Prepared Remarks of CFPB Director Rohit Chopra at Georgetown University’s DC Fintech Week

Yesterday, the CFPB finalized the Personal Financial Data Rights rule, which will move the United States closer to an open banking system in which consumers, not dominant firms, control their data.

Today, I primarily want to focus on the data protections in the rule, which are essential to ensuring the rule works to advance competition in financial markets. This rule will help to dramatically improve privacy and security, ending the problematic credential sharing and invasive surveillance that we too often see.

First, to obtain data on a consumer's behalf, a bank, fintech, or other financial company will need to adhere to federal data security requirements. This means they can't have shoddy security like we saw at companies like Equifax. And if they fail to meet their obligations, they can face enforcement actions and can even get shut down by the licensing or chartering authority.

Second, the rule works towards ending the practice of "screen scraping." This occurs when a company collects a consumer's username and password to log in to online banking on the consumer's behalf to scrape away data. "Screen scraping" is risky, since it can involve unencrypted credential sharing and massive overcollection of data.

Third, the rule requires companies to minimize the data they collect, secure it, and, as a default practice, delete it upon revocation. In addition, the rule forbids companies from seeking to obtain a permanent authorization to continually harvest data. These requirements should lessen the amount of data that would be vulnerable to a data breach.

Fourth, the rule allows banks and fintechs that currently hold the consumer's data to deny access to companies requesting on the consumer's behalf when they fail to meet minimum standards. Companies making requests will need to prove they have the authorization from the consumer, disclose their legal entity identifier, and more. The rule allows banks and fintech to engage in legitimate blocking, as long as those practices are applied consistently and fairly.

Fifth, and most importantly, the rule puts into place significant limitations on how companies can use data. Right now, financial companies send consumers an annual privacy notice that tells them any parties they reserve the right to share the data with. In theory, consumers review this and then opt out of sharing they don't want. In reality, almost no one opts out of anything. Many believe this is just another notice that doesn't meaningfully limit misuse of personal data.

The rule spells out a simple, but much different approach: you can use a consumer's data to provide the product or service the consumer asked you for, but you can't use it for unrelated purposes the consumer doesn't want. In other words, companies can't engage in a bait-and-switch, where they lure people in with an offer for a loan or an account, but then sell, exploit, or monetize the data for another purpose.

And there's a lot more. Taken together, these protections improve the privacy and security of our financial data, compared to the status quo. This will help to stop the lurch toward surveillance pricing.

The CFPB has closely studied how Big Tech companies and other firms can combine your search history, browsing history, geolocation history, your contacts, and more to create a detailed profile about you. We also see how large banks are also seeking to harvest more data from their customers without meaningful limits. When this information includes your sensitive personal financial data, this can create the conditions for surveillance pricing.

For example, if a rideshare giant knows that you worked an extra shift and just got a larger paycheck than usual, it might decide to charge you more for a ride home. If a dominant player in search knows that you just made a payment at a fertility clinic, it might start targeting you with ads for dubious treatments you didn't ask for.

While the CFPB's Personal Financial Data Rights that implements new statutory rights will help to jumpstart competition, it is also a major step forward for privacy, security, and data protection.