The nation’s first set of regulations to give consumers better control over their own financial data is nearly here, but not everyone will benefit from the new rules.
The Consumer Financial Protection Bureau (CFPB) is currently writing the rules known as Personal Financial Data Rights, a section of the Dodd-Frank Act that was never completed. As it stands now, the proposal only covers debit, checking, savings, and credit card accounts, leaving out tens of millions of low-income Americans who are unbanked, underbanked, or rely on government assistance.
The discrepancy has drawn the attention of Wharton marketing professor Wendy De La Rosa, who is urging the federal government to be more inclusive, even if it means slowing down implementation of the long-awaited rules.
“It’s almost unfathomable to me that we’re excluding the swath of the population that needs these protections the most,” De La Rosa told Wharton Business Daily on SiriusXM. (Listen to a podcast from the show.) She also wrote an opinion piece on the topic for American Banker.
Sometimes referred to as “the financial bill of rights,” the pending regulation is a holdover from 2010, when the Dodd-Frank Act was enacted following the Great Recession. The financial bill of rights section of the act was promised, but it remained dormant until it was revived by the Biden administration. According to CFPB, the changes are in review and expected to be finalized in 2024 — more than a decade after Dodd-Frank.
“Where I think the administration is in a tough spot is that it will take a little bit longer to make sure that all of these accounts are included in the bill of rights,” De La Rosa said. “And because it’s taken over 13 years to get to this place, there’s all of the sudden this need for speed, which I argue should not trump our need for equality and justice.”
“It’s almost unfathomable to me that we’re excluding the swath of the population that needs these protections the most.” — Wendy De La Rosa
Putting Consumers in Control
De La Rosa is a staunch proponent of the financial bill of rights because it is intended to help consumers and increase marketplace competition. Under the proposal, consumers will have detailed access to their financial transactions, be able to link their accounts without going through a third party, have better data protection and control over data sharing, and more easily switch banking institutions, among other features.
Bureau director Rohit Chopra said the changes will also establish greater transparency in credit scores, which will make lending more competitive and less of a mystery for consumers.
“Rather than rely on black-box models that people can’t make sense of, lending can move back to real-world data about someone’s ability to pay back a loan,” he said in remarks late last year. “This will eliminate bias and reliance on credit scores and other proxies.”
De La Rosa points out that some of these features may seem basic because they are available to some degree, but they are not guaranteed or protected by current regulations. That’s why she believes it’s critical to give low-income Americans the same protections. She offered an example of a SNAP recipient not being able to see a detailed transaction log of their food purchases, yet trying to keep track of their spending.
“Imagine trying to budget your money where all you get at the end of the day is your historical balance,” she said. “Today you have $100, but you have no idea, unless you have a perfect memory, about where you spent that money.”
The professor’s research focuses on behavioral science in financial decision-making, and she’s particularly interested in the financial well-being of the most vulnerable consumers. She said she doesn’t want to see the bureau create exclusionary regulations now, then come back later with a second set designed to include lower-income people.
“My hope is we do not even go there and try to create this two-tier regulation system, one for middle- and high-income Americans, and one for low-income Americans. That just feels fundamentally un-American,” De La Rosa said.
Instead, she advises the government to take a little more time to revise and roll out regulations that include everyone.
“It’s taken 13 years just to get to this point, and low-income Americans should not have to wait another 13 years. That’s sort of a promise and a hope and a maybe,” she said.