Colin Barrett, President/CEO, Tennessee Bankers Association
While far from a conspiracy theorist, I do find myself more suspicious than I once was. During a recent lunch with TBA Chairman Jim Rieniets, we were discussing destinations we have never had the opportunity to visit. As we were leaving, an advertisement from one of those very places popped up on Jim’s phone.
I am confident this happens to all of us, and that we just shrug it off. In this digital age, we don’t think twice about scanning QR codes or sharing our Venmo transaction history for the world to see in exchange for their convenience. However, this lack of concern for our privacy is put to work in Washington to develop policies that give the government a significant amount of information about our daily lives. Banks play a critical role in this, being used as a tool to collect information that not long ago would have been inconceivable.
In 2021, the Biden Administration proposed its much-maligned IRS proposal aimed at monitoring bank accounts with annual transactions over $600. The public’s fear of that government intrusion into their spending led to swift backlash, and the proposal was withdrawn. But current policy discussions in Washington are even more concerning.
There are few initiatives in our country’s history as intrusive as the CFPB’s rule to implement section 1071 of The Dodd-Frank Act. The Act itself requires banks to collect 13 data points on small business loan applicants. However, when the CFPB released the final rule—13 years after Dodd Frank passed—those 13 data points were “rounded up” to 81. While the banking industry is frustrated about adding this to their already burdensome list of regulations, the real outrage should be from the business community because their personal information will now be reported to the federal government.
Notably, the CFPB hasn’t clarified how this data will be used. However, considering the CFPB’s recent data leak affecting more than 250,000 individuals, should businesses trust their personal information with the CFPB?
Another area of great concern is the potential creation of a national digital currency, oftentimes referred to as a Central Bank Digital Currency (CBDC). A CBDC would serve as a digital tether between citizens and the Central Bank, which would be a major departure from the current payments system, while providing no additional benefit. For the banking industry, a CBDC has the potential to drain bank deposits, an area of already increased competition. For the public, this means another tool the government could use to monitor, and even control, monetary transactions.
The Fed has said that Congressional authority is needed to create a CBDC, and they are already studying the best way to go about it. Despite pushback from the industry and public, this is an issue that is here to stay and we need to remain vigilant.
Although there are threats to our privacy, there are opportunities as well. Congressman John Rose has drafted bipartisan legislation addressing “trigger leads” by restricting credit reporting agencies from selling customers’ information to third parties. We have heard countless stories on this issue in recent months, and it is not uncommon for customers to receive 50 emails, texts and phone calls within 48 hours of applying for a loan. Customers, often confused and believing their bank sold this information, have a right to apply for a loan without that information being sold to other lenders. Be on the lookout for companion legislation in the Senate in the near future.
We have rarely called on our customers to get involved in legislative battles in Washington. But considering the threat some of these policies could have on their privacy, that will need to change. Protecting our customers is a fight the banking industry has a responsibility to take head on.
