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Remarks of CFPB Director Richard Cordray on Consumer Access to Financial Records

November 18, 2016 / Source: CFPB

Thank you all for joining us in Salt Lake City. We have a special moment right now to peer into the future and see what we can learn. And we have a great opportunity to begin to discuss how we can help shape the future in ways that support and protect consumers.

We are here today to talk about the new opportunities and challenges being created through digital financial records. Whenever consumers make deposits, withdraw funds, or make payments using their various financial accounts, they leave a digital trail that becomes part of their financial record. This data yields enormous insight that can empower consumers to make decisions and improve their financial lives. The digital aspect of these records can enable great efficiencies. Whereas once upon a time consumers might have brought a shoebox full of paper to a financial advisor or loan officer, now consumers can accomplish the same thing just by providing access to their digital financial records. This is a world full of new promise, where consumers have the chance to gain the tremendous benefits of ease, speed, convenience, and transparency.

Where consumers can exert control by giving their permission for specific companies to access their digital financial records, they can access a growing number of services from a wide range of providers. Established financial institutions and startup FinTech companies are pushing forward aggressively to create websites and mobile applications that offer consumers a variety of innovative services.

Some sites help consumers monitor relationships with multiple financial institutions in one place. Others help consumers make spending decisions and manage their money while on-the-go. By looking at a consumer’s transactional history across their credit cards, bank statements, prepaid cards, and other sources of spending, websites or mobile apps can offer trend analysis that helps consumers understand their spending habits. Some people may not realize how much they are spending each day on certain categories of items, and these services can help them cut back and start saving for larger goals. 

Similarly, access to digital financial records can help consumers become better shoppers and make markets more competitive. Many consumer financial products, such as credit cards and prepaid cards, charge fees for different uses, which means the cost of the product can vary based on what people do with it. Consumers are often not very good at predicting their usage or even understanding their usage after the fact. But if consumers are able to access their digital financial records, then new applications can help them identify the provider whose product best serves their needs.

Access to digital financial records can be especially important to consumers who want to borrow money but lack enough credit history to generate a credit score or whose score may not accurately reflect their current creditworthiness. By allowing a prospective creditor to access the consumer’s transaction account, the creditor may be able to extend the credit needed at a fair price. These are just a few examples of services that already exist, and the future possibilities are vast.

The existence of these products and services often depends on whether consumers can authorize access to their digital financial records. Companies that collect this information from other providers are often called “data aggregators” or “account aggregators.” Many of us have little or no idea how this actually works. If you pay your taxes online through a commercial website, for example, you may be giving a third party access to your financial records. Or you may pass on access to your investment accounts so a commercial tax website can pull information about your retirement contributions for the year. This saves you time and effort because you no longer have to input all the information manually on your tax forms.

Access to digital financial records is critical. As with your student records or medical records, your financial records tell an important story about you. With health care, for example, if you are able to see your records, it is easier to participate in your care and treatment. You can review what you were told, ask tough questions, and consider other options. You can be a better advocate for yourself. The same can be said for your financial records. This is all about taking control and becoming a more active participant in your own financial life.

As we see the world changing all around us at a rapid pace, Congress has recognized the growing need for consumers to be able to obtain and use their digital account information. Congress provided for the right to do so in the Dodd-Frank Act, which states that information relating to a consumer’s transactions, including “costs, charges and usage data,” shall be made available in an “electronic form usable by consumers” upon request. Rulemaking authority over this issue lies with the Consumer Financial Protection Bureau, which also has the responsibility to pursue the statutory objective of ensuring that consumer financial markets “operate transparently and efficiently to facilitate access and innovation.”

The technology around digital financial records continues to develop, and so far there are many unanswered questions about how the information is being shared, by and to whom, and how safely. As with any emerging industry, we are hearing about some bumps in the road. Both FinTech companies and financial institutions, as well as consumer groups, are describing to us the various challenges, risks, and technological obstacles to further progress in this area. 

So today we are launching an inquiry to learn more about consumers’ access and use of their digital financial records. Specifically, the Consumer Bureau wants to know more about three things. First, we want to be aware of what is happening right now, especially the extent to which consumers who are authorizing access to their financial records can choose how their records are being shared. Second, we want more insight into the process for sharing financial records, whether it is or can be made safe, and what assurance consumers and providers will have that it can be done securely. Third, we want to learn about transparency and how much control consumers have over their own financial records. Our main goals are to encourage innovation that promotes opportunity and to protect consumers as these new and promising technologies continue to develop. 

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