Banking

Brown asks FSOC to examine ‘systemic’ risks of consumer data use

WASHINGTON — The Democratic chair of the Senate Banking Committee called on the Financial Stability Oversight Council to review the “systemic” risks of how financial institutions use consumer data, according to a letter published Tuesday. 

The letter sent by Sen. Sherrod Brown of Ohio to Treasury Secretary Janet Yellen — who heads the FSOC, a committee of U.S. financial agencies — asked the Biden administration’s regulators to examine “whether and to what extent the collection and sale of consumer data by financial institutions pose a systemic threat to U.S. financial stability and security.” 

“The breadth of personal consumer data that financial institutions have access to and can legally sell or otherwise disclose to commercial entities and to data brokers creates a concerning entry point for bad actors to obtain and use that information for their own purposes,” Brown said in the letter, adding that he remained concerned that sale of personal financial data could damage “Americans’ security and civil rights.” 

Treasury officials declined to comment on the letter. 

Brown has called on both Congress and federal agencies to do more to police the financial sector’s use of consumer data in recent years, including the introduction of the Data Accountability and Transparency Act in June 2020. The bill would have banned the use of facial recognition technology and the collection of personal data without specific exceptions, among other reforms. 

While lawmakers are currently in the early stages of a comprehensive and bipartisan data privacy bill — the first of its kind — U.S. banks are one of the nation’s few industries that already face federal privacy regulations today via the Gramm-Leach-Bliley Act. Brown’s letter on Tuesday acknowledged that existing framework but argued that the 1999 law did not go far enough to address the privacy landscape of 2022. 

“It is unclear … if consumers are aware of” their rights under Gramm-Leach-Blilehy “and how often those rights are exercised,” Brown wrote. “Additionally, because financial institutions do not share which third parties they sell data to, it is difficult to assess how data is used or if it is protected at all.” 

Yellen appeared on Capitol Hill earlier on Tuesday to testify before the Senate Finance Committee, where she fielded questions on inflation, taxation and fiscal policy. Brown, a member of the committee chaired by Sen. Ron Wyden, D-Ore., used his time on Tuesday to press Yellen on the benefits of a child tax credit introduced by the Biden administration in 2021 that has since expired. 

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