Director Chopra’s Prepared Remarks at the Consumer Advisory Board Meeting

I’m pleased to kick off this public meeting of the Consumer Financial Protection Bureau’s Consumer Advisory Board. Our advisory board is composed of individuals from across the Federal Reserve System’s districts, many of whom serving at the recommendation of the Reserve Bank Presidents. I want to thank each of our members for their service.

Today’s meeting will focus on tech: both in the present and in the future. Our agenda will include a discussion on the fast-growing Buy Now, Pay Later market, where many industry players harvest extraordinary amounts of data to sculpt a personalized retail user experience to induce more shopping and borrowing. We will review the CFPB’s latest study and some of the implications of our analysis, including some of the agency’s next steps.

We will also spend time on peer-to-peer payment systems. Last year, the CFPB ordered a number of Big Tech giants and dominant peer-to-peer payment platforms to provide information and data about what they collect, how they decide to kick off users, and what they do to observe existing consumer protections, like those related to fraud. Greater adoption of these services is leading to significant shifts and challenges for the consumer finance ecosystem.

But, first, we will discuss the CFPB’s launch of the Personal Financial Data Rights rulemaking, which seeks to accelerate America’s shift toward open banking and a more decentralized market structure. We are implementing these rules using a dormant authority under Section 1033 of the Consumer Financial Protection Act.

Last week, at an industry conference, I presented some of our goals for the rulemaking and for the future of open banking: promoting openness, increasing switching, reducing reliance on credit scores, protecting sensitive personal data, and preventing domination and monopolization. I also had a chance to meet with the FDIC’s Advisory Committee on economic inclusion and raised questions about the impact of open banking on the unbanked and underbanked, especially with respect to data and privacy.

I am encouraged by the positive reactions from across the consumer finance ecosystem on our planned approach. Of course, there is a lot of work that must be done.

Before I turn it over to the staff to guide the discussion, I want to surface an area where we have been devoting quite a bit of thinking and are eager for your input throughout the rulemaking process. It relates to industry standard-setting organizations and providers of critical infrastructure.

In the U.S., private organizations play a major role in setting standards across sectors of the economy. Telecommunications and health care provide some of the best examples, but financial services are no different. Sometimes these organizations are not neutral, but are instead owned or governed by certain market participants. Others may also integrate a function akin to a lobbying or trade association.

Decentralized, open banking will likely rely on fair standard-setting, through an amalgam of legally binding rules and industry developed standards. It can be difficult to achieve fair standard-setting, since incumbents will have a strong economic interest when it comes to protecting their turf.

In the United Kingdom, an Open Banking Implementation Entity was established to provide critical services and infrastructure, among other duties. Here, at home, there are already many efforts to ensure a common set of standards to exchange data. The CFPB is gleaning insights on the experience abroad, as well as domestic developments.

The CFPB will be developing the implementing rules with a practical mindset of how rules would be operationalized in the market.

We’re excited to continue our work collecting feedback on how we can create an open and competitive banking environment in our country. Thank you.