The Consumer Financial Protection Bureau last week launched a public inquiry into the growing array of services that share consumer data. Many of these services use bank and credit-card account records to offer low-cost mortgage and consumer loans, as well as tax-preparation tools. The inquiry is a 90-day call for comments and is generally a prelude to issuing a formal rule.
The Bureau has expressed concern that consumers are not as free as they should be to give their bank account information to online lenders, financial planners, and other third party services. The comment period is there to see if traditional banks have erected improper hurdles to such data-sharing with new companies that could provide services useful to consumers. Several new online products and services have become available recently. Traditional banks, according to the CFPB, may resist open data sharing as a way of keeping a captive audience for their own products, even when they do not yet have products ready for the market.
Also at issue is whether so-called “aggregators” create security risks or burden bank networks. These entities use a wide array of online means to tap bank balances, transaction history, and other information to provide services like budgeting or payments to consumers. Because these inquiries are automated, and because of the wide net they cast, traditional banks have often blocked access to protect their servers and networks.
These tensions were highlighted recently when it was reported this fall that several large banks temporarily curtailed the flow of data from customer accounts to websites that help people manage their personal finances, such as Intuit Inc. The outages, from banks including J.P. Morgan Chase, Wells Fargo and Bank of America, were motivated by a desire to protect their information systems and to ensure account information was being properly safeguarded. Financial technology firms sounded the alarm, arguing that the banks could use such shutdowns to effectively cut off competing services. With this inquiry, the CFPB is signaling its support for financial technology companies in their scuffles with banks and credit unions over customer account information.
“Impeding access to digital financial records not only blocks innovation from new entrants, it also reduces the incentives for financial institutions to innovate,” said CFPB Director Richard Cordray in prepared remarks.