On Tuesday, the Consumer Financial Protection Bureau (CFPB) announced an important proposal aimed at protecting consumer financial data from misuse, particularly concerning the practices of data brokers selling this sensitive information.
This initiative marks a key part of the Biden administration’s commitment to regulatory reform, highlighting the principle that personal data should only be shared when absolutely necessary—like when processing mortgage applications—to prevent it from falling into the hands of scammers.
New Classification for Data Brokers
By redefining data brokers as “consumer reporting agencies,” the CFPB intends for these companies to comply with the Fair Credit Reporting Act (FCRA).
This shift will specifically target firms that deal in sensitive information, such as Social Security numbers and contact details.
Rohit Chopra, the Director of the CFPB, stated that this rule aims to address practices that jeopardize individual privacy and overall safety in the data landscape.
Consumer Consent Requirements
One significant aspect of the proposal is the requirement for businesses to obtain explicit and separate consent from consumers before accessing or distributing credit reports.
This requirement seeks to eliminate the prevalent issue of consumers being buried in complex legal language when granting permission.
The CFPB argues that existing rules frequently allow data brokers to evade FCRA regulations, even when they handle information that the law aims to protect.
Concerns from Industry Associations
However, this proposal has sparked criticism from the Consumer Data Industry Association (CDIA).
The association warns that the new rule could unintentionally compromise public safety and lead to higher operational costs without enhancing the accuracy or dependability of data.
CDIA President Dan Smith noted that the organization is carefully assessing the proposed regulations but raised concerns about their legal implications and potential adverse effects on law enforcement and child support enforcement initiatives.
Source: Housingwire