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WSJ: Fintech Startups Want to Save One Key Page of Dodd-Frank

Updated: Aug 19, 2019

By Telis Demos

Feb. 2, 2017


President Donald Trump said this week that his administration is going to do a “big number” on the Dodd-Frank financial overhaul and dismantle it. A brewing fight between financial startups and banks over one small section of the law shows how rancorous, and complex, this process could prove.


The Dodd-Frank Act, which was signed into law in July 2010, is 849 pages long and has numerous provisions that have spurred hundreds of rules covering everything from bank regulation to debit- and credit-card fees to derivatives trading. Each of those issues often has passionate supporters and detractors; changes likely will set off renewed lobbying battles, just as happened when the law was initially crafted.


Consider Section 1033: While much attention around Dodd-Frank has focused on its proprietary-trading provisions or the consumer-protection agency it created, this one-page, 342-word provision has garnered the attention of startup venture-backed companies.

Although there is no indication that the administration is focused on this little-known section, some are gearing up to fight to protect it.


Section 1033 says that banks must “make available to a consumer, upon request…information relating to any transaction, series of transactions, or to the account” and “in an electronic form that can be used by computer applications.”


Fintech startups argue this language enshrines their right to pull data from customers’ bank accounts when the customers give them permission. Companies such as Betterment LLC, an online investment manager, say that accessing bank-account data helps them make it easier for consumers to use investing apps, borrow money or move dollars between accounts.


Banks, on the other hand, say that while they support customers’ right to share their account data, there should be certain restrictions as well. These are needed, they add, to protect consumers from third parties accessing more data than is authorized, or to track how data is used.


Already, Betterment and a group of well-funded fintech startups have created an industry group, called the Consumer Financial Data Rights group, in hope of protecting Section 1033 and pushing for broad implementation of it. The group, formed in January, said it would work with policy makers to promote “consumer choice and access.”


Other group members include Personal Capital Corp., Affirm Inc., Kabbage Inc., Varo Money Inc., and Hello Digit Inc.


“We seek to speak with a unified voice to Trump administration on this issue,” said Steven Boms, vice president of government affairs at Envestnet Yodlee, a bank-data aggregation provider.


Separately, Plaid Technologies Inc., which provides software tools for firms such as Betterment to access bank data, has been collecting signatures in favor of open data access from its customers and plans to present a petition to regulators and lawmakers in the coming weeks.


The fintech firms argue they need a provision like Section 1033, on which the Consumer Financial Protection Bureau has been gathering industry input as it considers potential rules, to ensure access for their apps and services. Because they aren’t typically set up as banks, they don’t have direct access to users’ checking and savings accounts.


“The most important issue is access to customers’ own financial data,” said Jon Stein, chief executive of Betterment, in an interview. “Customers have a right to manage their own.”

But banks haven’t been so enamored with the current setup. They warn that handing over online banking passwords to third parties is risky, and that outside services constantly pulling data from bank servers is a technological burden and could destabilize financial networks.

In 2015, banks such as Bank of America Corp. ,J.P. Morgan Chase & Co., and Wells Fargo & Co. at times suspended access for services that were “scraping” data by scanning online banking websites.


Upstarts and banks have discussed compromise proposals, such as creating new ways to create anonymous passwords. Some banks also plan to submit comments to the CFPB on data-safety guidelines for sharing.


“We know customers love sharing their data, and banks are working hard to make sure they can share their data regardless of whether there’s a law or not,” said Robert Morgan, vice president for emerging technologies at the American Bankers Association, a banking industry group.


Banks and fintech companies have managed to reach some accommodations. J.P. Morgan Chase recently struck a deal with Intuit Inc., which owns the Mint.com service, to enable the bank’s customers to share data without giving up their password to Mint and other Intuit services.


Fintech firms argue that so long as Section 1033 or something like it remains, both sides have to deal with each other. With Dodd-Frank’s future up in the air, though, the dynamics between the two groups could change.

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