Podcast - CFPB Targets Data Brokers with Latest Proposed Rule

Good day and welcome to another podcast of Clearly Conspicuous. As we've noted in previous sessions, our goal in these podcasts is to make you succeed in this very aggressive and progressive environment, make you aware of what's going on with federal and state consumer protection agencies and give you practical tips for success. It's a privilege to be with you today.

CFPB Proposes Rules to Protect the Public from Data Brokers

Today we discuss the CFPB preparing issuance of rules governing the practices of data brokers under the Fair Credit Reporting Act. So let's start with what the CFPB is doing. The CFPB plans to propose rules that would attempt to ensure that the public is protected from data brokers. The proposals under consideration would provide that a data broker or other company in the surveillance industry can be covered under the Fair Credit Reporting Act in a variety of ways, including if they sell certain types of consumer data. As a consequence, it would be generally not legal to see this kind of personal data for a reason other than a "permissible purpose." In March of 2023, the CFPB launched a public inquiry regarding data brokers, and a request for information sought input about people's experience with these companies and their business practices. Commentators focused on protecting sensitive information, called for more accountability and warned about AI applications. The industry has been a consistent source of consumer complaints to the CFPB and has taken a number of recent action to address issues in the surveillance industry.

What Are Data Brokers?

So let's ask what are data brokers. Data brokers is an umbrella term to describe firms that collect, aggregate, resell, license or otherwise share consumers' personal information with other parties. Data brokers include firms that specialize in preparing employment background screening and credit reports, and then collect information from public and private sources for purposes including marketing and advertising, building and refining proprietary algorithms, credit and insurance underwriting, consumer authorized data reporting, fraud detection, criminal background checks, identity verification and people search databases. The CFPB has found that consumer harms are presented by data brokers. Governmental agencies, technology and privacy experts, financial institutions, consumer advocates and others have identified numerous consumer harms and abuses related to the operations of data brokers, including significant privacy and security risks, the facilitation of harassment and fraud, the lack of consumer knowledge and consent and the spread of inaccurate information.

What the Fair Credit Reporting Act Established

Let's talk about the governing law, the Fair Credit Reporting Act. In 1970, Congress enacted the Fair Credit Reporting Act, which found that consumer reporting agencies assume a vital role in assembling and evaluating consumer credit and other information on consumers. The act established a set of comprehensive rules to govern the practices of consumer reporting agencies, including:

1. prohibiting the use or dissemination of certain personal data outside of prescribed permissible purposes identified by Congress
2. requiring that consumer reporting agencies assure maximum accuracy
3. providing consumers with the right to inspect data
4. providing due process to challenge false data

The CFPB's Next Steps

So what are the next steps? The CFPB is convening a small business review panel to receive feedback from small business panelists. Before the panel meetings the CFPB will send panelists an outline of the proposals under consideration, which will be published for the public review. After receiving the feedback from these panelists, the CFPB will issue a report summarizing the feedback. Following the report, the CFPB issues a Notice of Proposed Rulemaking, which will give the public an opportunity to comment on the proposed rule. After considering these comments, the CFPB may make changes to the proposed rule before issuing a final rule.

Key Takeaway

So here's the key takeaway. As always, pay attention to the CFPB development, as they may create initiatives with implications that go beyond the financial services industry, and watch the ways that current laws are being used to deal with current technological developments. So please stay tuned to further programs as we identify and address the key issues of developments and provide strategies for success. I wish you continued success and a meaningful day. Thank you.