Woodstock Institute agrees with Antonakes that strong, reliable data are critical to understanding how financial markets affect consumers and ensuring that the financial industry is abiding by consumer protection laws. Reliable data are also essential to ensure that CFPB regulations are based on evidence and are carefully targeted at issues those pose risks to consumers.
“The financial industry is already using every data tool at its disposal to target consumers with offers for payday loans, credit cards, and high-cost student loans,” said Spencer Cowan, vice president of research at Woodstock Institute. “In order to monitor a constantly-evolving marketplace and base regulations on clear evidence, the CFPB must be empowered to analyze timely, granular data on the interactions between corporations and consumers. Preventing the CFPB from using data to drive its decisions would ensure that the agency—and consumers—are always one step behind the financial industry.”
In Illinois, data-driven regulation has been a key component of laws designed to protect consumers from predatory payday loans. Payday and installment lenders must report important information about the product terms and conditions as well as borrower characteristics into a database that allows state regulators to verify whether lenders are complying with laws that cap interest rates, ensure that borrowers can afford to repay their loans, and break the cycle of debt.
The CFPB can use similar data-driven regulatory tools to hold financial service providers accountable, detect emerging consumer protection issues, and ensure that consumers are receiving accurate information about financial products. For example, the CFPB and the Federal Housing Finance Agency are developing a database on mortgage terms and conditions and borrower characteristics that would be the most comprehensive information on mortgages to date. The data could clue regulators in to another emerging mortgage crisis before it occurs and allow them to conclusively detect discriminatory lending practices.
It is critical that the CFPB make every effort to protect the privacy of consumers and safeguard its data. Acting Deputy Director Antonakes testified that, unlike private sector datasets, the majority of the information acquired by CFPB does not include personally identifiable information. He also emphasized that preventing security breaches and privacy violations is a top priority of the agency.
As Acting Deputy Director Antonakes noted, “Information is essential to properly supervise market participants, regulate markets, protect consumers and honest businesses from unscrupulous activities, and ensure the stability of the financial system and of the economy generally. Simply put, no agency can effectively supervise that which it does not understand.” An agency with a mission as important as the CFPB’s must be fully empowered to understand the industry and consumers it serves. We urge legislators to abandon efforts to unduly hamper the CFPB’s use of data to understand trends and protect consumers.
For more information, contact Spencer Cowan at email@example.com or 312-368-0310.