Wall Street Banks Accused of Trying to Sabotage Key Consumer Protection Rule

Posted on November 16, 2024 by Yves Smith

Yves here. As much as banks do try to increase the cost to customers of switching banks, depending on what the Consumer Financial Protection proposed rule about requiring a bank to “unlock” a departing customer’s financial data and transferring it to the new bank amounts to, the banks may have a very legitimate beef.

I do not know how many customers find access to historical records to be important. I have to assume small business customers do since payment records are almost certainly needed in the event of an IRS audit. Yes, you can retain them locally, but I prefer having the security of knowing I can get them from the bank if needed.

Merely from my dealing with three banks (Citi, TD and PNC), it is clear they retain historical information in very different formats. For instance, in my Citi small business account, which has an entirely different (more stringent) login process than their consumer accounts, I have been stymied in locating images of cancelled checks (Citi is very anti-check, this may be part of their effort to discourage use).

TD by contrast links small business to consumer accounts of the owner. They also includes check images in monthly statements for a fee; otherwise, if you want TD to run them down later, the past and perhaps still current practice is for TD to run them down for a fee. PNC does not include them with statements, evah; you can download images painfully, check number by check number, from the bank website.

Similarly, TD only allows downloading of transaction data in a CSV format for a very limited time, as in the past two months, while Citi does not seem to impose time limits.

So if any of these banks were to export their data to a recipient bank, the odds that it could affordably made it accessible to new customers seems like a fantasy.

However, to support the Consumer Financial Protection Bureaus’s beef, many (I assume all) banks wipe historical data when you close an account.

I apologize for not running down the fine points on this debate. Knowledgeable readers are encouraged to fill in the gaps.

By Julia Conley, staff writer at Common Dreams. Originally published at Common Dreams

Consumer advocates applauded last month as the Consumer Financial Protection Bureau finalized a rule aimed at making it easier for people to switch financial institutions if they’re unhappy with a bank’s service, without the bank retaining their personal data—but on Thursday, more than a dozen groups warned the CFPB that major Wall Street firms are trying to stop Americans from benefiting from the rule.

Several advocacy groups, led by the Demand Progress Education Fund, wrote to CFPB director Rohit Chopra warning that major banks—including JP Morgan Chase, Bank of America, Citi, TD Bank, and Wells Fargo—sit on the board of the Financial Data Exchange (FDX), which has applied to the bureau for standard-setting body (SSB) status, which would give it authority over what is commonly known as the “open banking rule.”

Standard-setting authority for the banks would present a major conflict of interest, said the groups.

The banks are also on the board of the Bank Policy Institute, which promptly filed what the consumer advocates called a “frivolous lawsuit” to block the open banking rule when it was introduced last month, claiming it will keep banks from protecting customer data.

At a panel discussion this week, Bank of America CEO Brian Moynihan also said the open banking rule, by requiring financial firms to unlock a consumer’s financial data and transfer it to another provider for free, would cause “chaos” and amplify concerns over fraud.

The groups wrote on Thursday that big banks want to continue to “maintain their dominance by making it unduly difficult for consumers to switch institutions.”

“The presence of these organizations on both the FDX and BPI boards undermines the credibility of FDX and presents various concerns relating to conflict of interest, interlocking directorate, and antitrust law,” they wrote.

Upon introducing the finalized rule last month, Chopra said the action would “give people more power to get better rates and service on bank accounts, credit cards, and more” and help those who are “stuck in financial products with lousy rates and service.”

The coalition of consumer advocacy groups—including Public Citizen, the American Economic Liberties Project, and Americans for Financial Reform—urged Chopra to reject FDX’s application for standard-setting authority so long as the banks remain on its board.

“It would be a flagrant conflict of interest for the same banks who are suing to block the open banking rule because it threatens their market dominance to also be in charge of implementing it,” said Demand Progress Education Fund corporate power director Emily Peterson-Cassin. “The American people are fed up with Wall Street controlling every aspect of their lives and the open banking rule is an opportunity to give all of us some financial freedom. The CFPB must stop this ploy by the biggest banks to keep us trapped under their thumbs.”

The groups called the open banking rule “a historic step forward for the cause of giving consumers true freedom intheir financial lives.”

“For this reason, it is imperative that SSB status not be granted to an organization whose board members are, either directly or through a trade association they are participating in, suing the CFPB to stop the rules from taking effect, particularly when such members may be ethically conflicted from such dual participation,” said the groups. “By rejecting SSB status for FDX or any other organization with similar conflicts of interest pertaining to Section 1033, the CFPB will help prevent big banks from sabotaging open banking rules.”

Print Friendly, PDF & Email

Leave a Reply Cancel reply