The Consumer Financial Protection Bureau is buying anonymous data and requesting records from banks on more than 10 million Americans to gain greater insight into consumer behavior and the financial marketplace. The agency said it intends to use the information as the basis for all of its work, including writing rules, litigating enforcement actions and promoting financial literacy.
“It is important for us to have data so that we can analyze it and we’re not dependent on asking the financial institutions what they think,” Cordray told members of the Senate Banking Committee. The bureau, he said, has “an interest in understanding how financial products and services are affecting consumers.”
Republican senators, however, said they were alarmed by the invasiveness of the project and questioned the bureau’s motives.
“The bureau was founded with a mission to watch out for American consumers, not to watch them,” said Sen. Mike Crapo (R-Idaho), ranking member of the committee. “Given that the CFPB’s inspector general has already identified data security issues at the bureau, how can the consumer be assured that this information is indeed safe?”
Crapo accused the CFPB of downplaying the nature and scale of the project. He also took issue with the amount of money the agency is spending. The consumer bureau has so far awarded about $20 million in contracts to third-party data firms to gather and manage information, as first reported by Bloomberg News.
Cordray refuted Crapo’s accusations, stressing that the data is essential to the oversight of financial service industries. “You want us to do careful cost-benefit analysis. We can’t do that without good data,” Cordray responded. He noted that several other government agencies, including the Federal Reserve, routinely collect data on consumers. And banks collect much more detailed data on customers to track behavior patterns, he said.
Other Republicans expressed concerns about whether people would see the data mining as the government peering into the finances of average Americans.
“To many people, this is going to sound downright creepy,” said Sen. Mike Johanns (R-Neb.). “People are going to be bothered by the fact that there’s this federal agency that’s collecting data.”
Facing questions from GOP lawmakers has become routine for Cordray. As head of one of the more polarizing agencies in Washington, he frequently is on the receiving end of criticism from Republicans about the legitimacy of the CFPB.
On Tuesday, Crapo repeated his view that the bureau should not be run by a single director but instead by a five-member commission and that the agency should get funding through the Federal Reserve, rather than Congress.
The wrangling over the structure of the agency has delayed Cordray’s confirmation as director for 20 months. President Obama drew the ire of Senate Republicans when he used a recess appointment to install Cordray as the agency chief in January 2012. The president renominated Cordray earlier this year, but Republicans vow to block any nomination until their demands are met.
Democrats pushed Cordray’s nomination through the Senate banking committee by a slim 12 to 10 margin last month. But with neither side willing to compromise on the structure of the bureau, Cordray’s confirmation is still in limbo.
At the hearing, Sen. Elizabeth Warren (D-Mass.) took the opportunity to chide her colleagues across the aisle for the stalemate. “This is about a minority that doesn’t want a watchdog that will keep an eye on the big banks to make sure they don’t cheat their customers,” Warren said.
Warren had crusaded for the creation of a consumer protection agency to police the abusive practices that harmed millions of Americans during the financial crisis.