Two of the intellectual centers of the progressive movement are closely watching how President Joe Biden’s administration chooses to write and implement a new rule governing consumers’ access to their financial data, seeing it as an early test for the administration’s willingness to break with business-as-usual approaches to financial regulation.
The rule, an obscure provision of the massive Dodd-Frank Wall Street reform legislation passed more than a decade ago, has united both the Wall Street watchdogs and anti-trust crusaders who have begun to play a larger role in the Democratic Party’s intellectual firmament since the end of the President Barack Obama’s administration.
Both groups have been largely pleased with Biden’s personnel selections so far ― he’s selected Rohit Chopra, an ally of Massachusetts Sen. Elizabeth Warren (D), to lead the Consumer Financial Protection Bureau, which will write the consumer data rule; and picked leading antitrust advocate Lina Khan to replace Chopra on the Federal Trade Commission ― and view the rule, known officially as section 1033, as an early measure of the administration’s willingness to adopt more aggressive positions.
“People are hopeful about most of the regulators who’ve been named so far,” said David Segal, the executive director of Demand Progress. “But this will be an early sign of the administration’s willingness to push back against the power of the finance industry.”
The goal of the rule is to give consumers control over their financial data, which should make it easier for them to switch between banks and other financial institutions, which could make Americans less reliant on the nation’s largest and most politically powerful banks. For example, it would be easier for consumers to switch banks if they could do so without having to reset their automatic bill payments and direct deposit information.
Graham Steele, the director of the Corporations and Society Initiative at Stanford University’s Graduate School of Business, said a strong rule had the potential to reshape vast parts of the nation’s financial landscape.
“It does a lot to break up the Wall Street cartel and their control over a bunch of this space,” Steele said, potentially challenging not only large banks but also the big three credit reporting bureaus and Mastercard and Visa’s duopoly over payment processing. “It could really help bring in new actors to challenge these different structures.”
Steele, a former top aide to Democratic Ohio Sen. Sherrod Brown, said the rule could help bring down costs for consumers and also “demystify” financial products for everyday Americans.
When CFPB solicited comments on the rule earlier this year, liberal and consumer advocacy groups lined up behind a strong rule. The Center for American Progress called it an “easy win for consumer choice.”
Chopra seems inclined to agree with them.
“I don’t want to see a banking system or financial services system where new market entrants cannot get in, cannot compete and win the day,” he said during his confirmation hearing before the Senate Banking Committee. “Dominant players should not be able to squelch out competition and that’s something we always need to be mindful of.”
But a strong rule will almost certainly face heavy opposition from Wall Street. The Clearing House, whose membership includes JPMorgan Chase, Citigroup and Bank of America, suggested CFPB should issue guidance on the topic rather than create a formal regulation. They’ve also suggested giving consumers more control over their data could create security risks, a concern consumer advocacy groups have downplayed.
The incumbent banks in recent years have faced challenges from financial technology companies, who have pushed for more access to data. In 2019, for instance, some PNC Bank account holders were blocked from using the money-sending app Venmo. When the account holders complained, PNC directed them to sign up for Zelle, a similar app co-founded by PNC, Wells Fargo and other large banks.
“This data and consumer information is an incredibly valuable commodity,” Steele said, noting it provides key insights into a consumer’s spending habits and financial situation. “The incumbent banks want to guard this information very closely. They’re going to fight very hard against having to turn anything over either to consumers or to their competitors.”
It’s unclear when CFPB may issue a final rule. A final vote on Chopra’s confirmation is likely tied to the status of Khan’s nomination to the FTC in order to prevent Republican-nominated commissioners from gaining a majority on the commission. Some Democrats closely watching the rulemaking process think it’s unlikely the bureau will make a final decision on the rule until after Chopra is sworn in.
Still, progressives cautioned that a final rule is only the start of ending corporate concentration in the financial industry.
“Data portability is important, but it’s not a panacea,” Segal said. “The tech space is monopolized. There’s been a wave of concentration in the financial industry that still needs to be unwound.”