The Biden administration continued to crack down on financial institutions on Thursday, proposing a new rule that would protect Americans against companies that abuse their data.Thank you for reading this post, don't forget to subscribe!
The proposed Personal Financial Data Rights Rule, announced by the Consumer Financial Protection Bureau (CFPB), would prohibit financial institutions from hoarding an individual’s data. It would also require companies to share data associated with credit card, checking, prepaid or digital wallet accounts at the individual’s direction to a third party, such as a new bank.
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The CFPB said it will now take comments from the public and expects to finalize the new regulation this autumn.
The proposed rule would make it easier for consumers to end their relationships with banks and transfer their transaction data to another financial institution. It will also prevent companies receiving data from misusing or unfairly monetizing such financial information.
The move is the latest in a series of efforts by the CFPB and Congress to protect Americans’ personal finance data and improve competition in the consumer finance industry.
“With the right consumer protections, the shift toward open and decentralized banking can enhance competition, improve financial products and services, and discourage junk fees,” said CFPB Director Rohit Chopra. “Today, we are proposing a rule to give consumers the power to steer clear of poor service and choose the financial institutions that provide the best products and prices.”
Rohit Chopra, director of the Consumer Financial Protection Bureau. (Credit: The Washington Post via Getty Images) (The Washington Post via Getty Images)
‘Very easy to switch’
The CFPB said that under the proposed Personal Financial Data Rights Rule, banks and other providers would be required to make personal financial data available to consumers at no charge through a safe, secure and reliable digital interface.
Chopra said in a call with reporters: “The CFPB’s proposed rule would require that financial companies that offer transaction accounts such as checking accounts, prepaid cards, credit cards, digital wallets give you access to your personal financial data. Provide so that you can share or transfer data to another provider…this will make it much easier to switch, you will not lose your transaction history which essentially acts as your life book. You will get a new Don’t start with a firm that has less history with you and is less likely to get you a better deal.”
Customers use Chase Bank ATMs in Chicago. (Credit: Scott Olson/Getty Images) (Scott Olson via Getty Images)
Consumers will also have more rights to grant or revoke access to their personal finance data.
Additionally, consumer authorization for a third party to access their data may only last for one year, the CFPB said, with the possibility of re-authorization by the consumer.
The government watchdog said in a press statement that the measure would be a “move away” from risky data collection practices. It will also strengthen security to prevent uncontrolled surveillance or misuse of data. For example, a bank will not be able to sell your data to a third-party broker or fintech company.
Finally, third parties will not be allowed to collect, use, or retain data to further their own commercial gains or advertising. The goal is to reduce the likelihood of being targeted for loans or high-fee products that may not be in your best interests, the CFPB said.
Lael Brainard, director of the National Economic Council, said, “One of the problems we see with competition in this area is that it is often challenging for consumers to change banks in part because their financial transaction history data has to be stored in a new bank. It’s difficult to take to the bank.” the United States said in the press call. “That’s why in his executive order to promote competition, the President encouraged the CFPB to consider issuing a rule to make it easier for consumers to move their financial data to a new financial services provider.”
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avoid junk fees
Since launching its Personal Financial Data Rights rulemaking initiative in October 2022, the CFPB has made significant progress in strengthening consumer rights protections.
Last year, the CFPB launched a campaign to reduce exploitative junk fees charged by banks and financial companies. The government agency found that reducing or eliminating overdraft fees would save households billions of dollars per year and promote a fair and transparent marketplace.
The CFPB said many banks have begun eliminating or reducing junk and non-sufficient funds fees. The CFPB estimated that these changes would result in $5.5 billion in annual fee savings for consumers, while eliminating the NSF fee would result in $2 billion in annual savings.
The Biden-Harris administration also announced new actions to crack down on junk fees On October 11, the Federal Trade Commission proposed a rule that would bar businesses from charging hidden fees. In other words: companies are required to show the full price up front.
President Biden speaks about efforts to eliminate hidden junk fees at the White House on October 11. (AP Photo/Susan Walsh) (Associated Press)
The government watchdog also proposed a rule in February 2023 to curb excessive credit card late fees. Companies currently charge customers up to $41 for each missed payment, costing Americans approximately $12 billion annually.
If successful, the rule would reduce the late fee provision to $8, eliminate automatic annual inflation-fee adjustments, and ban late fee amounts exceeding 25% of the required minimum payment.
gabriella Is a personal finance and housing reporter at Yahoo Finance. Follow him on Twitter @__GabrielaCruz,
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