Senator Elizabeth Warren Criticizes Treasury Department Report on FinTech
It seems the latest FinTech news has been less about funding rounds, acquisitions, or IPOs and has instead been dominated by talks of regulation. Just a couple of weeks ago New York Department of Financial Services superintendent Maria Vullo filed a lawsuit against the Office of the Comptroller of the Currency, seeking to stop the agency from issuing national bank charters to FinTech firms. Not long after that the Senate Banking Committee also met to discuss the potential impacts of FinTech and a Treasury Department report on the same topic. Unfortunately, as Credit Union Times reports, the meeting saw some Senators — including prominent Massachusetts Democrat Elizabeth Warren — pushing back against the some of the report’s findings.
Speaking to the committee, Senator Warren said, “I think it’s critical that the government move methodically on a regulatory approach to FinTech so we encourage productive innovation but we don’t expose consumers to a lot of unnecessary risks.” She added, “In almost every instance, [Treasury’s report] advocates for deregulation in an effort to stimulate the FinTech industry. I’m concerned about a lot of those recommendations.”
One of Warren’s main issues with FinTechs was the data that many firms collect from users and customers. Specially she noted, “One set of recommendations is rolling back rules about how banks can share personal and financial information with third-party data aggregators.” The Senator also asked Cornell University law professor Saule Omarova about these issues, with Omarova responding, “My main concern is that the Treasury recommendation will open the floodgates for the banks … to open up this treasure trove of sensitive financial data on the customer that they have for much more uses by various types of companies.” In some rare bipartisanship, Warren’s and Omarova’s concerns were echoed by Idaho Republican and committee chair Senator Mike Crapo who stated customers must know “when their data is being collected and how it is being used.” Senator Crapo added that some FinTech products “revolve around big data analytics, data aggregation and other technologies that make use of consumer data. Oftentimes these processes operate in the background, and are not always completely transparent to consumers.”
It’s worth noting that these issues that Senators Warren and Crapo are discussing are not unlike those facing much of Silicon Valley, including the Facebooks and Googles of the world. While those entities may be collecting more personal data on the whole, the types of information — namely financial accounts and social security numbers — are still considered to be more sensitive than what social networks are likely to get. However, testifying before the committee, Innovation and Governance Program director and George Mason University senior research fellow Brian Knight noted, “[T]he collection, aggregation, and use of consumer data has significant potential to allow consumers to enjoy the benefits of a more competitive and innovative market. Of course, there is no such thing as a free lunch, and increased risks may accompany the benefits.” That seems to be the conundrum that FinTechs are dealing with and that regulators are trying to balance. Of course, per usual, it seems that these big questions won’t be answered immediately, with plenty of pushback from both sides along the way.