Is sharing financial data caring?
10/22 equated to 1033 this year. The CFPB's Section 1033 rulemaking gives consumers greater control over their financial data. The aim? To promote innovation and open banking while loosening big banks' grip on the market. Does it fully deliver on its promise?
💪🏻 Consumer empowerment: Rule 1033 enables consumers to access and share their financial data. According to the CFPB, at least 100 million consumers have authorized third-party financial institutions, such as a data aggregator or data intermediary, to access their account data in recent years. This move challenges large banks’ dominance, giving smaller banks and fintech firms a chance to offer more relevant services to a broader audience.
The intent is to set a foundation for a more inclusive open banking system, and expand consumer choice and flexibility, leading to better financial outcomes such as lower loan rates and higher savings returns.
🛡️ Data controls: Rule 1033 places a strong emphasis on consumer privacy, restricting data-sharing to authorized purposes. Yet, limiting secondary data use and requiring annual reauthorization may unintentionally hinder consumer choice. These restrictive measures could prevent smaller players (mid-size banks, fintech) from using data effectively to market credit and financial products.
Responsible secondary data use for anonymized data analysis and targeted advertising could expand financial inclusion and present new beneficial services to consumers. Implementing more flexible controls (potentially AI-powered) could help financial institutions streamline secure data sharing and incident flagging, while consumers could benefit from intuitive tools to manage permissions.
🌎 Financial ecosystem: in the near term, Rule 1033 may accelerate the use of API-driven data brokers and platforms, enabling banks and fintechs of all sizes to access and consume data in a standardized way, and better serve pools of consumers traditionally left behind (credit invisible, thin file).
Long-term, it could offer consumers reduced fees, competitive rates, and secure “pay-by-bank” options. To support these goals, standards-setting bodies should align Rule 1033 with existing regulations (e.g. CCPA) to avoid conflicting requirements and streamline compliance.
In short: Rule 1033 is a step toward empowering consumers with data control, enhancing competition, and promoting financial inclusion. By enabling permissioned data sharing, it can help previously underserved consumers access valuable services. While annual reauthorization protects consumer consent, this requirement may inadvertently slow down the adoption of services designed solely for consumer benefit, such as credit score improvement, if consumers fail to timely renew their consent. A more flexible enforcement where all players support transparency, fairness, and openness would truly make data-sharing an act of consumer care.