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The CFPB released its proposed rule Thursday, which would implement a section of the Dodd-Frank Act requiring financial institutions to share certain specific consumer financial data with third parties if the consumer says so.
According to the CFPB, the rule would apply to credit unions, banks, card issuers and other "payment facilitation providers" to hand over the financial data of consumers or members to a third party. CFPB Director Rohit Chopra said he believes the proposed rule would "give consumers the power to walk away from bad service and choose the financial institutions that offer the best products and prices."
While the proposed rule seems like a good idea in theory, officials with NAFCU and CUNA are concerned that, if the rule is approved, the CFPB will open the door to a number of potentially unintended consequences for credit unions.
"CUNA supports credit union members' and consumers' ability to access and share their personal financial data while ensuring that the information remains safe, secure, accurate and private," CUNA President/CEO Jim Nussle said. "We are concerned with this proposal, particularly that it would require credit unions to create, maintain and service interfaces for third parties to access member data, but prohibit charging a fee for services provided. At a time when credit unions are being hit with increasing costs just to serve their communities, we're very disappointed with requiring credit unions to divert time and resources away from member services to subsidize and provide free services to third parties' competing businesses."
NAFCU Vice President of Regulatory Affairs Ann Petros struck a similar tone, but went a step further with her concerns.
"NAFCU appreciates efforts to promote consumer choice in the financial services marketplace so that the value of institutions like credit unions that practice relationship banking can be recognized by even more consumers. However, this rule has the potential to invite rapid expansion of nonbank access to sensitive consumer account information," Petros said. "The rule could also pose more systemic risks to the banking sector. It could facilitate rapid and unpredictable movements of deposits, expand data security and data privacy concerns, and drive further consolidation within the credit union industry through extraordinary compliance costs and the obligation to provide – at no charge – data to third parties."
According to an analysis of the proposed rule, NAFCU said companies would be prohibited from using consumers' accessed data for targeted advertising, and customers would have to reauthorize access every year and would be able to revoke access at any time.
But the compliance and resource burden of the proposed rule remains, not to mention the technical and security concerns that NAFCU said could lead to "enormous compliance costs and ultimately distort the financial sector's competitive landscape."
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Michael Ogden
Editor-in-Chief at CU Times. To connect, email at [email protected]. As Editor-in-Chief of CU Times since 2016, Michael Ogden has led the editorial team in all aspects of content strategy and execution, including the creation of the publication’s exclusive and proprietary research database of the credit union industry’s economic landscape. Under Michael’s leadership, CU Times has successfully shifted to an all-digital editorial product with new focuses on the payments, fraud, lending and regulatory beats. Most recently, he introduced a data-focused editorial product for subscribers that breaks down credit union issues into hard data, allowing for a deeper and more factual narrative for readers. In 2024, he launched the "Shared Accounts With CU Times" podcast, which offers a fresh, inside-the-newsroom perspective through interviews with leaders from the credit union industry and the regulatory world. He dives into pressing credit union issues, while revealing the personalities working behind-the-scenes to push the credit union world forward. His background includes years as a radio and TV anchor/reporter and a public relations and digital/social media manager, where he covered the food and music industries, as well as cooperatives and credit unions. Over the years, he has launched numerous exclusive video and podcast series, including a successful series of interactive backstage interviews with musicians at music festivals, showcasing his social media and live streaming production skills.
