Corporate Counsel Daily, ABA, Better Markets submit comments on CFPB proposal to implement Dodd-Frank Section 1033, (Jan 3, 2024)

By Patricia K. Ruiz, J.D.

The Bureau proposed the rule last October with the aim to facilitate a “shift toward open banking” and improved customer control over personal financial data.

The American Bankers Association (ABA) announced it has submitted comments to the Consumer Financial Protection Bureau in response to its proposed rule for implementing Section 1033 of the Dodd-Frank Wall Street Reform and Consumer Protection (Dodd-Frank) Act, raising concerns that the rule may appear reasonable in abstract but will break down in practical application. Better Markets, meanwhile, announced it submitted comments stating that the CFPB rule will protect consumers’ privacy, combat racial and economic injustice, and foster open competition.

ABA recommendations. First, the ABA recommended that the CFPB create a final rule that comports with the bounds of authority delegated to it by Section 1033, specifically noting that the rule must not prohibit data providers from assessing fees, as doing so is not supported by law. Additionally, the ABA recommended that the CFPB take a more active role in managing the data sharing ecosystem it is creating, while affording data providers flexibility to manage risk and prevent fraud. To that end, the CFPB must make clear that data providers are not responsible for ensuring third parties and data aggregators are complying with the final rule. The ABA urged that there should be a clear and unambiguous basis to supervise data aggregators and that the CFPB must ensure a baseline of compliance with the final rule from nonbanks operating in the ecosystem. The final rule should encompass the full spectrum of risk management concerns faced by banks and should encourage the use of data access agreements and provide flexibility to combat fraud.

The ABA recommended that the CFPB must not mandate that Section 1033 be used as a vehicle to initiate payments to and from a Regulation E account and that the CFPB must permit recoupment of costs as a matter of public policy. The ABA also recommended that the CFPB clarify that data providers making information available pursuant to Section 1033 are deemed not to be furnishers under the Fair Credit Reporting Act. Finally, the ABA recommended that the CFPB should revise several sections of the regulatory text to avoid confusion or otherwise ensure the practical operationalization of the rule. The ABA provided specific examples of regulatory text to be revised with this in mind.

Better Markets comments. In its response to the CFPB, Better Markets wrote that it believes the proposed rule strikes an appropriate balance between protecting consumers, creating standards and accountability mechanisms for financial service providers, and bolstering consumers’ rights to control their own financial data, while also fostering competition and innovation. Better Markets wrote that the framework will make it easier for consumers to take control of their financial futures and choose products and services that work best for them, providing consumer protections across a broader swath of the financial system.

Better Markets urged the CFPB to expand the scope of entities or persons who would be covered by the rule to help ensure more consumers are protected in more instances. It also called upon the CFPB to continue to pursue a data minimization approach throughout the rule, limiting what consumer information can be collected, how it can be used, by whom, and under what circumstances. Better markets reasoned that progress on these issues would have significantly positive benefits for individuals who have been marginalized by the existing financial system. Finally, Better Markets urged the CFPB to keep racial justice and equity concerns at the forefront and, as the rule is implemented, to monitor and report on how and whether the new data access rights and protections afforded by the rule is achieving parity with respect to racial equity.

CFPB final rule. The CFPB issued the proposed rule in October 2023 (see Banking and Finance Law Daily, Oct. 20, 2023). The CFPB stated it intends the proposed Personal Financial Data Rights (PFDR) rule to facilitate a “shift toward open banking,” that is, banking with ostensibly improved customer control over personal financial data; expanded competition among financial service providers; and, ease of consumer mobility when it comes to changing service providers. The CFPB said the proposed rule will allow people to “break up with banks that provide bad service” and reduce misuse or wrongful monetization of “sensitive personal financial data.” Industry associations expressed generally supportive initial reactions; however, most expressed specific concerns about holding fintechs to the same standards as non-banks; costs and other implementation issues; liability for data mishaps; and whether incumbents will really be able to authenticate upstart entrants attempting to access consumer data. The industry expects a final rule in 2024. The CFPB said it intends to cover additional products and services in future rulemaking.

Companies: American Bankers Association; Better Markets

RegulatoryActivity: BankingOperations CFPB DoddFrankAct FinancialStability FinTech GCNNews Privacy