The Consumer Financial Protection Bureau (CFPB) fights for Americans with one or two hands tied behind its back. Data is a powerful new currency that, on an individual basis, can only be as helpful as it is accurate. When we submit to the authority of third parties to validate data, we void our agency and potentially relinquish our futures. Companies also open themselves up to headaches, increasing regulatory burden and litigation. The CFPB relies implicitly upon third parties to verify that you are who you say you are—and that should scare everyone.
The problem is not that there’s a lack of regulation, it’s that the CFPB’s regulation is built on shaky and flawed foundations that will continue to fail consumers and allow for abuse. Your data is meant to be an accurate representation of who you are and what you’ve done. However, too often we find that this data is inaccurate and the only ones who regularly pay the price are the consumers the CFPB is meant to defend. In an ecosystem whose parasites are fueled by obfuscation, the only way forward for the CFPB and consumers is to cut through the fog and put the power back in the hands of the individuals.
Curbing Regulation
With the increasing volume of data breaches and identity theft cases, the CFPB is doing what it can’t do for consumers directly. However, what it can and is doing is to add more regulations. In a recent Law360 article titled “Embracing a Consumer-Centric Paradigm Shift in Data Privacy,” it’s argued that the traditional approach of adding more regulations might not effectively address the concerns surrounding data privacy and accuracy. Instead, the report advocates for a paradigm shift toward a more consumer-centric approach. This approach acknowledges that consumers should play a more active role in controlling and verifying their personal data. So, what does that look like?
Of the People, By the People
One compelling argument against additional regulation is the idea of empowering consumers to verify their data before it’s used by third parties. The premise is simple: consumers should have the ability to confirm the accuracy of their data, ensuring that it reflects their true identity, background, and financial history. This approach not only benefits consumers but also provides businesses with more reliable and accurate data for decision-making.
Consider the recent Equifax incident, where incorrect FICO scores caused significant disruptions in people’s lives. The Equifax credit score glitch lawsuit and the recent breach report exemplify how simple data errors and unnecessary storage of individuals’ personal data can have profound consequences. If consumers had the ability to verify their data before it was used for lending decisions, they could have identified and rectified errors in a timely manner. This would have been a win-win situation for both consumers and businesses, as consumers would know what needed correction, and businesses would have avoided downstream litigation.
The Regulatory Waltz
Traditionally, regulators have imposed new rules on companies to protect consumers. In addition, state and federal regulators hinder businesses while the digital world blurs state lines. However, the cycle often repeats itself: third parties exploit or sometimes go around these rules, consumers bear the consequences, and regulators respond with new regulations. This pattern can create a never-ending loop that doesn’t necessarily benefit anyone. It creates an environment in which users and businesses face the consequences of a broken system while regulators play whack-a-mole with new issues stemming from the same old problem.
A more effective approach involves democratizing data. Consumers should have the ability to verify their data and eliminate errors, ensuring they become better-informed individuals. This aligns with the consumer-centric paradigm shift proposed in the aforementioned report.
Who Are You Supposed to Be?
Data verification doesn’t mean consumers can change factual information about themselves. It means they can correct inaccuracies, ensuring their financial records, credit reports, background, and personal data are as accurate as possible. This process empowers individuals to become better consumers and enables businesses to make important decisions based on reliable information.
Let’s pretend that you, John A. Smith, are in the process of applying for a job with Company X. They were impressed with your resume, they loved you in the interviews, and all that’s left is the formality of a background check. Company X farms their background checks out to a third party that pulls up a troubling report. They see multiple arrests and credit issues that send up a red flag. Company X only sees the red flag and they promptly throw your application in the garbage. The problem is that they pulled up John B. Smith’s report. You cannot correct this because all you get from Company X is the door slammed in your face. Let’s say that they did manage to pull up the right report, you will still never be able to contextualize these issues in the next interview you do or work to fix what can be saved in this report.
In a system where consumers can verify their data, the individual would have the opportunity to dispute the error before the hiring decision was made, avoiding potential litigation for the business.
Data Emancipation
Democratizing data isn’t solely the responsibility of regulators, consumers, or businesses; it’s a collaborative effort. Regulators should encourage this approach by creating an environment where consumers can easily access and verify their data. Businesses should not only support these efforts but lead the efforts by providing transparent access to data and correcting errors promptly.
Rather than relying solely on regulations, we should empower consumers to take control of their data. By doing so, we can break the cycle of overregulation, protecting both consumers and businesses and ensuring a future where individuals are informed and in charge of their data. In this democratized data landscape, regulators, consumers, and businesses can all win. With a product like Trua, consumers are able to own their identities and backgrounds again. Through Trua, you will not be able to lie about what is bad in your report—but you will have full transparency. There is power in knowing how the world finds you and rates you. If the CFPB seeks to help Americans, it can start by putting this power back in the hands of consumers.