The Honorable Rohit Chopra
Director
Consumer Financial Protection Bureau
1700 G Street, NW
Washington, DC 20552
Re: Small Business Advisory Review Panel for Required Rulemaking on Personal Financial Data Rights: Outline of Proposals and Alternatives Under Consideration
On behalf of the American Fintech Council and its members, we thank the Consumer Financial Protection Bureau (CFPB or Bureau) for this opportunity to provide feedback on the CFPB’s Small Business Advisory Review Panel for Required Rulemaking on Personal Financial Data Rights: Outline of Proposals and Alternatives Under Consideration (SBREFA Outline of Proposals) being considered in its upcoming rulemaking on section 1033 (Section 1033) of the Dodd-Frank Wall Street Reform and Consumer Protection Act (Dodd-Frank).
AFC’s mission is to promote an innovative, transparent, inclusive, and customer-centric financial system by supporting the responsible growth of lending, fostering innovation in financial technology (Fintech), and encouraging sound public policy. AFC members are at the forefront of fostering competition in consumer finance and pioneering ways to better serve underserved consumer segments and geographies. For instance, AFC has publicly supported 36 percent rate caps at state and federal levels, which is a key component of addressing responsible lending. Our members are also lowering the cost of financial transactions, allowing them to help meet demand for high-quality, affordable products. We welcome the opportunity to address consumer data privacy as this is an important issue for our members.
AFC supports regulation that will protect consumers and ensure that they can be confident about the privacy and use of their data. We believe Section 1033 regulation can help spell the end of consumers paying too much for credit and earning too little from their bank accounts. A successful rulemaking will help consumers more easily switch their business to Fintechs and banks that offer lower rates on loans and that pay higher interest and rewards on checking and savings accounts. It will improve market function so that consumers are treated better and the best options in the market can win.
We also encourage the Bureau to consider its shared jurisdictional authority on several topics addressed in this request for information and future rulemaking to maintain consistency and partner with other financial regulators where these issues pertain to the financial services industry. The Bureau should continue to balance regulation and consumer protection in a manner that does not inadvertently hurt responsible businesses, especially Fintech platforms that are providing products that help consumers and should avoid proposing duplicative or extra-jurisdictional regulatory requirements in its upcoming rulemaking.
I. Legitimate Use of Confidential Consumer Data
Well-regulated financial systems, including technology companies and technology-focused banks like AFC’s members are critically important today for the financial health of consumers and the banking system. More and more consumers are seeking credit and applying for loans from their mobile devices and/or home computers, resulting in the collection of relevant data required to address consumer need and potential risks.
We appreciate the need for balancing consumer permissions and consent as it relates to their data use with the legitimate business need for the use of data. We urge the Bureau to consider current exemptions under the Gramm-Leach-Bliley Act (GLBA) which account for bona fide business needs regarding consumer data and privacy. Access to customer data has been crucial to the development of online platforms and lending for our members to better serve their customers. Today, Fintech platforms are making sure that consumers and businesses can readily access the capital they need to thrive and grow. Platforms are reaching borrowers with more cost effective, convenient, and transparent credit options, made possible in part by the ability of customers to securely share their financial information with online platforms without fear of abuse of their data.
We firmly believe in the balance of consumer choice and legitimate business needs. AFC also believes that although the protection and security of consumer financial information is of the utmost importance, unnecessary and burdensome restrictions should not be placed on entire industries to address the bad actors. Developing new systems and operational practices to comply with overly complicated or prescriptive rules will be time consuming and expensive. This may divert capital and resources that would otherwise contribute to the expansion of capital to the benefit of consumers through new and improved products. Some of our members are concerned about a future rulemaking that will result in additional compliance costs and burdens that may result in less, not more, access to credit as a whole.
Future rulemaking that reasonably guarantees customers’ access to and protection of their own data will help drive the financial innovation that will be crucial to economic growth. Traditional financial institutions, financial technology firms, and regulators should all work collaboratively to make sure that financial services customers can find the tools and products that will enable them to borrow, save, and invest in the manner that best meets their financial needs and does not hurt their informational privacy.
