CFPB Director Outlines Future Rulemaking on Consumer Financial Data Rights
Commentary by Steven Lofchie
CFPB Director Rohit Chopra said that he intends to "activate a dormant authority" under Section 1033 of the Consumer Financial Protection Act ("Consumer rights to access information") to give consumers control over the financial data they maintain with banks, and to facilitate transfer of their information to another financial institution. In remarks at a FinTech conference, Mr. Chopra said that this will give consumers the power to walk away from a company that lacks the best services or charges excess fees.
Mr. Chopra said that the CFPB is researching methods to improve data sharing practices between financial institutions. He stated that current data sharing standards are inconsistent across the industry. Mr. Chopra identified three elements in a future rulemaking, including (i) "requiring financial institutions offering deposit accounts, credit cards, digital wallets, prepaid cards, and other transaction accounts to set up secure methods, like APIs, for data sharing"; (ii) stopping "incumbent institutions from improperly restricting access when consumers seek to control and share their data"; and (iii) establishing "safeguards to prevent excessive control or monopolization by one, or even a handful of, firms."
Mr. Chopra also weighed in on the controversy of banks' policies on extensions of credit. He expressed concern that many banks currently consider external factors related to an applicant's ability to pay back a loan, which often creates a bias that presumes a customer's ability to pay based on generalizations. He suggested that a CFPB rule allowing customers to move their financial information from one bank to another will improve credit practices by allowing banks to make credit decisions based on customer-specific information, rather than models.
Mr. Chopra said that due to the unique nature of the CFPB's rulemaking process, he does not expect a rulemaking to be finalized until 2024, but said that the CFPB will soon begin the process of gathering information from small banks and financial institutions and will subsequently publish a report on its findings in early 2023.
Commentary
Essentially, Mr. Chopra argues that a customer should have access to, and control over, its financial records, just as a customer (patient) has control over its medical records, which it has the right to transfer from one doctor to another.