As regulators create new ‘open banking’ rules to make it easier for consumers to share financial information, smaller banks urge CFPB to consider more gradual technology shift and weigh costs I’m here.
The Consumer Financial Protection Bureau’s Open Banking Proposal is intended to allow consumers to seamlessly switch between financial service providers, giving banks and credit card We are requesting that you develop technology that you can use to share with your emerging competitors. Public comment on his CFPB outline for that plan was closed on Jan. 25.
Credit unions and community banks have urged the CFPB, in particular, to develop rules to eliminate the practice of so-called “screen scraping,” in which third-party apps and websites use consumer login credentials to access websites. I asked them to slow down. A bank or card issuer account. Large banks and privacy advocates support ending the practice, arguing that scraping poses security and privacy risks.
Consumers’ ability to easily transfer data to their bank’s competitors could spur better and cheaper services. But public comment also indicates that agency rulemaking, required under Section 1033 of the Dodd-Frank Act of 2010, is fraught with concerns about privacy, fairness, and the readiness of the industry to embrace change. increase.
“In the long term, the commoditization of financial data, driven by the CFPB’s goal of ‘reducing switching costs,’ could have the opposite effect of what was intended. Community Bankers of America (ICBA) said in a letter to the CFPB.
data scraping
Data aggregators such as Plaid and Yodlee now use screen scraping as their primary tool to facilitate data transfer between banks and other financial companies.
Banks and privacy advocates have warned of the security and privacy risks associated with scraping, such as third parties misusing consumer credentials or collecting more data than they are allowed to.
Data aggregators have also been accused of selling consumer data without consent, according to the nonprofit Electronic Privacy Information Center.
The CFPB’s overview of open banking assumes that banks will move almost entirely from scraping to systems that set up application programming interfaces (APIs) and data portals for transferring consumer information.
An API is a type of standardized interface software that data providers use to authenticate consumers and transmit requested information. Consumers are not required to share their credentials with third parties.
But according to ICBA, moving to data-sharing portals like APIs can be expensive and out of reach for smaller financial institutions.
The Federal Insured Credit Union Association said it could hurt Wall Street banks and emerging fintechs even more.
EPIC supports the adoption of standard APIs to reduce reliance on data aggregators, the group said in a letter to the CFPB.
The industry is steadily moving toward using APIs and data portals instead of enabling sharing of customer information. Plaid estimates that more than 60% of his traffic now uses his API, mainly due to contracts with big banks, according to a letter to the CFPB.
“Technology Neutral”
ICBA has said it supports moving to API standards for sharing customer data. However, advocacy groups for the community bank said in a letter that APIs currently have “limited adoption”, largely because the technology is expensive to purchase.
The group and NAFCU asked the CFPB to consider “technology-neutral” requirements that would allow screen scraping or to phase in API requirements. This gives smaller financial institutions time to adopt them, while also avoiding the requirement that financial institutions accept all screen scraping requests.
Other commenters, including the nonprofit Future of Privacy Forum, also urged government agencies to tighten data security requirements for companies that receive consumer financial information.
PNC Bank’s parent company, PNC Financial Services Group Inc., told the CFPB that consumers face an increased risk of identity theft and financial fraud when data recipients are not subject to bank-level data security standards and regulatory oversight. said he was worried about it. Federally regulated financial institutions are subject to strict information security requirements.
“Consumers are entitled to equally stringent data protection regardless of whether their data is stored in banks or non-banks,” the PNC said in a letter to authorities.
The CFPB can bring data aggregators and fintech apps under supervision as a way to protect consumer data.
FDATA North America, a trade association representing data aggregators, has urged the CFPB to oversee its members.
wider range
The CFPB has so far considered imposing data sharing requirements on banks and credit card companies.
But other consumer finance players not included in the CFPB’s plans are playing an increasingly important role in the industry. In the United States, non-bank mortgage lenders issue the majority of mortgages. The majority of US auto loans are issued by auto lenders owned by auto companies. Consumers are also increasingly making purchases through “buy now, pay later” and installment loan services.
Including only banks and credit card companies in Section 1033 gives us a glimpse of the money that goes into and out of a consumer’s bank account each month, but it doesn’t give us the full picture, for example interest rates or the remaining term of a mortgage. Most trade groups said.
“It would be logical for the industry to withdraw from a wider range of financial accounts held by consumers in order to better assess their financial health,” the Consumer Bankers Association said in a comment letter.
According to the Financial Technology Association, an industry group that includes data aggregators and fintech lenders, the CFPB should expand the scope of the 1033 rule to get a more complete picture of consumers’ financial lives.
The FTA has said that data-sharing requirements should be phased in for FTA members and other non-bank companies.
In its letter, the FTA said, “Consumers will benefit most from Section 1033 in that it provides them with a comprehensive ability to assess their financial health and wellbeing and purchase a wide range of financial products and services. will enjoy the
