Financial Services Trade Groups Urge CFPB to Reconsider Data Broker Rule

Recently, a coalition of seventeen financial services trade groups expressed serious concerns about the Consumer Financial Protection Bureau (CFPB) proposed rule. This rule aims to amend existing regulations under the Fair Credit Reporting Act (FCRA) to extend its reach by broadening the definitions of “consumer report” and “consumer reporting agency.” Despite the CFPB’s position that the adjustment is targeting data brokers specifically, the implications are much more expansive.

Concerns Regarding the Proposed Rule

The Mortgage Bankers Association, Consumer Bankers Association, American Fintech Council, and the U.S. Chamber of Commerce, among others, penned a letter to the CFPB criticizing the proposal. In their correspondence, they argued that the rule is flawed in its substance and procedure.

• The proposed changes would equate data brokers with credit bureaus and background check companies.
• Companies that deal with data regarding income, financial tier, credit history, credit score, or debt payments could be classed as consumer reporting agencies required to comply with the FCRA.

Legal and Operational Challenges

The trade groups outline that expanding the definitions of “consumer report” and “consumer reporting agency” goes against the FCRA’s statutory language established by Congress and contradicts decades of settled case law.

They contend that the proposed interpretations not only exceed the original statutory framework but also present substantial legal concerns and possible unintended outcomes. If implemented, the rule could significantly hinder financial institutions in fighting identity fraud and adhering to various regulations like the Bank Secrecy Act and Anti-Money Laundering Acts.

Moreover, the lack of clear exceptions for beneficial use cases could pose operational challenges, jeopardizing the security of consumers and experienced financial institutions.

Questioning the CFPB’s Justifications

The coalition further criticized the CFPB’s cost-benefit analysis of the proposed rule. They argued that the Bureau’s conclusions are based on unsubstantiated data and assumptions that lack critical supporting evidence.

• The Bureau itself acknowledges that it lacks sufficient data or information to fully understand the policy implications or gauge the potential impact effectively.

Given this, the groups stress the need for a more data-driven approach before implementing broad regulatory changes that could reshape the financial landscape.

The Future of the Proposal

Comments on the proposed rule are permissible until March 3, 2025; however, the future of the rule remains uncertain. Acting CFPB Director Russell Vought has reportedly directed officials to halt work on proposed rules, adding another layer of complexity to the rulemaking process.

Implications for Stakeholders

The potential suspension of rulemaking activity could leave financial institutions and consumer rights advocates in a state of flux, awaiting clarity on regulations that could significantly affect their operations.

Given the stalemate, stakeholders must consider strategic alignments and advocacy efforts to navigate potential regulatory shifts. The coalition of trade groups highlights the need for a balanced approach that considers both consumer protection and the operational realities faced by financial institutions.

• Prioritizing consumer data security while facilitating the practical needs of the financial services industry is crucial.
• Engagement in these discussions and the commenting process offers a chance to influence future regulatory landscapes.
• The focal point for discussions should remain on evidence-based amendments aligned with the statutory framework established by the FCRA.

In conclusion, as the deadline for comments approaches, a holistic approach towards the regulatory framework remains imperative. Given the contentious nature of the proposed rule, ongoing dialogue and engagement with the CFPB are crucial for addressing the diverse concerns of all stakeholders involved.

Source: https://www.consumerfinancemonitor.com/2025/02/10/financial-services-trade-groups-call-on-cfpb-to-abandon-its-data-broker-proposed-rule/