The Consumer Financial Protection Bureau (CFPB) wants US tech companies to shed light on their data harvesting practices. It ordered six of the biggest names in tech to turn over information regarding financial data and what they do with them.
CFPB to Look Into Big Tech’s Data Harvesting
Last week, the CFPB ordered Apple, Amazon, Facebook, Google, PayPal, and Square to reveal details of their proprietary payment networks.
The agency also said they are studying what information Chinese payments companies Alipay and WeChat Pay require from their users. The information includes what type of data they collect from users and how they use it.
The agency also wants to know how these companies resolve disputes and what protections do consumers have. The CFPB’s order is the first significant move by the CFPB under its new director, Rohit Chopra. He helped launch the consumer watchdog during the Obama administration.
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The information order allows the agency to look into data harvesting practices conducted by big tech companies. This covers how firms gather and monetize data, and whether they share data with buyers.
It can also indicate whether companies engage in behavioral targeting based on information consumers submit. More importantly, the CFPB wants to know if these companies restrict user choices to deny competitors.
CFPB Can Play a Major Role in Regulating Big Tech
Chopra previously led the Federal Trade Commission’s efforts to regulate Big Tech in his previous role as federal trade commissioner.
While the CFPB is known for going after banks and other financial institutions, it can play a major role in going after Big Tech. “The CFPB’s inquiries will help inform regulators and policymakers about the future of our payments system,” Chopra said in a statement.
He added that the information can help “shed light on the business practices” of some of the biggest firms in the world.
Meanwhile, an Electronic Transactions Association representative downplayed hints of impropriety among its member companies. ETA Chief Executive Jodie Kelley said that the security and safety of clients remain their top priority.
He added that the digital transactions industry is deeply committed to protecting consumer data and using technology to stamp out fraud.
“The digital transactions industry has a good story to tell about its efforts to protect consumer data. We look forward to working with Director Chopra and the CFPB on this important effort,” he added.
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The CFPB’s market-monitoring orders compel companies to provide the information requested. These open-ended requests for data sometimes precede related policy actions or help set new rules.
In addition, the Consumer Bankers Association said it welcomes the CFPB’s efforts to “level the playing field” between traditional banks and online payments processors.
Banking industry representatives argue that Big Tech firms have built their e-commerce businesses with few rules in place to protect consumers.
CBA president Richard Hunt also issued a statement supporting the CFPB’s order. “Since the bureau was founded, a growing share of banking activity has occurred outside of the purview of leading regulators,” he said.
This puts “consumers and the resiliency of the financial system at risk,” Hunt noted.
While online payment systems such as those used by Apple, PayPal, or AliPay already existed for years, many social platforms are now ramping up their own systems.
Google and Facebook now want to direct control over overpayments on their platforms. These data harvesting practices could pose problems.
Social Platforms into Payment Systems
Meanwhile, Matt Stoller is a research director for the American Economic Liberties Project. AELP is a nonprofit that promotes competition.
He said that since social platforms work as platforms, they have the power to control which users can stay and which ones need to get kicked out.
This can’t possibly be the same ruling when payment systems get involved. “As they go into payments, what are their policies there?” Stoller asked.
In addition, nobody knows exactly what private companies do with the results of their data harvesting efforts. Pamela Dixon, founder and executive director of the World Privacy Forum, wants to know what they do with the information.
“No one wants to be profiled on our financial data. I think a lot of people would prefer that their wallet information is private to them,” she said.
Watch the CNBC Television video reporting that the CFPB head wants to know what Big Tech is doing with users’ financial info:
Do you agree with the CFPB in ordering the disclosure of what tech companies do with the information given them? Or, do you see this as another government oversight that handicaps companies from innovating?
Tell us what you think. Share your comments below.