The Trump administration has taken actions to halt work at, and potentially even abolish, the Consumer Financial Protection Bureau (CFPB). However, these actions have overshadowed a recent rush of dangerous new agency rulemaking that would grant the federal government more control over consumer financial data.
Late last year, the CFPB proposed a rule to expand the application of the Fair Credit Reporting Act (FCRA) and Regulation V to additional uses of consumer information. Data brokers would be regulated like credit reporting agencies under the FCRA, and credit reporting agencies would be restricted from using specific consumer data for marketing purposes — activities that ultimately help allocate credit to businesses and consumers.
The arbitrary expansion of the FCRA increases compliance costs for data brokers and credit reporting agencies, but it is also a heavy-handed government mandate that will inhibit the necessary usage of data to correctly compile credit reports, ensure reliability and liquidity in the U.S. credit markets, and prevent fraud.
Fortunately, Trump’s decision to fire the CFPB director, Rohit Chopra, means that the new rule is unlikely to be finalized and may even be repealed. However, it is incumbent upon the acting CFPB director to avoid mimicking Chopra’s interventionist policies and instead choose to pursue beneficial reforms. These could include welcoming fintech partnerships and promoting technology and innovation to benefit consumers.
The CFPB also finalized a rule in January prohibiting specific uses of medical debt. Under the rule, banks and credit unions would be restricted in how they can use medical debt when issuing credit, while credit reporting agencies would be restricted in how they can use medical debt in credit reports. The dearth of information could limit the availability of credit of all kinds to low-income and historically marginalized people.
In response, Congress should introduce a joint resolution of disapproval under the Congressional Review Act to nullify the rule and prohibit regulators from issuing any future rule that is substantially similar.
The CFPB recently issued a rule that compels banks to share consumer data with third-party financial technology companies. The rule seemingly implements section 1033 of the Dodd-Frank Act. While the statute’s original intent was to afford consumers more control over their transaction information, the final rule deviates from statutory intent by compelling banks to disclose detailed customer information to third parties, which is not explicitly authorized by federal law. This rule and other burdensome CFPB rules should be closely scrutinized and repealed.
The administration has made clear that this regulatory overreach is unacceptable, recently launching an initiative that directs agencies to repeal “10 existing rules, regulations, or guidance documents” for every new rule they propose. The administration hits the nail on the head by stating that too much regulation “stops American entrepreneurship, crushes small business, reduces consumer choice, discourages innovation, and infringes on the liberties of American citizens.”
During Chopra’s tenure, the CFPB’s regulations and guidance touched myriad parts of the U.S. financial markets.
Instead of protecting consumers, the CFPB has extended its tentacles into every aspect of consumer financial data. This does not protect consumers from unfair, deceptive or abusive acts or practices but opens the door for the government to control and manipulate consumer data. The administration can turn away from big-government overreach and stay true to its government-wide deregulatory initiative. It must now take advantage of this opportunity and provide relief to consumers and businesses.
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Nate Scherer is a policy analyst with the American Consumer Institute, a nonprofit education and research organization. For more information about the Institute, visit us at www.TheAmericanConsumer.Org or follow us on X @ConsumerPal.