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US trade groups have petitioned the Consumer Financial Protection Bureau (CFPB) to bring large fintechs, bigtechs and data aggregators under its supervision ahead of its open banking rulemaking.
Earlier this week (August 2), eight national trade groups, including the American Bankers Association (ABA) and The Clearing House Association (TCH), filed a petition with the CFPB urging it to make rules to ensure fintechs, bigtechs and data aggregators abide by the forthcoming open banking regulations.
The request has been filed in the agency’s new petition process, which was set up in February to make it easier for the public to engage with the agency and send petitions for rulemaking directly to the CFPB.
This has been the first time that any of the groups have utilised the CFPB's petition process.
The move comes as the agency is working to implement rules under Section 1033 of the Dodd-Frank Act, which will govern how consumers can share their financial data with third-party providers.
Although the Section 1033 rule requires data aggregators and data users, such as third-party fintechs, to comply with standards for sharing consumer financial data, these entities will not be subject to the CFPB’s ongoing supervision for compliance when the rule is finalised, similar to current arrangements.
At present, the market largely relies on discrete and contractual relationships by banks to maintain oversight and assess any potential risks to consumers by data aggregators and data users, or requires banks to implement other mitigation strategies for screen scraping activities.
“This supervisory imbalance creates both an unsustainable model as the aggregation services market grows and the risk that the laws applicable to the activities of those larger participants in this market will be enforced inconsistently,” the petition reads.
“These risks, in turn, raise the prospect that potential consumer harm associated with the activities of data aggregators and data users will not be timely identified and remedied.”
The regulator, however, can define by rule larger nonbank participants of a consumer financial product market that thus become subject to its examination and supervisory activities.
It has previously done so in the markets such as international money transfers, consumer reporting, consumer debt collection, student loan servicing and automobile financing.
The trade groups now ask the CFPB to start a rulemaking process to define larger participants in the market for aggregation services.
“Consumer protection laws and regulations must be enforced in a fair and comparable way to ensure legal and regulatory obligations are observed.”
“We believe the CFPB should ensure that data aggregators and data users that are larger participants in the aggregation services market — not just banks and credit unions — are examined for compliance with applicable federal consumer financial law, especially the requirements of the forthcoming 1033 rulemaking, including the substantive prohibitions on the release of confidential commercial information,” the petition adds.
Data aggregators have access to a tremendous amount of consumer financial data, with some estimating they hold log-in credentials for tens of millions of customers.
Although consumers may consent to the sharing of their financial data, a TCH survey last year showed that many of these consumers are unaware of how these intermediaries collect, use or share their data.
Bringing large data aggregators under CFPB supervision has been supported by a number of nonbank organisations, including Plaid and Yodlee.
In its comment submitted to the CFPB’s 2020 advance notice of proposed rulemaking, Plaid said “[m]any data aggregators, including Plaid, have reached a size at which supervision would provide helpful oversight and assurances to the ecosystem”.
Similarly, Yodlee said the CFPB “should use its authority to bring under its supervision all data aggregators and authorised entities accessing consumer financial data directly from data holders. These entities — including Yodlee — clearly meet the threshold of ‘larger participants’ in the financial services ecosystem.”
Yodlee told VIXIO, as a market leader in financial data aggregation, the company "is proud to support and endorse" the call for oversight and supervision of data aggregators by the CFPB.
"[We] believe that the responsible management and secure exchange of consumer permissioned financial data is the right thing to do."
