By Victoria Guida and Zachary Warmbrodt

Presented by U.S. Bank

Editor’s note: Morning Money is a free version of POLITICO Pro Financial Services morning newsletter, which is delivered to our subscribers each morning at 5:15 a.m. The POLITICO Pro platform combines the news you need with tools you can use to take action on the day’s biggest stories. Act on the news with POLITICO Pro.

The Consumer Financial Protection Bureau is about to propose guardrails that could sharply restrict how Financial firms handle customer data. It has the potential to shake up the competitive dynamics across the industry.

The move is the culmination of a yearslong power struggle between traditional players like banks and fintech startups that are increasingly stepping on their turf. Technology has forced freer sharing of data among financial firms as people and businesses are drawn to the convenience of apps offering services like payments and budgeting.

But the system by which all these different companies share your data, and what they do with it, is based on a lot of ad hoc arrangements that open up the possibility your data will be used in ways you don’t want when it’s shared.

The bureau, using authority from the Dodd-Frank Act, as soon as this week will issue a proposal that will attempt to establish more of a framework for what data should be shared and when, and how long companies can have access to it, based on customer consent. It’s also expected to leave room for the industry to continue to negotiate more technical aspects of data-sharing standards.

For context: If you’ve used an app like Venmo or Wealthfront that requests access to your bank or brokerage account to function properly, you may be aware that there’s a company that often sits between your bank and the app — data aggregators like Plaid, Finicity and Yodlee. These aggregators act as middlemen between the entity that has your information and the entity that you want to have it, a conduit for data.

A NEW POLITICO PODCAST: POLITICO Tech is an authoritative insider briefing on the politics and policy of technology. From crypto and the metaverse to cybersecurity and AI, we explore the who, what and how of policy shaping future industries. We’re kicking off with a series exploring darknet marketplaces, the virtual platforms that enable actors from all corners of the online world to traffic illicit goods. As malware and cybercrime attacks become increasingly frequent, regulators and law enforcement agencies work different angles to shut these platforms down, but new, often more unassailable marketplaces pop up. SUBSCRIBE AND START LISTENING TODAY.

But banks, which have long faced tough standards for what they do with their customers’ data, want discretion over which data fields they have to share — and they want the ability to verify that it really is the customer requesting it.

Also relevant: the more information they share, the more they open themselves up to competitive threats; for example, if people can use an app to see what interest rate they’d be charged at different lenders, they have more ability to shop around.

Data aggregators have actively sought more oversight from the CFPB in the hopes of bolstering their perceived reliability. They’ll soon find out if that approach will pay off. (Notably, the CFPB already quietly announced this summer that it was “conducting, or has scheduled, supervisory examinations of one or more data aggregators.”)

The proposal could also have massive implications for the payments system. If it makes it easier for customers to make ACH payments rather than card payments, that could help merchants bypass swipe fees. It could also provide more impetus for fintechs on behalf of their users to push banks to make use of real-time payments infrastructure.

Here are areas to watch in the proposal:

• Screen scraping: The CFPB said last year it’s considering limits to so-called screen scraping, where, when a customer logs into their bank account within an app, the data aggregator then scrapes the data that the customer can see — a process banks hate. Firms will be watching to see if the rule mandates an end to that practice.
• Application programming interfaces: The financial industry has been moving toward sharing information through API — a standardized set of data fields for a given purpose. The question is how much information the CFPB will mandate that banks and brokers share with third parties. 
• Liability: Currently, who’s responsible in the event of fraud or hacks is something that’s negotiated between parties, and it can bog down the time it takes for data aggregators and banks to set up digital connections. It’s unclear how extensively the CFPB will answer those questions.
• Exemptions: The Independent Community Bankers of America said the CFPB “should consider appropriate exemptions from creating and maintaining an API-enabled third-party access portal for some smaller financial institutions.”

Happy Thursday – We’re approaching the Speaker Patrick McHenry zone. MM readers, are you thrilled? Unmoved? Please send thoughts: [email protected].

A message from U.S. Bank:

At U.S. Bank, we believe young people deserve access to financial education. That’s why we partner with Junior Achievement chapters around the country to teach young people the skills they need to take charge of their economic and academic success. By supporting the next generation, we are investing in communities across the country not just today, but for decades to come. Because U.S. Bank is small enough to care, and big enough to make a difference. Learn more.

The Export-Import Bank kicks off its two-day annual conference in Washington … Senate Banking has a hearing on nominees for FDIC IG, SEC, NCUA, Ex-Im Bank and SIPC at 10 a.m. … Fed Chair Jerome Powell speaks at the Economic Club of New York at noon … Fed Vice Chair for Supervision Michael Barr speaks at the Fed’s stress testing research conference in Boston at 1:30 p.m.

Republicans eye Jordan alternatives — House Republicans are bracing for Rep. Jim Jordan to drop his speaker bid, though he’s vowing to keep fighting after a second failed vote Wednesday.

What if McHenry keeps the speaker gavel? — Rep. French Hill is expected to lead the Financial Services Committee, at least in the short term, if current chair McHenry assumes a temporary role as speaker, according to lawmakers and aides who spoke with our Eleanor Mueller. The Arkansas Republican is the committee’s vice chair — a role that’s helped set up the former Treasury official and banker as McHenry’s heir apparent.

