CFPB Ends No-Action Letter with Fintech Lender Upstart Network

Source: American Banker

The Consumer Financial Protection Bureau and the online lender Upstart Network have mutually terminated a “no action letter” that was the first agreement of its kind to give a fintech immunity from regulatory actions. 

CFPB Director Rohit Chopra said Wednesday that the bureau sought “immediate termination” of the no-action letter after Upstart asked for changes to both the terms of its agreement and its artificial intelligence-based underwriting model.

Upstart, of San Mateo, California, said it exited the agreement after the CFPB scrapped its fintech sandbox program last month.

As part of the changes to its innovation office, the CFPB said it will no longer process applications for no-action letters designed to allow companies to develop products without fear of supervisory action. Instead, the office will focus on promoting competition, hosting events and making it easier for consumers to switch financial providers. 

Five years ago, the CFPB created a lot of buzz in the fintech community when it issued its first no-action letter in 2017 as part of a program to foster innovation. Upstart’s no-action letter was renewed in 2020 under former CFPB Director Kathy Kraninger, a Trump appointee, but Upstart was required to notify the CFPB of any significant changes to its artificial intelligence model.