Statement of CFPB Director Rohit Chopra, Member, FDIC Board of Directors, at the FDIC Advisory Committee on Economic Inclusion Meeting

Today, the Advisory Committee will be discussing the results of the FDIC’s Survey of Unbanked and Underbanked Households, conducted in partnership with the U.S. Census Bureau. The survey highlights the roles of unexpected and high fees, privacy concerns, and other impediments that contribute to Americans staying away from banking with an insured bank or credit union.

In addition, today, the CFPB will launch the first step of the rulemaking process on Personal Financial Data Rights, pursuant to a dormant authority under Section 1033 of the Consumer Financial Protection Act. The CFPB is developing proposals to require financial institutions offering deposit accounts, credit cards, digital wallets, prepaid cards, and other transaction accounts to set up secure methods, like APIs, for data sharing.

By allowing individuals to share their personal financial data in a secure way, we can facilitate more switching, lower fees, and higher levels of customer care. In many respects, this will help us move toward more traditional, cash-flow underwriting and away from black-box models that use mysterious correlations and that invite concerns about bias. It can also reduce reliance on credit scores.

As you discuss the FDIC’s survey results, there are two specific issues I would like you to consider, where the CFPB and the regulators will need your input.

First, as financial services providers rely on more personal data, how might this lead to greater exclusion of the unbanked and underbanked?

Financial transaction data can certainly help fill in the gaps for those with thin credit files. More and more financial companies are requiring this data for underwriting. But for those who are completely outside of the banking system, they will be unable to provide this data, so how can we ensure that they are not worse off in the future?

Second, privacy is a concern for some of the unbanked and underbanked. What can we do to give individuals peace of mind in a world where abuse and misuse of personal data has become the norm?

As part of the rulemaking process, the CFPB is exploring safeguards to strictly limit how personal financial data can be used and shared. What type of safeguards would give the most comfort to those who may be wary of how financial companies treat their data?

We look forward to the input we receive on these issues and more. Thank you.