US Financial Services Committee members request changes to Open Banking rule

Members of the House Financial Services Committee in the US have written to the Consumer Financial Protection Bureau (CFPB) requesting some revisions to the secondary data use restrictions in its proposed Personal Financial Data Rights rule.

US Congressman Mike Flood led the bipartisan letter, along with Congresswoman Brittany Pettersen (D-CO), Congresswoman Erin Houchin (R-IN), and Congressman Gregory W. Meeks (D-NY), as well as 10 other committee members.

In a press release, Rep. Flood said: “In our digital age, it’s important that consumers are given control over their own data so they can use it in ways that benefit them.

“Today, we’re asking the Consumer Financial Protection Bureau to adjust the Personal Financial Data Rights proposal to unlock the innovation and competition that will come from Open Banking.”

The letter, which is addressed to CFPB director Rohit Chopra, states broad support for “the proposed rule’s efforts toward data privacy, data minimization, and its prohibition on third parties selling consumer data”.

The signatories also agree that “our financial services system should put the consumer in charge of how their data is used”.

However, Flood and the other Financial Services Committee members are concerned that “the strict limitation on data use within a single product selected by the consumer could severely limit the benefits of those products to consumers, and it could hinder the development of healthy competition for the benefit of consumers”.

Of particular concern is that the data use limitations could hinder fraud prevention efforts, as well as product improvements and the ability to help low-income consumers.

Regarding fraud protection, the incoming rule “could limit the use of data to improve existing anti-fraud tools or develop new ones”, the US lawmakers wrote.

The letter also stated that secondary data use restrictions may prohibit some companies from “leveraging data to improve a product or from using data to develop other innovative products” and highlighted cash flow underwriting as an example, citing its “tremendous promise to improve access to consumer credit, especially for the 50 million Americans deemed unscorable or credit-invisible”.

Rep. Meeks said: “Through this rulemaking, the CFPB is making significant strides in giving consumers control over their data usage and sharing.

“For that reason, we want to ensure that unintended consequences, such as reduced competition and increased risk of fraud, don’t undermine the rule in a way that could negatively impact consumers.”

Under the Data Rights rule proposed by the CFPB in October last year, individuals in the US would be able to share data about their use of checking and prepaid accounts, credit cards, and digital wallets, and to access competing products and services, without their data being collected, used, or retained to “serve commercial interests over their own”.

Further reading: CFPB issues rule to recognise Open Banking standard setters