Senate Testimony Warns of Financial Monitoring Concerns by Chopra

Consumer Financial Protection Bureau Takes Steps to Secure Financial Data and Promote Open Banking

In a series of recent developments, the Consumer Financial Protection Bureau (CFPB) has been actively working to safeguard financial data and promote open banking in the United States.

At a Senate hearing, Senator John Kennedy (R-LA) raised questions about the CFPB's entitlement to funding. However, Director Rohit Chopra, who testified for the first time since the Supreme Court upheld the constitutionality of the federal agency's funding structure, dismissed these claims and asserted that everyone is complying with the statute regarding its funding.

Chopra urged lawmakers to adopt measures to protect financial data, citing reports about data brokers gathering information on Americans that can be purchased by scammers and other actors from countries of concern. To this end, the CFPB proposed a rule under the Fair Credit Reporting Act to restrict the use of certain sensitive data by data brokers.

The CFPB's efforts to safeguard consumers have been fruitful. The agency is on track to save customers $20 billion in junk fees every year, and it has already returned $20.7 billion to consumers.

Meanwhile, the CFPB created a consumer complaint function that is expected to process over 2 million consumer complaints about banks or financial companies this year. Notably, JPMorgan Chase spokesperson Trish Wexler stated that no transaction or personal information is shared in developing discount offers. However, Chopra cited reports about JPMorgan Chase and PayPal's plans to use sensitive customer data for "surveillance-based targeting." PayPal did not respond to Reuters' request for comment.

Besides JPMorgan Chase and PayPal, specific other financial institutions planning to use sensitive customer data for surveillance-based audience segmentation have not been publicly confirmed.

In a move to advance open banking, Chopra called on lawmakers to accelerate the adoption of open and decentralized banking in the U.S. JPMorgan Chase announced a new business unit, Chase Media Solutions, to connect brands with customers and offer cash back. The CFPB believes this move could revolutionize the banking industry, making it more accessible and customer-centric.

The Federal Reserve has not generated any earnings since September 2022, operating at a loss. The CFPB's funding comes from transfers made by the Federal Reserve Board from the combined earnings of the Federal Reserve system.

Recently, the CFPB laid out the first part of the open banking framework, which aims to increase competition, promote innovation, and provide consumers with greater control over their financial data. This initiative is expected to transform the financial landscape in the U.S., making it more secure, efficient, and inclusive.