If McHenry stays speaker longer term, the Financial Services chairship is expected to be decided by the GOP Steering Committee, where Hill would likely face competition from Reps. Blaine Luetkemeyer and Bill Huizenga, possibly even Rep. Andy Barr.

While there might be differences on the margins — Luetkemeyer is seen as a little less enthusiastic about crypto than McHenry, for example — the agenda under any of the successors would probably be close to status quo.

“The good news is between Huizenga, Hill, Luetkemeyer and Andy, they all have the same philosophy as Patrick,” one industry executive told MM. “And almost the same personality.”

What Elizabeth Warren’s reading — Treasury on Wednesday announced sanctions against Hamas officials and a Gaza-based crypto exchange, as it sought to cut off revenue for the group, Sam Sutton reports.

Treasury announced the sanctions hours after Sen. Elizabeth Warren and 104 other lawmakers urged the Biden administration to crack down on illicit crypto activity, following reporting that Hamas raised funds using digital currency.

Separately, the administration said it will ease Venezuelan oil sanctions following an agreement to allow free elections next year.

GOP signals opposition to Lew — Senate Republicans aren’t sold on confirming former Treasury Secretary Jack Lew to be the next ambassador to Israel, our Connor O’Brien reports. During a hearing Wednesday, GOP senators hit Lew with harsh questioning over his role in the Iran nuclear pact during the Obama administration. Republicans won’t be able to block Lew if Democrats stick together, though they could slow down his confirmation.

SEC wins diversity case — A federal court upheld the SEC's decision to bless a corporate board diversity policy imposed by Nasdaq, rejecting a constitutional challenge brought by conservative activists.

First in MM: GOP presses the Fed — Rep. Andy Barr is amping up pressure on the Federal Reserve to give Congress more details on its proposed overhaul of bank capital rules, Eleanor reports.

The central bank's Sept. 5 response to an earlier letter "fails to answer any of our questions," Barr writes in a letter he plans to send later today to the Fed's vice chair for supervision, Michael Barr. In July, the Kentucky Republican and Rep. Bill Foster (D-Ill.) requested access to the cost-benefit analysis behind the proposal, projections of its industry impact and more.

Powell’s view: Andy Barr told Eleanor that he raised the issue to Fed Chair Jerome Powell in person Wednesday and that Powell committed, when it came to the final rule, “there would be consensus.” Barr said he took that as “an indication that the proposal cannot go forward as-is.” Two Fed board members, Michelle Bowman and Christopher Waller, dissented on the proposal. The Fed did not respond to a request for comment.

Powell also met with members of House Small Business, Rep. Dan Meuser (R-Pa.) told Eleanor.

Senate Dems join Republicans to undo CFPB rule — The Senate passed a resolution to block a CFPB rule that requires lenders to report demographic information on small-business loans, our Katy O’Donnell reports.

Sens. Joe Manchin (D-W.Va.), Jon Tester (D-Mont.), John Hickenlooper (D-Colo), Kyrsten Sinema (I-Ariz.) and Angus King (I-Maine) joined Republicans to halt the regulation. The White House is threatening to veto the rollback.

Iran bill blocked — Jasper Goodman reports that Sen. Tim Scott was unable to get unanimous consent to pass a bill that would extend Iran sanctions. Sen. Mike Lee objected on behalf of Sen. Rand Paul, who was away because of a death in his family.

A message from U.S. Bank:

Gensler targets Wall Street’s Costco approach — A new SEC plan would stop stock exchanges from offering lower fees or higher rebates to the most active brokers trading on their platforms, Declan Harty reports. SEC Chair Gary Gensler says he’s looking out for smaller brokers that pay higher fees than their larger competitors.

PLAYBOOK IS GOING GLOBAL! We’re excited to introduce Global Playbook, POLITICO’s premier newsletter that brings you inside the most important conversations at the most influential events in the world. From the buzzy echoes emanating from the snowy peaks at the WEF in Davos to the discussions and personalities at Milken Global in Beverly Hills, to the heart of diplomacy at UNGA in New York City – author Suzanne Lynch brings it all to your fingertips. Experience the elite. Witness the influential. And never miss a global beat. BE PART OF THE CONVERSATION. SUBSCRIBE NOW.

ECB preps digital euro — Reuters reports that the European Central Bank will begin a two-year “preparation phase” for the digital euro on Nov. 1, during which it will finalize rules, choose private sector partners and do more testing.

Parsing the Beige Book — The Fed’s latest Beige Book — a survey of business sentiment across the country — suggests that economic momentum is much weaker than implied by other recent hard data releases, according to analysts with Evercore ISI.

A message from U.S. Bank:

At U.S. Bank, community is everything.

That’s why we’re investing in communities around the country by partnering with organizations like Junior Achievement.

Together, we are teaching young people the skills they need to take charge of their economic and academic success. Students in these programs learn valuable financial education lessons, build professional skills and plan for the future.

We are proud to offer our staff the opportunity to mentor young people in practical, meaningful ways that will impact their lives as they grow into adulthood. By supporting the next generation of Americans, we’re investing in the future of the country and its communities.

U.S. Bank. Small enough to care, and big enough to make a difference.

Learn more.

Follow us on Twitter

Follow us

To change your alert settings, please log in at https://www.politico.com/_login?base=https%3A%2F%2Fwww.politico.com/settings

This email was sent to [email protected] by: POLITICO, LLC 1000 Wilson Blvd. Arlington, VA, 22209, USA

Please click here and follow the steps to unsubscribe.