What Happens to Accountability When Data Goes Dark?


Accountability, especially in the financial industry, has always been hard. Perhaps that is obvious now, nearly a decade after the financial crisis of 2008, as congressmen continue to debate key portions of Dodd-Frank Act. For some, like then-Harvard Law professor Elizabeth Warren, the lack of industry oversight has long been cause for concern. In 2007, she wrote an methodical condemnation of the state of the financial services industry, empathizing with the ill-equipped consumer trying to navigate a complex, if not incomprehensible, marketplace.

Financial products, she noted, experienced none of the regulatory scrutiny that was regularly afforded to everyday household items, even though predatory payday loans are inevitably less egalitarian in their distribution of disaster than fire-prone toasters. There was no safety commission to guard against products that placed consumers in financial jeopardy. Nor was there information readily available about such products to help consumers make informed financial decisions.

To rectify this gap, Warren proposed a safety commission for financial products. The commission would level the playing field between borrowers and lenders by making the dealings of financial institutions more transparent to the consumer. In 2010, after the passage of the Dodd-Frank Act, she was tapped by the Obama Administration and tasked to create the regulatory body she had called for. Shortly thereafter, the Consumer Financial Protection Bureau, or the CFPB, opened its doors.

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The CFPB has yet another mechanism for shedding light on the financial services industry: data. The bureau fields consumer complaints related to mortgages, credit cards, student loans, and more, and publishes all of it as open data. Last year alone, the CFPB processed about 200,000 complaints. If the data from recent years is any indication, that number will likely keep growing.

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The complaints run a wide gamut, but a few categories rise to the top. Mortgages, debt collection, and credit reporting consistently remain the most heavily represented areas of complaints, with credit reporting overtaking mortgage-related complaints in 2016, according to the published CFPB data. Some of the complaints also include a narrative description of the consumer’s issue (when consent has been provided). It is difficult to miss the anger and frustration expressed in those complaints. Until the CFPB, there was no systematic way to listen to the challenges that ordinary Americans often face.

Access to that world of data, however, should not be taken for granted. Last week, the U.S. House of Representatives passed a bill that seeks to bring significant change to how the CFPB functions. The bill, known as the Financial CHOICE Act, was introduced by Representative Jeb Hensarling (R-TX), the chairman of the House Financial Services Committee. Hensarling once described the CFPB as as “the most powerful and least accountable Washington bureau in American history.” The proposals in his bill reflect that sentiment.

Amongst many changes is a particularly interesting proposal under a friendly title: “Homeowner Information Privacy Protection.” The bill proposes the suspension of data sharing requirements, charging the Comptroller of the United States with the task of determining whether such data sharing is necessary. This includes data related to the Home Mortgage Disclosure Act, which, as the title suggests, is literally about the disclosure of such data.

Yes, data-sharing must be done carefully. Research on data-linking techniques has shown that it is possible to re-identify “anonymized” data if the proper measures are not undertaken. To that end, it is worth noting that there are some existing practices in place to ensure the privacy of those the appear in the CFPB complaints database. For example, names, account numbers, and other “personally-identifying information” have been scrubbed from the complaint narratives. And, to the frustration of those who may be trying to examine geographic trends in complaints, up to three digits of the zip code associated with a complaint can appear blocked out. For those interested in the full scope of their privacy efforts, the CFPB publishes a detailed guide on the kind of information it removes and why.

The purpose of the CFPB, according to the writings of its creator, is to empower American consumers to make the best financial choices – with the necessary information. The loss of public data would not only disallow consumers from making informed choices about the financial products they choose, but it would also make it harder for policymakers to hold financial institutions accountable.

Perhaps the most important reason for public access to data – that even those who seek to unencumber financial institutions of burdensome regulations can agree with – is best articulated by the creator of the CFPB herself: “The basic premise of any free market is full information.”