CFPB's financial records-sharing plan faces uncertain prospects, experts say

8 February 2017. By Xiumei Dong and Neil Roland.

A US Consumer Financial Protection Bureau initiative to help consumers share digital financial records more safely with their advisers faces an unpredictable future at the embattled agency, legal experts said.

"That initiative may not be a priority at least until the future direction of the agency is better understood," said Andrew Sandler, co-founder of the BuckleySandler law firm in Washington, who represents banking and financial services firms.

Another stumbling block is that the CFPB plan is only at a preliminary stage. Even in the best of circumstances, it probably couldn't be finalized as a rule, guidance or industry standard until after Director Richard Cordray's term ends, another lawyer said.

"It is not clear when new CFPB leadership will arrive," said Tom Pahl, a former managing counsel at the Consumer Financial Protection Bureau during the Obama administration. "When they do, they likely will adopt a less regulatory approach, which could affect if the CFPB issues rules requiring financial institutions to permit consumers and others on their behalf to access digital financial records."

Cordray's term is due to expire in July 2018. Some Republican lawmakers have called on President Donald Trump to fire the Obama appointee before then, adding to uncertainty at the agency.

CFPB plan 

Last November, the CFPB asked consumers for their experiences in granting access to digital bank and credit card information to money managers, loan underwriters, and tax and budget advisers.

This "request for information" sought to understand how easy and secure it is for consumers to share their records with advisers and consultants, and how much control customers have over these records.

Some financial startups including Betterment, an online investment manager, have said that accessing consumers' bank data with their permission makes it easier for customers to move money between accounts or use investing apps.

On the other hand, banks have called for restrictions to protect consumers' privacy and security.

"Some financial institutions have suggested that providing third-party access to account information creates significant costs and risks to the institutions," the CFPB has said.

The public comment period ends Feb. 21.

The CFPB said that, after reviewing comments, it could develop a rule proposal or guidance, or encourage industry to develop a non-binding "best practices" standard.

Embattled CFPB

The CFPB has become a political football since Trump's election emboldened congressional Republicans.

Republican lawmakers have been seeking for years to have the agency run by five commissioners rather than a single director, a structure that would water down its efficiency.

The lawmakers also have sought to have CFPB funding determined by Congress rather than the US Federal Reserve, an idea backed by Trump's Treasury Secretary nominee, Steven Mnuchin.

Legislation being hammered out by House Financial Services Committee Chairman Jeb Hensarling would make changes in both CFPB organizational structure and funding.

In addition, the courts have stepped in, clouding the picture further.

Last year, a federal appeals court held that the CFPB's single-director structure was unconstitutional. The agency has appealed the case.

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