U.S. Consumer Agency Weighs Update of Rules on Access to Personal Financial Data

October 23, 2020

The U.S. Consumer Financial Protection Bureau (CFPB) on Thursday said it is seeking public comment on a proposal to modify rules governing the access and use of consumer financial data which is collected by a growing number of online financial institutions.

The watchdog proposed updating the 2010 Dodd-Frank Financial Reform law to ensure online banks, financial technology firms and data aggregators act in a consumer’s best interest when collecting their data, the agency said.

“While consumer access to financial records can enable the development of innovative and beneficial consumer financial products, it can also present consumer risks,” it said in a statement.

The Consumer Financial Protection Bureau Proposed Rule

Section 1033 of the Dodd-Frank Wall Street Reform and Consumer Protection Act provides, among other things, that subject to rules prescribed by the Bureau of Consumer Financial Protection, a consumer financial services provider must make available to a consumer information in the control or possession of the provider concerning the consumer financial product or service that the consumer obtained from the provider. The Bureau is issuing this Advance Notice of Proposed Rulemaking to solicit comments and information to assist the Bureau in developing regulations to implement section 1033.

From tracking expenditures to trading stocks, there has been an explosion in apps that pull data from consumer checking and saving accounts. App providers say that authorized access to that account data helps make it easier for consumers to invest, borrow money or make payments.

But consumer advocates say growing competition between firms to hoard such data puts consumers at risk, since it is not always clear how that data is then used.

They point in particular to the growth of artificial intelligence-driven alternative credit scoring and lending data models, which draw on data beyond traditional FICO scores and general credit reports, to make better underwriting decisions.

While those lending models could help get credit to under-served groups, they require stricter oversight to ensure they do not lead to new forms of lending bias, say consumer groups.

Thursday’s proposal, which is subject to a 90-day comment period before it can be adopted, seeks to address this and related issues.

“We agree that consumers should have access to their own data and that its use can be beneficial,” said Chi Chi Wu, an attorney at the National Consumer Law Center.

“But allowing access by others to this data can also pose significant risks, and part of CFPB’s goal in this rulemaking should include protecting against those.”

(Reporting by Katanga Johnson in Washington Editing by Matthew Lewis)

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