The government should not be able to force open your window for others to reach in and ransack the place.
Yet that is exactly what the Consumer Financial Protection Bureau (CFPB) did with Rule 1033 before the Trump administration reversed this misguided decision that put consumer data & privacy at risk.
This issue hits especially close to home for states like my home state of Utah, where a booming technology sector and a culture of innovation have fueled the growth of fintech startups and data-driven platforms.
Finalized last year under the Biden administration by former CFPB Director Rohit Chopra, Rule 1033 — often referred to as the “open banking” rule — allows the CFPB to share sensitive consumer data with financial technology (fintech) companies to allow for better and more accurate credit and financial history.
The goal of Rule 1033 was to supposedly help underserved American families by providing more financial mobility within the American marketplace.
While this sounds good on the surface, the devil is, naturally, in the details.
What goes unsaid is that Rule 1033 actually forces financial institutions to simply hand over their customers’ sensitive banking information and histories over to fintech companies for free.
The financial futures of every American family are being treated as commodities to be passed around without caution nor care.
Most people don’t think twice when they choose to send a quick Venmo or CashApp payment. However, what they may not know is that doing so quietly gives unknown third parties access to sensitive financial information they don’t need and shouldn’t keep.
This means Rule 1033 opens a window into these institutions’ secure vaults of information allowing for things such as malicious data harvesting, credit fraud and widespread privacy violations.
This massive breach of privacy was compounded most bizarrely by the consumers’ inhibited ability to even see how their data was passed around amongst these institutions and companies like used needles in a shady back-alley drug deal.
The intent of Rule 1033 was to allow for those that lack traditional credit markers, like credit cards or long-term home and auto loans, to still build a comprehensive credit score that reflects your history of personal fiscal responsibility.
To illustrate, my husband and I bought our first house in 2023. We had a steady income and a strong financial record, and we saved without relying on credit cards.
While the rule was not finalized until 2024, my husband and I could have been subject to Rule 1033. Our financial institution would have been forced to hand over our private financial data to third-party fintech companies — whether we even knew or not.
Another example of unintentional market effects of Rule 1033 is the advent of “Buy Now, Pay Later.” This new method of financial navigation takes advantage of the additional consumer financial data to give customers more freedom within the market in the form of fluid miniature personal loans, even for tiny everyday purchases. You can now use this option to pay for something as small as DoorDash orders.
This shows the potential positives behind what something like Rule 1033 could provide, if only its core functional tenets were better tailored to suit the open market outside of the hypothetical.
As enticing as these conveniences may seem, they are equally as enticing for the many entities that can access this incredibly sensitive and valuable personal financial information.
In addition, there is virtually zero effective control over how this data could be used or abused by these various entities, up to and including re-selling this data to various information brokers and financial market aggregates that exploit this sunspot sizzling beneath the American marketplace.
As it stands, what CFPB’s rule 1033 frames as “empowerment” is really a gateway for more surveillance, more risk of data breaches and less control for families who’ve done everything right. Financial privacy shouldn’t be sacrificed in the name of regulatory experiments.
Freedom to share financial data must come with the freedom to choose. The power of the free market must always lay with the consumer, not those that would fashion themselves as the regulatory rulers of the world market. Consumers are people, not numbers on a credit line.