In the context of modern data collection and usage practices, customers are offered significant benefits, such as the ability to access affordable loans and other banking services not previously available to them. Innovative fintech companies are able to offer these products responsibly to consumers by leveraging the consumer-provided data collected on the fintech company’s platform. As evidenced in multiple government, industry, and academic reports, including the recent report of the US Treasury, these activities have provided significant benefits to consumers, particularly those in traditionally underserved areas, such as low- and moderate-income communities. AFC is cognizant that some consumers may feel uncomfortable with the fact that companies collect, retain, and use their data to provide innovative products and services. AFC members continuously strive to exemplify proper protections for their consumers, even in the absence of federal or state regulation. Overall, in the forthcoming rulemakings, we believe that the CFPB should focus on achieving its goals of increasing competition in the financial services industry and ensuring that consumers have the best opportunity to choose the financial service provider that best fits them, instead of creating prescriptive rules that would not encourage innovation, nor further consumer choice.
II. Rulemaking Priorities
To ensure effective rulemaking on the issues put forth in the SBREFA Outline of Proposals, AFC believes that the Bureau should give due consideration to properly:
As noted in the SBREFA Outline of Proposals, the CFPB intends to focus its initial rulemakings on Section 1033 towards a “financial institution” as defined by Regulation E, and a “card issuer” as defined by Regulation Z. We respect the Bureau’s jurisdictional boundaries as it relates to the regulation of financial and nonfinancial institutions, as well as its rationale for prioritizing the regulation of "covered data providers” due to their importance in consumer financial data issues. However, given the complexity and interconnectedness of consumer financial data with market participants outside of the covered data providers identified by the CFPB, we recommend that the Bureau expands its definition of covered data providers for the purposes of its initial rulemaking on Section 1033. Further, as a direct response to question 5, we believe that the CFPB should pursue a more holistic approach to its forthcoming rulemakings on Section 1033.
AFC and its members also recommend that the CFPB coordinate with other agencies, such as the Federal Trade Commission (FTC), with shared jurisdiction over consumer data rights to ensure an effective regulatory structure that avoids regulatory arbitrage.
Metrics
To properly balance burdens on covered data providers while ensuring that the largest number of consumers are served through the agency’s initial rulemakings, the Bureau should ensure that it is establishing functional metrics that ensure proper inclusion and exemption of data providers. Singular metrics that the CFPB identified in its SBREFA Outline of Proposals, such as asset size and activity thresholds, do not necessarily reflect the nuances of how data may or may not be used by bank and nonbank financial institutions, or the risk profile of these activities. Therefore, we recommend that the CFPB consider combining various metrics to construct a risk-based approach in its upcoming rulemaking.
III. Impact of Data Collection on Underwriting and Risk Assessment
Bank and nonbank financial institutions collect consumer data for a myriad of use cases. Most common among these use cases are opportunities to conduct underwriting more effectively, offer consumers more tailored financial products or services, and ensure proper fraud risk mitigation. As evidenced by research from the government and industry sources, collection and use of additional data variables can mitigate fraud risks and substantially increase access for borrowers traditionally underserved by the financial services industry. AFC members have leveraged consumer-permissioned data collection practices and innovations, such as machine learning, to more effectively assess consumers that engage with their products and services, to ensure that consumers are responsibly served, and that no undue risk enters the financial system.
Conclusion
AFC urges the Bureau to continue its interagency work with the FTC and other regulators as it moves forward with rulemaking on this very important topic. In addition, we urge the CFPB to work with existing legal and regulatory frameworks as it relates to legitimate use of consumer data and to strike a fair, feasible balance between privacy rights and legitimate business interests in data usage. Consumer data protection and the ability to provide financial services to our customers is of the utmost importance to our members. We thank the CFPB again for this opportunity to comment.
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About the American Fintech Council: The mission of the American Fintech Council is to promote an innovative, responsible, inclusive, customer-centric financial system. You can learn more at www.fintechcouncil.org.
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