ history of repayment will be reported to credit reporting agencies. The goal of the product is to make small-dollar credit more easily available to consumers.