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FILE - In this Jan. 6, 2012, file photo President Barack Obama visits the new director of the Consumer Financial Protection Bureau (CFPB), Richard Cordray, right, at CFPB FILE - In this Jan. 6, 2012, file photo President Barack Obama visits the new director of the Consumer Financial Protection Bureau (CFPB), Richard Cordray, right, at CFPB's offices in Washington. (AP Photo/J. Scott Applewhite, File)  

Consumer Financial Protection Bureau compared to NSA

Yet another federal agency is under fire for mining the personal information of American citizens.

The Consumer Financial Protection Bureau is gathering reams of financial records from U.S. banks with detailed information on millions of Americans’ personal finances,  eliciting sharp criticism from business groups and Republican lawmakers.

The U.S. Chamber of Commerce flatly declared the data collection illegal and a U.S. senator compared it to the National Security Agency’s controversial surveillance program.

In a June 19 letter to CFPB Director Richard Cordray, David Hirschmann of the Chamber’s Center for Capital Markets Competitiveness blasted the agency for failing to follow regulations that require the creation of specific rules to govern the collection of personal financial data.

“The Bureau has not issued an order or a regulation imposing upon businesses an obligation to provide account-level data on an ongoing basis,” said Hirschmann, calling the CFPB’s data demands “unlawful.” He sought more details regarding the breadth and methods of the secretive program and expressed concern that customers’ private information may be at risk.

The Chamber, which counts many of the largest U.S. banks among its members, initially protested the CFPB’s activities in a February letter that denounced the the bureau’s demands as unfocused and overly burdensome. But by declaring outright that the CFPB’s data collection violates the law, they have upped the ante.

“The letter that CCMC sent to the CFPB is meant to highlight our strong concerns and start a dialogue on the Bureau’s data collection policies,” Chamber spokesperson Lisa Burgess said in an email to The Daily Caller News Foundation. “While the business community agrees that the CFPB should be a data-driven agency, prudence and the law require transparency and clarity to be a part of the process.”

Defending the data mining at an April hearing before the Senate Banking Committee, Cordray argued that the practice was no different than methods used in the private sector and that the information collected helps inform bureau analysts how to best protect consumers.

“The notion that we’re tracking individual consumers or invading their privacy is quite wrong,” he said, adding that the CFPB guards personal information carefully.

The CFPB collects data from all across the financial landscape, including information on credit cards, mortgages and financial products like debt cancellation and checking account overdrafts. Such records are usually demanded by the CFPB during the routine inspection of U.S. banks, forcing them to comply with the request or face possible legal sanctions.

“The CFPB is demanding mounds and mounds of data during the examination process of financial institutions, basically making the implicit threat that they either give them all this information on their customers or fail the exam,” said John Berlau, a scholar at the Competitive Enterprise Institute, to TheDC News Foundation.

The Chamber’s letter revealed new information about a program still shrouded in secrecy. In April, Bloomberg News reported that credit card information from nine major banks would be stored and analyzed by a New York-based consultant firm. Now the Chamber alleges that some credit card issuers are being directed by the CFPB to provide monthly summaries of cardholder transactions on a continuous, account-by-account basis.

Companies have informed the Chamber of Commerce that these summaries may constitute hundreds of pieces of cardholder data every month.

The CFPB also collects data from institutions outside its jurisdiction, shelling out millions of dollars for access to valuable financial records. In one instance reported by Bloomberg News, the bureau paid a Dublin-based credit monitoring company $8.4 million for data on 5 to 10 million American consumers.

Many in Congress are skeptical of the data mining program. Idaho Republican Sen. Mike Crapo has repeatedly voiced his apprehension, particularly in a May 16 letter to Cordray where he sought “a full and thorough legal analysis to ascertain [the CFPB's] authority to engage in such sweeping collection of consumers’ financial information.”

Asked for comment, a Crapo spokesperson hesitated to declare the program illegal “without adequate disclosure about the CFPB’s actions and intent,” but told TheDC News Foundation that the program’s legality and privacy protections remain a topic of serious concern.

On June 18, Wyoming Republican Sen. Mike Enzi compared the program to the NSA’s surveillance activities. “The NSA claims it is protecting you from terrorists,” he said. “The consumer protection bureau claims it is protecting you from banks.  At what point does ‘protection’ become power or control?”

Berlau agrees, calling the bureau’s activities “an NSA-style surveillance program without any serious justification, such as terrorism.” He sees the program as another example of government’s willingness to delve deeply into the personal lives of its’ citizens to “protect us from ourselves and our own choices.”

The CFPB claims that individuals’ names and addresses are not included in the database, minimizing the potential for abuse or theft of records. Critics counter that the program’s secrecy makes such claims impossible to verify.

A March 2013 report from the Federal Reserve’s Office of Inspector General  raised concerns about the technical security of the CFPB’s data and information systems. “If you have credit card data, if you’ve made certain purchases, it can be fairly easy to reverse-engineer that and identify who the person is,” Berlau said.

Critics believe that the CFPB can discern market trends and conduct cost-benefit analyses by utilizing a random-sampling approach, similar to methods utilized by agencies like the Securities and Exchange Commission. They contend that a sprawling database of consumer information is ineffective as well as illegal.

Burgess said that the Chamber of Commerce sees litigation as “an act of last resort.”

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