#BHC

As we noted in our assessment last week, CFPB Director Chopra has taken another bold step rewriting consumer finance with a strong stand in favor of stiff new consumer-data protections.  These would abandon the notice-and-consent approach which, as Mr. Chopra rightly says, leaves most of us with little privacy and less protection.  Instead, certain uses to which firms put our data would simply be prohibited. If the CFPB can get this right, then it will strike a blow not only for personal privacy, but also for sound finance with far fewer high-risk conflicts of interest.

The notice-and-consent approach to privacy protection is the epitome of information asymmetry and thus of ineffective consumer protection.  We all know what it is by virtue of the regular process by which our smart phones apprise us of updates often designed more to capture our data than to improve reliability or functionality.  Under pressure, phone providers have recently added a bit more information on what each update does if one can find and then understand it, but failure to agree to an update endangers continued cell-phone service.  This is the equivalent of solitary confinement and so each of us dutifully agrees to each update no matter how much of our privacy we give away.

Financial-privacy disclosures are still largely an analog game by virtue of the privacy notices required under the 1999 Gramm-Leach-Bliley Act. Back then, finance was bereft of digital paraphernalia and banks dominated it.  Thus, these privacy notices were and are essentially …