Pub. 1 2021 Issue 3

16 | The Show-Me Banker Magazine CONSUMER PROTECTION IN THE FINTECH ERA By Carl White, Senior Vice President, Supervision In February, we looked at some of the regulatory issues that have arisen with fintech firms entering banking. This month, we are examining some of the consumer issues that have surfaced with these innovative ways to bank. Technology has revolutionized the way consumers interact with the financial system. Older innovations (such as the internet and mobile devices) and newer developments (such as big data and computer algorithms) have changed banks and what we think of as banking: making deposits, taking out loans and managing investments. Agencies charged with consumer protection of financial activity have had to adapt as well. While consumers face a dizzying array of new choices — in products and providers — and the possibility of wider access and lower costs, potential pitfalls have emerged too. Two of the biggest are data security/privacy and the possibility of consumer confusion about the protections available, exacerbated by the speed at which products and providers are being launched. Consumer Protection Regulators Two federal agencies are primarily responsible for consumer protection in financial services: • The Consumer Financial Protection Bureau (CFPB) • The Federal Trade Commission (FTC) Both agencies are charged with making sure consumers are unharmed by the practices of businesses under their purview without taking action that could harm market competition. The CFPB and the FTC devise and issue consumer protection rules for the financial firms they oversee; these rules include regulations on issues such as payments and data security, which are particularly important to fintech firms. They also have enforcement actions in their toolbox when regulating fintech firms, since these agencies are responsible for implementing and enforcing consumer protection laws for nonbank financial companies. In recent years, the FTC has issued enforcement actions against fintech firms for unauthorized charges, fraudulent money transfers, and unfair and deceptive acts. Data Security and Privacy The giant strides made in digital banking are in no small part due to the tremendous amount of financial (such as loan payments history) and non-financial (such as social media) consumer data available to providers that assist with credit approvals, identity verification and marketing. With somuch personal data circulating, the risks of data breaches and loss of personal privacy increase too. In July, a popular neobank 1 experienced amassive data breach that affectedmore than sevenmillion users. In addition to passwords, hackers were able to access names, birthdates, physical addresses and other pieces of personally identifiable information. Fortunately, more sensitive information such as Social Security numbers and credit card numbers were undisturbed. Data sharing is another issue amplified by the emergence of digital banking. Numerous federal banking laws directly or indirectly govern “ownership” of consumer