How data security solutions support compliance with the CFPB’s new data sharing rule
The recent announcement from the Consumer Financial Protection Bureau (CFPB) on Personal Financial Data Rights marks a significant shift in how financial institutions handle customer-generated data. This move, evolving from the Dodd-Frank Wall Street Reform and Consumer Protection Act, emphasizes the need for enhanced data security and privacy, spotlighting secure communication platforms as critical tools for compliance.
Summary of the CFPB's Proposed Rule
Originating from Section 1033 of the Dodd-Frank Act, the proposal aims to empower consumers with greater access and control over their financial data.
The rule mandates both depository and nondepository entities to ensure the availability of specific consumer data to authorized third parties. It outlines:
- Obligations for Third Parties: Implementing stringent privacy requirements and setting standards for data access.
- Data Providers' Responsibilities: Providing consumers and authorized third parties with "covered data" in an electronically usable format, without imposing fees or charges.
- Consumer Rights: Including mechanisms to revoke third-party access to their data.
- Limitations: Prohibiting third-party actions, for example, targeted advertising, cross-selling, or data selling which are not deemed "reasonably necessary."
What this means for your organization
Secure data sharing
The proposed rule underscores the importance of secure data sharing mechanisms. As such, organizations need to consider secure solutions that provide end-to-end encryption to protect sensitive financial data from unauthorized access during transmission and storage.
Compliance and risk management
Financial institutions must now be more vigilant about the third parties they interact with. The rule requires entities to authenticate the identities and authorization scopes of third parties requesting data. Secure communication platforms can play a crucial role here by offering features that support identity verification and data integrity checks.
Requirements of small financial institutions
The NPRM acknowledges that smaller institutions might face significant impacts, necessitating potential partnerships with vendors for consumer and developer interface solutions. Secure communication platforms can be a cost-effective, compliant solution for smaller entities, reducing the need for large-scale internal infrastructure development.
Overlap with FCRA SBREFA Panel
The ongoing changes in the regulatory landscape, including the Fair Credit Reporting Act (FCRA), further complicate the data environment for financial institutions. These developments call for adaptable, secure communication systems capable of responding to evolving legal requirements and customer expectations.
The proposed rule by the CFPB represents a significant pivot in the financial sector’s approach to consumer data management.
Financial institutions must act swiftly to evaluate their current data sharing and communication practices, ensuring they align with this evolving regulatory environment to maintain trust, compliance, and a competitive edge.
We’re on hand to help financial institutions to understand their requirements under the proposed rule, as well as global data protection legislation. Find out how our Secure Email and Secure File Transfer solutions can support you in protecting sensitive consumer data with advanced encryption, MFA, and DLP tools.
