Weekly Fintech Focus

  • House Financial Services Committee discusses consumers’ rights to access their personal financial data.
  • The CFPB takes action against an online lender for deceptive marketing.

House Financial Services Committee Discusses Consumer Rights to Access Personal Financial Data

On September 21, 2021, the House Committee of Financial Services Task Force on Financial Technology held a hybrid hearing entitled “Preserving the Right of Consumers to Access Personal Financial Data.” The memorandum for the hearing highlighted the ongoing debates over how financial institutions should be allowed to use or share consumer data and how the increased use of consumer financial data by fintech companies and other financial institutions has raised concerns around consumer protection and privacy, and how the laws and regulations currently operate in this space.

The purpose of the hearing was to examine recent developments in fintech data-sharing, including the level of control consumers have on how their data is being used. The hearing focused on calls for a clearer legal and regulatory regime for data-sharing among financial institutions and third parties and for more measures that addressed the issue of informed consent from users whose information is aggregated and shared. Consumer advocates expressed that meaningful consent cannot exist when people do not know what information they are agreeing to share and that more than simply having users select “agree” on terms and conditions is needed. Consumer advocates also focused on the need for greater oversight of data aggregators that are often responsible for such data-sharing.

The hearing can be viewed as particularly timely in light of numerous lawsuits related to data aggregation ongoing in various courts around the country. Additionally, the CFPB is currently engaged in a rulemaking under Section 1033 of the Dodd-Frank Act to clarify standards around consumer-authorized access to financial data, which received a further push in July 2021 as President Biden’s executive order on promoting competition in the American economy encouraged the CFPB director to consider such rulemaking with the goal of facilitating the portability of consumer financial transaction data to allow consumers to easily switch financial institutions and use new innovative products.

Online Lender Faces CFPB Enforcement Action for Deceptive Marketing

Earlier this month, the CFPB filed a lawsuit in the U.S. District Court for the Northern District of California against LendUpLoans (“LendUp”), an Oakland, California-based online lender that provides loans to consumers primarily for personal, family, or household purposes. The CFPB alleges that LendUp is in violation of a 2016 CFPB consent order, which in addition to having to pay $3.5 million in consumer redress, also prohibited LendUp from making misrepresentations in its marketing claims about the benefits of repeat borrowing from its company. The complaint accuses LendUp of continuing to engage in the same deceptive marketing practices that resulted in the consent order. Specifically, according to LendUp’s marketing, borrowers who repaid loans on time and took free courses offered through LendUp’s website would earn “points” that would allow them to “climb” to higher LendUp Ladder levels, where they could access lower interest rates and larger loan amounts. However, many repeat borrowers who ascended to higher LendUp Ladder levels received the same or higher rates compared to their previous loans. Many also did not gain access to larger loans.

The CFPB is seeking a permanent injunction from committing future violations; damages, restitution, and other monetary relief to consumers; disgorgement for unjust enrichment; and the imposition of a civil money penalty.