WASHINGTON–The CFPB and the European Commission have announced plans to start an “informal dialogue” across what they said will be a range of financial consumer protection issues.
“The digitalization of the financial services sector has significant implications for businesses and households, from pricing and customer service to competition and privacy,” the organizations said in a joint statement. “Financial institutions have expanded their deployment of automated decision making, including the use of artificial intelligence (AI). New products and services, such as Buy Now, Pay Later, are shifting the way people borrow and spend money. Digital payments are faster and more frictionless and are increasingly offered and controlled by Big Tech companies.”
The Risks
According to the two government bodies, these developments, if left unchecked, could:
- Increase consumers’ exposure to fraud and manipulation
- Limit their product options over time, threaten their control over their own data
- Force them to accept more expensive personalized pricing for the same products and services compared to other consumers.
‘We Must Do More’
“Policymakers on both sides of the Atlantic are responding to these issues, but we must do more to compete with the pace of evolving markets and consumer needs,” the two regulatory bodies said, adding the primary focus will be on digital developments in the financial sector and the impact on consumers, to improve policy and regulatory cooperation.
“This cooperation includes sharing insights and experience on issues related to consumer financial products and services, with the aim of exchanging technical expertise and coordinating on the most pressing policy issues,” the agencies announced.
The Dialogue
According to the two governments, the dialogue will cover the following issues:
- Automated decision making and processing of data in financial services, including the deployment of AI, and the related opportunities and risks for consumers such as the lack of transparency, misuse of data and violation of financial privacy rights, discrimination, and exclusion.
- New forms of credit such as ‘Buy Now, Pay Later’ products, and the related risks to consumers, including over-consumption and over-indebtedness.
- Strategies to effectively prevent over-indebtedness and to help over-indebted consumers to repay their debt sustainably.
- Digital transformation that ensures fair choice and access to financial services for consumers, including the unbanked, underbanked, and consumers who want to protect their own data.
- Implications for competition, privacy, security and financial stability of Big Tech companies offering financial services, including payment services.
The Next Steps
The governments said the European Commission and the director of the CFPB will meet at least once a year.
“This informal dialogue will involve staff discussions, including bilateral meetings between senior staff and subject matter experts, and roundtables, involving, as appropriate and depending on the topic, stakeholders that include consumer groups, industry representatives, the OECD G20 Task Force on Financial Consumer Protection, and/or others,” according to the government. “Certain subjects may need to be addressed in a non-public format, while other issues may be appropriate for broader stakeholder involvement.”
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