The Consumer Financial Protection Bureau (CFPB) has proposed a new rule aimed at restricting data brokers from selling Americans’ sensitive personal information. This initiative seeks to enhance consumer privacy and security by imposing stricter regulations on the data brokerage industry. The proposed rule would classify data brokers as consumer reporting agencies under the Fair Credit Reporting Act (FCRA), thereby subjecting them to more rigorous oversight and compliance requirements.

We’ve seen that hackers are using artificial intelligence in new ways to mine unprecedented troves of personal information dumped online in the past year, along with unregulated commercial databases, then leveraging it to trick consumers. By reclassifying legitimate data brokers as reporting agencies, the Consumer Financial Protection Bureau is trying to counteract some of the bad actors.

Understanding the Proposed Rule

The CFPB’s proposal targets data brokers—companies that collect, aggregate, and sell personal information. By redefining these entities as consumer reporting agencies, the rule would extend FCRA obligations to them, including:

• Accuracy Requirements: Ensuring that the data sold is accurate and up to date.
• Consumer Access: Providing individuals with access to their personal data and the ability to dispute inaccuracies.
• Safeguards Against Misuse: Implementing measures to prevent unauthorized use of personal information.

This reclassification aims to close existing loopholes that have allowed data brokers to operate with minimal oversight, often leading to the unauthorized sale of sensitive information.

Implications for Consumers

For consumers, the proposed rule offers several potential benefits:

• Enhanced Privacy Protections: By restricting the sale of sensitive data, such as Social Security numbers and financial information, the rule aims to reduce risks like identity theft and fraud.
• Increased Transparency: Consumers would gain greater insight into who has access to their personal data and for what purposes, empowering them to make informed decisions.
• Improved Data Accuracy: With the ability to access and correct their data, individuals can ensure that their personal information is accurate, which is crucial for activities like applying for credit or employment.

Implications for Businesses

The proposed rule would significantly impact data brokers and businesses that rely on purchased consumer data:

• Compliance Obligations: Data brokers would need to implement comprehensive data management practices to comply with FCRA requirements, potentially involving substantial operational changes.
• Operational Costs: Ensuring compliance may lead to increased costs related to data security measures, employee training, and system upgrades.
• Market Dynamics: Businesses that depend on consumer data for marketing or other purposes might face challenges in data acquisition, prompting a shift towards more transparent data collection methods.

Broader Context and Challenges

The Consumer Financial Protection Bureau’s proposal aligns with a growing emphasis on data privacy and security, reflecting concerns about the misuse of personal information by malicious actors, including foreign adversaries. However, the future of the proposed rule is uncertain, especially with potential administrative changes that could alter the CFPB’s direction. Critics argue that such regulations could burden businesses and stifle innovation, while proponents assert that they are essential for protecting consumer rights and national security. As the proposal undergoes further review and public commentary, its final form will determine the extent of its impact on consumers and the data brokerage industry.