Patrick McHenry Grills CFPB Director On 'Bad Actors' Harvesting Americans' Financial Data

4 months ago

During a House Financial Services Committee hearing Thursday, Rep. Patrick McHenry (R-NC) spoke about the 'harvesting' of Americans' financial data.

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Transcript

00:00I want to begin with data privacy.

00:04This is something that you have spent time on as Director of the Bureau.

00:11It's something that we in Congress have spent some time on, the last few Congresses, on

00:16trying to update our data privacy standards for financial services.

00:20So let's start there.

00:23When we discussed our data privacy bill at the beginning of this Congress and passed

00:27it out of committee, we focused on Gramm-Leach-Bliley.

00:33Speak to the portfolio of data privacy laws that you enforce and how you do that.

00:39Yeah.

00:40So I would think about the range of privacy laws that are not just financial in nature.

00:45The Fair Credit Reporting Act is not just about the credit reports we think about.

00:50It's also about all the other data that is collected about us and sold.

00:55You also put into law Section 1033.

00:59That is about how consumers have control over their data and how they can permission it

01:05and protect it.

01:06There's also key data security standards that the laws that you oversee have important roles

01:12to play.

01:13So, Mr. Chairman, the CFPB is very, very eager to make sure we are enforcing this properly

01:20and that we are developing the rules that are fit for the times of artificial intelligence

01:25and more intrusive data collection.

01:26Okay.

01:27So you spoke specifically in your opener about bad actors internationally harvesting Americans'

01:37financial data through unregulated or loosely regulated means.

01:43Explain.

01:44Well, when this committee 50 years ago was involved in putting into place protections,

01:50they were worried about these companies collecting data and sometimes rumors about us for sale.

01:57So the answer was the Fair Credit Reporting Act.

02:00But we see there's new types of data brokers that may not see themselves as having to comply

02:06with that.

02:07I think we all need to do work together to make sure they know they have to respect those

02:11data protections.

02:12There are a lot of controversial things that the Bureau does.

02:15It's uncontroversial that you are the repository of financial data protection.

02:22And there's no controversy around your enforcement of existing laws.

02:26So let's drill down on FCRA, Gramm-Leach-Bliley, and 1033.

02:30Gramm-Leach-Bliley, standard from the 1990s, it was much more about the financial use of

02:36data among affiliates within a corporate structure.

02:42We have a bill to update those data privacy standards modeled in large part out of California.

02:49And we've had a set of questions in exchange about secondary use of that data.

02:55But how would you, in a measured way, update the Gramm-Leach-Bliley data standards?

03:01I think we should accept that that notice that we get all the time is not really effective

03:06when it comes to having meaningful control.

03:09I would urge you all to think about some common sense permissible purposes or restrictions

03:15that really draw the line of how that data can be in some way shared or reused or monetized.

03:22In some ways, it's similar to what was put into place in the Fair Credit Reporting Act

03:26as well.

03:27Okay.

03:28You mentioned trigger leads.

03:31Describe how — why do you mention trigger leads as it relates to data protection?

03:36Well, it is a privacy issue.

03:38I think that when you apply for a mortgage loan, sometimes you then get inundated with

03:44calls, sometimes from sketchy players.

03:47I don't think most people think that when they apply for something, there's going to

03:51be a deluge, that everybody knows about it, and mortgage lenders feel that their customers

03:57say to them, did you tell everyone?

03:59This is a privacy issue, too, in addition to one about fairness.

04:03Okay.

04:04Now, 1033, I have a concern that if your regs are put in place, or your proposed regs, that

04:17this really enshrines incumbents and the value of incumbents with data, financial data.

04:23How do you address that?

04:24I think what we want to do is make sure that you can't have a bait-and-switch.

04:28You can't say I'm offering you an auto loan really to harvest it and sell for other purpose.

04:34So what we're trying to do, Mr. Chairman, is find out with respect to secondary uses,

04:40product optimizations, how do we get that line right so that it does not really entrench

04:45anyone, but still respects people's privacy.

04:49The bait-and-switches that we see, I just — we should have no tolerance.

04:52Okay.

04:53And do you have a timeline for this rulemaking?

04:56We're going to finalize it this fall.

04:57My goal is October.

04:58Okay.

04:59With that, thank you.

05:00I know there are other specific questions members have, but thank you for addressing

05:06data privacy in particular.

05:08I'll now recognize the ranking member, a gentlelady from California.

Patrick McHenry Grills CFPB Director On 'Bad Actors' Harvesting Americans' Financial Data

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