The Consumer Financial Protection Bureau (CFPB) initiated rulemaking that would require banks and other financial institutions to make a consumer’s personal financial data available to them upon request.
The rule would allow consumers to transfer their account history from their existing financial institution to a new one, according to the agency’s outline proposal published Thursday. The CFPB said the change would encourage competition and enable consumers to obtain new financial services offered by startups and financial technology (fintech) firms.
Consumers could also ask their financial data be transferred to a third party, with certain privacy protections in place, to gain access to a budgeting app or other fintech tools, for example. Most third parties currently obtain customer financial data by alternative methods like screen scraping, the CFPB said, which is not secure or, as more personal financial data is encrypted, sustainable.
As part of the CFPB’s rulemaking process, the agency must convene a panel of small businesses to provide input on its intended proposal. It will release a report regarding feedback received in the first quarter of 2023 before advancing to putting out a formal proposal by the end of next year. The agency hopes to finalize a rule in 2024.
According to the CFPB’s summary of the outline, financial data that would have to be made available by covered entities at a consumer’s request include:
- Periodic statement information regarding transactions and deposits that have settled, including fees, account terms and conditions, and the annual percentage yield of an asset account or the annual percentage rate of a credit card account;
- Information regarding prior transactions and deposits that have not yet settled;
- Information about prior transactions not typically shown on periodic statements or online financial account management portals;
- Online banking transactions the consumer has set up but have not yet occurred;
- Account identity information; and
- Other information, including consumer reports obtained and used by the covered data provider in deciding whether to provide an account or other financial product or service to a consumer; fees the covered data provider assesses on its consumer accounts; bonuses, rewards, discounts, or other incentives the covered data provider gives to consumers; and information about security breaches that exposed a consumer’s identity or financial information.
The CFPB is pursuing the rulemaking via a long-dormant section of the Dodd-Frank Act, which orders covered entities like banks and other financial institutions to make available to consumers, upon request, “transaction data and other information concerning a consumer financial product or service that the consumer obtains from the covered entity.” Dodd-Frank directs the CFPB, in its rulemaking, to “promote the development and use of standardized formats for information made available to consumers,” the agency stated on its personal financial data rights rulemaking page.
The CFPB held its first hearing on the rule in 2016, issued an advanced notice of proposed rulemaking in October 2020, and will be accepting comments on its outline until January 2023.
“Dominant firms shouldn’t be able to hoard our personal data and appropriate the value to themselves,” said CFPB Director Rohit Chopra in a press release. “The CFPB’s personal financial data rights rulemaking has the potential to jumpstart competition, giving Americans new options for financial products.”
In a speech Tuesday, Chopra compared the potential rule to allowing customers to transfer their phone numbers to different carriers. The rule would reduce switching costs or barriers to entry, promote price transparency and shopping, reduce conflicts of interest, and place limits on business activity “in order to ensure that firms don’t exploit their control over critical networks,” he said.
“[W]e expect that the public will gain more bargaining leverage once data-holding companies must share authorized consumer data with authorized third parties,” he said. “And, this will lead to more shopping by consumers, both because they have the leverage to walk away and because they will have access to more tailored products and services.”
The proposal outline comes as the CFPB faces an existential crisis due to a federal appeals court decision regarding its funding mechanism. The agency joins the Securities and Exchange Commission in working to pass dormant provisions of the Dodd-Frank Act.