CFPB Data Collection Methods Under Fire

When Robert Cordray, Director of the Consumer Financial Protection Bureau ("CFPB"), testified before the Senate Banking Committee in April, 2013, he attempted to reassure senators that the CFPB had no interest in tracking individuals' financial transactions, even though the bureau has access to financial information of millions of Americans.

Senator Mike Crapo, R-Idaho, the Committee's ranking Republican, who opposed the creation of the CFPB, was not convinced. He raised questions about the CFPB's ability to collect information, what it intends to do with it, and whether individual Americans could be identified through the aggregate data.

Director Cordray defended the actions of the CFPB by stating that the bureau collects data in three areas - credit cards, consumer credit reports and mortgages. He stated that the bureau purchases "anonymized" data on credit cards, just like private companies and other government regulators do. The bureau also purchases aggregated consumer reports from the same vendors used by the Federal Reserve Board of New York to create its own reports, and the bureau is working with the Federal Housing Finance Agency to create a mortgage database using anonymous mortgage records.

Cordray added that even if it is possible to "reverse-engineer" the aggregated data to track individual consumers, the bureau has no interest in doing so. Such action would be very difficult, and would violate a provision of the Dodd-Frank Act that bars the CFPB from collecting any personally identifiable financial information.

After that April Senate hearing, Senator Crapo requested the General Accounting Office ("GAO") to investigate the data collection program of the CFPB, and on July 18 the GAO announced that it would investigate whether the bureau had violated its authority and had breached any privacy rules.

Even while the GAO conducts its probe, Senator Crapo has...