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Bureau issues approval order for dual usage credit cards

The Consumer Financial Protection Bureau has announced it has issued a compliance assistance sandbox (CAS) approval order to Synchrony Bank regarding their proposal to develop a “dual-feature credit card.”

The card is designed for consumers with a limited or damaged credit history as a tool that can be used to establish or reestablish a favorable credit history. Synchrony intends to offer a lower rate on secured use with the opportunity for eligible accountholders to graduate to unsecured use after 12 months. The terms of both secured use and unsecured use will be disclosed at the opening of the dual-feature credit card account. The terms will then be redisclosed with the opportunity to opt-in to unsecured use.

A CAS approval offers an entity confronting regulatory uncertainty a “safe harbor” from liability under specified legal provisions. Entities are offered safe harbor for specified conduct that the Bureau finds compliant with those legal provisions, subject to good faith compliance with the terms of the approval. The Synchrony CAS approval order implements the existing safe harbor approval mechanisms provided under the Truth in Lending Act, and is valid for three years.

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