The Corner

Economy & Business

The Government Shouldn’t Collect Private Financial Information from America’s Poor

One area of agreement, in principle at least, between the Left and the Right is that it’s a problem when the government collects too much data from citizens and invades Americans’ privacy. 

That’s why new rules that mean that the Consumer Financial Protection Bureau (CFPB) will begin collecting huge volumes of personal financial information should concern everyone. 

The CFPB, which was created under Dodd-Frank supposedly to protect consumers and prevent the next big financial crisis, is now being used to try to discourage payday lending, vehicle title, and certain high-cost installment loans.  The rule will require customers applying for a small-dollar loan – the average of which is $350 — to submit extensive personal financial information in support of their applications. In addition to determining a customer’s ability to repay the loan, the lenders will be required to share this information with each credit reporting agency (CRA) registered with the Bureau.

This a big barrier for borrowers who depend on these loans as a lifeline.  And, yes, these loans have high interest rates so come at a big cost to borrowers, but they are also often the best option for people facing a financial crisis.  Effectively eliminating these borrowing options won’t mean that people in need won’t take out loans, but they will find other worse ways to fill their needs.  .  . . or fall further into debt and crisis.

And just as importantly, this new requirement will mean the government has a huge database of financial information on this class of borrowers – who are disproportionately minority and lower-income.  With this data all in one place, it will be vulnerable to a potential hack.

And hacks happen.  In July, Equifax, a leading credit-reporting agency that collects personal financial information on most Americans, admitted it was hacked, meaning that the sensitive personal data, including Social Security numbers, addresses, and credit card numbers, of more than 140 million people was put at risk.  And just this week the SEC reported a hack.  Now government will have a new pool of data for hackers to try to infiltrate.

The Competitive Enterprise Institute just today released a paper outlining many reasons why the CFPB needs fundamental reform.  Congress should take this seriously, and not allow this deeply flawed entity to increase its power and collect even more private data from vulnerable communities of Americans. 

 

 

 

 

 

Carrie Lukas is the president of the Independent Women’s Forum.

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