How to Protect Consumer Rights in Battle Over Data Access
For those who believe passionately in the democratization of consumers' financial data, the Consumer Financial Protection Bureau's new interest in protecting third-party access to such data is a significant victory.
Earlier this fall, CFPB Director Richard Cordray — in a keynote at the Money20/20 event — called on financial institutions to ensure consumers have continuous, unfettered access to their data, and expressed “grave concern” that several financial institutions are limiting their customers' data access. The bureau followed up on his remarks last week by seeking public comment on what regulatory steps might be needed to ensure access.
Software tools, which require access to financial data, can help Americans create and monitor a budget, minimize the fees they incur from their financial institutions, optimize their investments, help manage fixed incomes and more. To improve their financial health, consumers'right to access and share their financial data is critically important.
According to the Federal Reserve's 2016 survey on Americans' economic well-being, 42% of Americans were unable to pay their bills at least one month within the last year. The survey also found nearly half of American households would have to incur debt or sell assets to pay for a surprise $400 expense. In this reality, the clearest path toward improving Americans' financial lives is one that allows Americans to access their financial information via the tools and providers they choose.
Thankfully, Congress presciently codified consumers' right to their data. Section 1033 of the Dodd-Frank Wall Street Reform and Consumer Protection Act ensures that consumers are supposed to be given the opportunity to take advantage of the broad range of technology-powered, data-driven tools that are available in the market to empower them to improve their financial health.
Despite this section, access to financial transaction data to power these impactful tools is under threat. Several U.S. financial institutions have instituted a range of technical and administrative hurdles that interfere with the consumers' rights of access to their financial data. A small number of financial institutions have moved to limit the amount of data that consumers can access. Other institutions are seeking to define bilateral agreements with onerous contractual terms.
These actions would restrict consumers'ability to take full advantage of marketplace solutions that would empower them to improve their financial state. As a result, there are an escalating number of cases where consumers are excluded from engaging with services provided by the financial technology community that have the ability to improve their financial well-being.
There are ways in which the wider financial community can look to remedy this situation and build on Section 1033 of Dodd-Frank. One solution is a consumer bill of data rights that codifies a consumer's absolute right to control access to their financial data in whatever manner they choose and, in turn, to utilize the power of technology to improve their financial well-being.
It is undeniable that all financial institutions operate in a highly complex regulatory environment with legal and moral obligations to protect their customers'assets. This means that secure and unfettered access to consumer's financial data must be granted in a balanced, principled ecosystem that should also define the responsibilities of all of the players in the market.
Under such an ecosystem, financial institutions are compelled to safely and securely share their customers' data upon their request, aggregators need to work to securely enable the connection between financial information and the data-driven fintech tools consumers wish to use, and fintech service providers need to ensure that appropriate safeguards are integrated and balanced in all new innovations.
A coordinated and pragmatic approach, which encompasses the entire industry, is necessary; however, it's important that we are all working toward a common end goal that places consumers at the forefront. The creation of a consumer data bill of rights would build on the foundation laid out by Dodd-Frank by establishing the roles and responsibilities of each player in the evolving ecosystem.
The democratization of data comes with requirements for all stakeholders in the 21st century's financial services system, all in support of enabling and protecting American consumers and their financial data. The growth of the financial technology sector brings with it immense opportunities to empower Americans to take better control of their finances and, in turn, offer their children the essence of the American dream: a life better than their own.
This is the assumed goal of all who work in the financial services industry. It is an outcome that we are closer to achieving with the latest technologies. Allowing data to enable the promise of these financial technologies is a vital step in this effort. This data needs to be freely accessible to consumers whenever they need it to be effective.
Steve Boms is vice president of government affairs at Envestnet | Yodlee, a data aggregation and analytics platform.