CFPB takes action to help employers develop emergency savings programs to boost worker financial resilience
The Consumer Financial Protection Bureau (Bureau) today announced that it issued a Compliance Assistance Statement of Terms Template (CAST Template) under its Compliance Assistance Sandbox (CAS) Policy to Build Commonwealth, Inc (Commonwealth). Employers interested in creating an automatic savings (Autosave) program as a way for employees to build emergency savings and increase their financial resiliency would then be able to use the CAST Template as the basis for an application to receive approval from the Bureau to create such a program.
Under an Autosave program, new and existing employees would be able to build emergency savings by directing a portion of their earnings to an existing account at a financial institution of their choice. If an employee does not designate an account, the employer would create an Autosave account for the employee at an institution designated by the employer. Autosave programs would be structured similarly to automatic 401(k) retirement savings programs and employees would receive certain advance notice, and have the right to not participate.
A 2019 report by the Federal Reserve showed that 37 percent of adults could not cover a $400 expense with cash or a cash equivalent. For 25 percent of these adults, the most common approach was to pay for the expense using a credit card and then carry a balance. Twelve percent of adults said they would be unable to pay the expense by any means.
Regulatory uncertainty can hinder the development of innovative products and services with the potential to benefit consumers. To encourage innovation, last year the Bureau introduced the CAS Policy, which enables testing of a financial product or service where there is regulatory uncertainty. After the Bureau evaluates the product or service for compliance with relevant law, an approved applicant that complies in good faith with the terms of the approval will have a “safe harbor” from liability for specified conduct during the testing period. The Policy includes a provision concerning CAST templates, which permit third-party entities such as service providers or non-profits to secure a template that can serve as the foundation for approval applications from covered entities that provide consumer financial products or services. Approvals based on the Commonwealth CAST Template will provide protection from liability under the “compulsory use” provisions of the Electronic Fund Transfer Act, and the Bureau’s regulation implementing EFTA, Regulation E.
Commonwealth’s application may be found here: https://files.consumerfinance.
The Commonwealth CAST Template may be found here: https://files.consumerfinance.