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On Nov. 21, the United States Congressional Task Force on Financial Technologies held a hearing on the role of big data in financial services.
The last major legislation focused on the subject was the Gramm-Leach-Bliley Act of 1999, which formalized a financial service firm’s obligations to clients — specifically, how they share client information. Given the field’s expansion over the past 20 years, the Fintech Task Force’s posture on Thursday was that of an early exploration of options and opportunities for new and major legislation.
The current conundrum
Obviously, the scene has changed remarkably since 1999. Financial services are more accessible than ever. Smartphones and powerful free apps have put financial capabilities previously reserved for industry professionals literally into the hands of everyday consumers. The flip side, as the task force seemed to acknowledge, is that many of those financial opportunities approach consumer data predatorily. The old axiom “if you are not paying for the product, the product is you” seemed to frame the conversation.
While the public eye was largely directed at the ongoing Trump impeachment hearings the same day, the members of the Fintech Task Force — led by chairman Stephen Lynch (D-MA) and ranking member Tom Emmer (R-MN) — questioned five expert witnesses who testified as to the state of the industry and appropriate measures to rein in big tech.
The five testifying
The witnesses espoused a range of views reflective of highly distinct professional backgrounds. Lauren Saunders, an associate director at the National Consumer Law Center, focused on minimizing firms’ legal right to use consumer data in ways beyond those that users would reasonably expect. She also expressed concern about the ways that machine learning was amplifying discriminatory financial practices in ways that would be harder to correct than in traditional systems.
An associate professor of computer science at Brown University and chief scientist at Aroki Systems, Dr. Seny Kamara also believed that firms were running rampant over consumer rights. A cryptographer, Kamara showed a unique insight into ways that technology itself could limit financial service providers’ access to consumer data. He cautioned, however, against excess hope in the field, saying “It is easy to get carried away on a wave of technological optimism.”
Like Saunders, Dr. Christopher Gillard, an English professor at Macomb Community College and an advisor to the Digital Pedagogy Lab, was extremely concerned about the role of new technologies in reinforcing old discrimination. He referred to “opaque systems that offer consumers little power of redress” in the form of practices hidden from consumers under the auspices of proprietary code. Gillard further affirmed that “We must reject the notion that regulations stifle innovation.”
More optimistic in tone, Don Cardinal, managing director of the Financial Data Exchange (FDX), pointed to industry moves away from data practices like screen-scraping, in which customer login information is accessible to aggregators. He saw the industry as addressing the problems preemptively.
Similarly, Duane Pozza, a partner at law firm Wiley Rein, sought to define the concept of big data and emphasize its role in expanding financial services. He was particularly interested in cash-flow data, which Saunders had called out as a potential major overstep when it allows loan providers to access data on merchants and specific purchases rather than vaguer information on overall balances and transfers. Saunders said that such data enabled profiling and discrimination on a major and distopian scale. Pozza saw cash-flow data as a means of freeing credit seekers from the traditional gatekeepers of credit scores.
Curiously bi-partisan issue
Though traditional party lines did come into play, with Republicans making slightly more mention of consumer choice and Democrats more frequently bringing up consumer protection, the assembled congresspeople all seemed to be in alignment that consumers had little choice and were unprotected.
Chairman Lynch described the contracts users must agree to in order to access services: “Framed as privacy agreements, they’re actually lack-of-privacy agreements.” Lynch specifically called out the agreements of Mint, Venmo and Qapital, which according to him were, respectively 30, 40 and 10 pages long and filled with language that Lynch, an attorney, described as dense legalese. The consensus was that such problems are inescapable, with Rep. Ben McAdams (D-UT) opining that, as a consumer, he has no idea how many firms are using his data right now.
The shared atmosphere in the room was that consumers were being failed. It was a rare moment of consensus, with the major exception of witness Don Cardinal, who was frequently quick to point out how much progress the field has seen in recent years, as well as how much financial access has expanded to new demographics thanks to innovative companies.
New laws for today’s data challenges