CFPB Targets Data Brokers With Latest Proposed Rule (Podcast) – Data Protection

In this episode of his “Clearly Conspicuous” podcast
series, “CFPB Targets Data Brokers with Latest Proposed
Rule,” consumer protection attorney Anthony DiResta shares his
insight on the Consumer Financial Protection Bureau’s (CFPB)
proposed rules governing the practices of data brokers under the
Fair Credit Reporting Act (FCRA). He outlines the comprehensive
rules established by the FCRA that regulate consumer reporting
agencies as well as the CFPB’s previous studies regarding data
brokers. Mr. DiResta explains that the key to staying on top of the
current laws that deal with technological developments is to pay
attention to the CFPB’s initiatives that go beyond the
financial services industry.

Listen to more episodes of Clearly Conspicuous
here.

Podcast Transcript

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.

The content of this article is intended to provide a general
guide to the subject matter. Specialist advice should be sought
about your specific circumstances.