WASHINGTON–In follow up to its announcement earlier this week that it will be facilitating rules to provide for personal financial data rights for Americans, paving the way for open banking and open finance, the CFPB has now outlined options it said are designed to strengthen consumers’ access to and control over their financial data.
The issuance of the options is the first step before issuing a proposed data rights rule that would implement section 1033 of the Dodd-Frank Act, according to the CFPB.
The Bureau said that under the options it is considering, consumers would be able to more easily and safely walk away from companies offering bad products and poor service and move towards companies competing for their business with alternate or innovative products and services.
Creating a Marketplace
“This rulemaking aims to create a marketplace where companies would need to improve their offerings to keep their customers,” the CFPB said.
“Nascent firms would be able to use consumer-authorized data to build and widely offer products and services that can compete with big incumbents. Consumers could switch providers to get a better deal or escape poor customer service, and companies would have to keep and attract customers through competitive prices, high-quality services, and improved products.”
According to the Bureau, the current environment “illustrates the imperative” for this rulemaking. Companies compile vast troves of personal data, including information about people’s use of financial products and services.
“By monopolizing the use of personal financial data, financial institutions are able to block competitors’ access to potential customers and stifle development of competitors’ products and services. In addition, data protection concerns have contributed to a lack of trust among market participants, and a growing sense of powerlessness among the general public,” the CFPB said. “Clear data rights for consumers have the potential to give individuals more bargaining leverage.”
Ideas Under Consideration
The CFPB said its new document is an outline of proposals and alternatives under consideration for the CFPB’s data rights rulemaking.
“If today’s proposal is finalized, the rule would require firms to make a consumer’s financial information available to them or to a third party at that consumer's direction,” the CFPB said.
As described in the outline, the CFPB is considering proposals, for instance, that would empower consumers who want to switch providers to transfer their account history to a new company, so they do not have to start over if they are unsatisfied with the service provided by an incumbent firm.
The CFPB said it is also considering proposals that would include important options around privacy for personal financial data authorized for third party use, including limitations that would prevent third parties from reselling authorized data for other uses.
Panel to be Formed
The rulemaking process will include panel convenings to seek feedback from small entities on the proposals under consideration. Later, the panel will prepare a report on the input received from the small entities, and the CFPB will consider the input as it develops a proposed rule, according to the Bureau.
The CFPB’s Outline of Proposals and Alternatives Under Consideration can be found here, Small Business Advisory Review Panel for Required Rulemaking on Personal Financial Data Rights .
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