WASHINGTON — The Consumer Financial Protection Bureau on Thursday proposed a new rule to increase competition among banks by requiring the transfer of customer data upon request.
The Personal Financial Data Rights rule would ensure consumers' legal right to their checking and prepaid account, credit card and digital wallet history and require fee-free data sharing among financial institutions, according to a release. It also includes restrictions on the monetization of sensitive consumer data by banks and tech companies and permits customers to revoke access to their data.
"When it comes to our financial lives, a handful of very large banks and financial firms control much of the market," CFPB Director Rohit Chopra told reporters Thursday. "This has left many families with fewer viable options, and many people feel stuck to the provider they signed up for years and years ago."
If adopted, the rule would reactivate a statute of the 2010 Dodd-Frank Act tasking the CFPB with ensuring fair competition for consumer financial products. The bureau floated the policy earlier this month as part of a package of initiatives introduced by the Biden administration aimed at cracking down on so-called junk fees.
"Bringing this 2010 legal provision into reality can lead to a more open banking and finance system where consumers can easily switch, escape junk fees and obtain better service rather than feeling taken for granted," Chopra said.
Chopra said consumer finance markets such as credit card and deposit accounts can reel in customers with temporary rate deals but "make it really bureaucratically difficult to switch."
Some banks also pay as little as 0.01% interest on bank accounts, he added, while competitors offer much higher rates.
"If switching were easier, Americans could earn billions of dollars more in interest each year," Chopra said.
The rule would exempt smaller banks and credit unions that have no digital interface with their customers.
Lael Brainard, director of the National Economic Council, praised the CFPB for acting on President Joe Biden's 2021 executive order on promoting competition in the U.S. economy.
Biden "encouraged the CFPB to consider issuing rules to make it easier for consumers to take their financial data to a new financial services provider," Brainard told reporters Thursday.
"And today's rule will help ensure financial companies compete based on service quality and pricing, deter junk fees and other confusing practices that consumers distrust and (put) in place key privacy provisions to ensure companies can't misuse customer data," she added.
The CFPB will accept comments on the rule proposal until Dec. 29 and will work to finalize it by next fall.
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