CFPB and European Commission Open Dialogue About Digitization of Finance

As financial services become more digital, consumer advocates on both sides of the Atlantic are taking notice.

To that end, Didier Reynders, commissioner for justice and consumer protection of the European Commission, and Rohit Chopra, director of the U.S. Consumer Financial Protection Bureau (CFPB) announced Monday (July 17) they had begun an “informal dialogue” on a number of issues.

“The digitalization of the financial services sector has significant implications for businesses and households, from pricing and customer service to competition and privacy,” the two officials said in a news release.

For example, financial institutions have begun using things like artificial intelligence (AI) to automate decision making, while services like buy now, pay later (BNPL) change how consumers borrow and spend money.

Meanwhile, Reynders and Chopra said, digital payments are faster and more frictionless and are increasingly controlled by Big Tech firms.

“These developments, if left unchecked, could increase consumers’ exposure to fraud and manipulation, limit their product options over time, threaten their control over their own data, and force them to accept more expensive personalized pricing for the same products and services compared to other consumers,” the two officials said.

“Policymakers on both sides of the Atlantic are responding to these issues, but we must do more to compete with the pace of evolving markets and consumer needs.”

Last month, the CFPB said that it had gotten a number of complaints from customers frustrated by their interactions with banks’ AI chatbots, used to answer questions or solve problems.

The agency said that roughly 37% of Americans interacted with a banking chatbot last year, a number that is expected to climb, as the top 10 commercial banks in the country are employing chatbots on some level.

“When chatbots provide inaccurate information regarding a consumer financial product or service, there is potential to cause considerable harm,” the CFPB said in a news release.

The bureau said its analysis of the issue found that banks risk providing customers with inaccurate information or failing to guard consumer data and privacy, in violation of consumer financial protection laws.

And in May, Chopra gave an interview to The Associated Press discussing his agency’s work to address some of the challenges presented by AI.

“One of the things we’re trying to make crystal clear is that if companies don’t even understand how their AI is making decisions, they can’t really use it,” Chopra told AP. “In other cases, we’re looking at how our fair lending laws are being adhered to when it comes to the use of all of this data.”