The U.S. Consumer Financial Protection Bureau (CFPB) is seeking public opinion on a proposal to modify rules governing the access and use of consumer financial data which is collected by a large number of online financial institutions.
They proposed an update of the 2010 Dodd-Frank Financial Reform law to ensure online banks, financial technology firms and data aggregators act in a consumer’s best interest when collecting their data.
The agency said in a statement that “while consumer access to financial records can enable the development of innovative and beneficial consumer financial products, it can also present consumer risks”
There is a huge increment in the number of apps pulling data from consumer checking and savings accounts for many services like tracking expenditure and trading stocks. App providers say that authorized access to that account data helps make it easier for consumers to invest, borrow money or make payments.
But consumer advocates say growing competition between firms to hoard such data puts consumers at risk since it is not always clear how that data is being used.
They point specifically to the expansion of artificial intelligence-driven alternative credit scoring and lending data models, which draw on data beyond traditional FICO scores and general credit reports, to create better underwriting decisions.
Consumer groups comment on this situation that, “while those lending models could help get credit to under-served groups, they require stricter oversight to ensure they do not lead to new forms of lending bias.”
Chi Chi Wu, an attorney at the National Consumer Law Center stated that “we agree that consumers should have access to their own data and that its use can be beneficial, but allowing access by others to this data can also pose significant risks, and part of CFPB’s goal in this rulemaking should include protecting against those.”
