Didier Reynders and Rohit Chopra have kicked off an informal dialogue on a range of critical financial consumer protection issues.
The digitalisation of the financial services sector has significant implications for businesses and households. Key subjects for discussion between the EC and CFPB include pricing and customer service, competition and privacy. Financial institutions have expanded their deployment of automated decision making.
This includes the use of artificial intelligence. New products and services, such as Buy Now, Pay Later, are shifting the way people borrow and spend money. Digital payments are faster and more frictionless and are increasingly offered and controlled by Big Tech companies. The EC and the CFPB argue that such developments, if left unchecked, could increase consumers’ exposure to fraud and manipulation.
More needs to be done to respond to evolving markets and consumer needs
Moreover, it may limit consumers’ product options over time, threaten their control over their own data, and force them to accept more expensive personalised pricing for the same products and services compared to other consumers.
Policymakers on both sides of the Atlantic are responding to these issues. But according to Reynders and Chopra, more must be done to compete with the pace of evolving markets and consumer needs. In this context, based on their shared priorities and public mandates, Commissioner Reynders and Director Chopra agreed to start a new dialogue on consumer financial protection.
This will focus primarily on digital developments in the financial sector and the impact on consumers. The aim is to improve policy and regulatory cooperation. This cooperation includes sharing insights and experience on issues related to consumer financial products and services, with the aim of exchanging technical expertise and coordinating on the most pressing policy issues.
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The European Commission and the Director of the CFPB will meet at least once a year. This informal dialogue will involve staff discussions, including bilateral meetings between senior staff and subject matter experts.
AI, new forms of credit, data and the threat from big tech
The dialogue will cover a number of areas, such as Automated decision making and processing of data in financial services. This including the deployment of AI, and the related opportunities and risks for consumers such as the lack of transparency, misuse of data and violation of financial privacy rights, discrimination, and exclusion.
New forms of credit such as ‘Buy Now, Pay Later’ products, and the related risks to consumers. This will include over-consumption and over-indebtedness.
Other subjects for discussion include strategies to effectively prevent over-indebtedness and to help over-indebted consumers to repay their debt sustainably.
The EC and CFPB will also discuss digital transformation that ensures fair choice and access to financial services for consumers. This will include the unbanked, underbanked, and consumers who want to protect their own data.
And finally, they will discuss the implications for competition, privacy, security and financial stability of Big Tech companies offering financial services, including payment services.