The U.S. consumer agency is accepting comments on a proposed rule that would allow individuals to control their personal information and decide when to share it.
WASHINGTON, D.C. – The U.S. Consumer Financial Protection Bureau (CFPB) has proposed a rule that would accelerate a shift toward open banking. It would give consumers control over personal financial data and new protections against companies that misuse it.
The proposed Personal Financial Data Rights rule activates a dormant provision of law enacted by Congress more than a decade ago, CFPB says.
If approved, the rule would increase competition among financial institutions by forbidding them from unilaterally hoarding a person’s data. Instead, it would require them to share someone’s data with other companies offering better products if the consumer requests it.
In theory, a consumer unhappy with their current provider, Bank A, could more easily switch their information and ongoing business to Bank B under the rule.
“With the right consumer protections in place, a shift toward open and decentralized banking can supercharge competition, improve financial products and services, and discourage junk fees,” says CFPB Director Rohit Chopra. “We are proposing a rule to give consumers the power to walk away from bad service and choose the financial institutions that offer the best products and prices.”
Currently, no across-the-board rules create oversight for financial data. One financial institution might not share it at all, even upon request; another might share some but not all. A consumer with two accounts in two financial institutions likely has two different histories. CFPB says the proposed rule will remedy that.
Personal Financial Data Rights proposed rule overview
- Junk fees: Banks and other providers would have to make personal financial data available – at no charge to consumers – through dedicated digital interfaces that are safe, secure and reliable.
- Sharing data: People would have a legal right to grant third parties access to information associated with their credit card, checking, prepaid and digital wallet accounts. This could benefit consumers with thin credit scores when they apply for a mortgage. It will also help consumers switch providers more easily.
- Bad service: If an institution hoards a consumer’s data, it’s harder for them to walk away, CFPB says. But the rule, if enacted, would empower them to walk away.
In addition to “robust protections to prevent unchecked surveillance and misuse of data,” CFPB says it provides new rules for financial institutions, including:
- Third parties could not collect, use, or retain data to advance their own commercial interests through actions like targeted or behavioral advertising.
- People could revoke access to their data. If they do so, a financial firms would have to do so and delete that data after a reasonable time.
- Companies won’t be allowed to collect consumer data by “screen scraping” via the internet, and other tactics CFPB calls “risky data collection practices.”
- The rule also contains several fair-housing requirements to ensure industry standards are open and inclusive.
The requirements would be implemented in phases, with larger providers subject to them earlier than smaller ones. Community banks and credit unions with no digital interface would be exempt.
Comments must be received on or before Dec. 29, 2023.
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