Many Americans are understandably unsettled by news reports about the National Security Agency’s widespread monitoring of telephone and Internet traffic. Attracting far less attention is the rampant snooping of a more personalized nature carried out daily by the Consumer Financial Protection Bureau (CFPB).
The two-year-old agency created by the Dodd–Frank financial regulation statute is supposed to keep an eye on banks, mortgage servicers, credit agencies, and the like. But the bureau is also watching consumers very closely, amassing an Orwell-worthy database on all manner of spending, including credit cards, mortgages, auto loans, overdrafts, and payday loans.
The credit data can be engineered to construct individual credit profiles. For example, the mortgage data includes the property purchased or refinanced, the ongoing payment history, and the borrower’s other debt obligations.
The data grab has prompted complaints that the bureau is exceeding its authority under the Dodd–Frank statute, and neither Congress nor the White House is empowered to rein it in. Indeed, CFPB director Richard Cordray refused to disclose the extent of the monitoring when directly asked to do so during a hearing before the Senate Banking Committee on April 23.
The bureau has spent tens of millions of dollars to obtain the consumer data from private credit agencies. It also is strong-arming banks and the other institutions it regulates to hand over millions of records—at significant cost. The demands for documents, according to the U.S. Chamber of Commerce, are often unfocused, overly inclusive, and not coordinated with other regulators.
Exacerbating matters are data “management, operational and technical control weaknesses” cited by the CFPB’s inspector general. According to the report, “CFPB has not established a comprehensive information security strategy to guide the implementation of an agency-wide information security program.”
The Senate is now preparing to vote on the confirmation of Cordray for a new five-year term. It is an opportune time for lawmakers to scrutinize the CFPB’s surveillance and undertake reforms to increase its transparency and accountability. Doing so should rank as a priority before a confirmation vote takes place.