Switching Banks Ought to Be Easy

Finally, an interoperability rule for your money

By Cory Doctorow  / pluralistic.net./ https://creativecommons.org/licenses/by/4.0/

"If you don't like it, why don't you take your business elsewhere?" It's the motto of the corporate apologist, someone so Hayek-pilled that they see every purchase as a ballot cast in the only election that matters - the one where you vote with your wallet.

Voting with your wallet is a pretty undignified way to go through life. For one thing, the people with the thickest wallets get the most votes, and for another, no matter who you vote for in that election, the Monopoly Party *always* wins, because that's the part of the thick-wallet set.

Contrary to the just-so fantasies of Milton-Friedman-poisoned bootlickers, there are *plenty* of reasons that one might stick with a business that one dislikes - even one that actively harms you.

The biggest reason for staying with a bad company is if they've figured out a way to punish you for leaving. Businesses are keenly attuned to ways to impose switching costs on disloyal customers. "Switching costs" are all the things you have to give up when you take your business elsewhere.

Businesses love high switching costs - think of your gym forcing you to pay to cancel your subscription or Apple turning off your groupchat checkmark when you switch to Android. The more it costs you to move to a rival vendor, the worse your existing vendor can treat you without worrying about losing your business.

Capitalists genuinely hate capitalism. As the FBI informant Peter Thiel says, "competition is for losers." The ideal 21st century "market" is something like Amazon, a platform that gets 45-51 cents out of every dollar earned by its sellers. Sure, those sellers all compete with one another, but no matter who wins, Amazon gets a cut.

Think of how Facebook keeps users glued to its platform by making the price of leaving cutting off contact with your friends, family, communities and customers. Facebook tells its customers - advertisers - that people who hate the platform stick around because Facebook is so good at manipulating its users (this is a good sales pitch for a company that sells ads!). But there's a far simpler explanation for peoples' continued willingness to let Mark Zuckerberg spy on them: they hate Zuck, but they love their friends, so they stay.

One of the most important ways that regulators can help the public is by reducing switching costs. The easier it is for you to leave a company, the more likely it is they'll treat you well, and if they don't, you can walk away from them. That's just what the Consumer Finance Protection Bureau wants to do with its new Personal Financial Data Rights rule.

The new rule is aimed at banks, some of the rottenest businesses around. Remember when Wells Fargo ripped off millions of its customers by ordering its tellers to open fake accounts in their name, firing and blacklisting tellers who refused to break the law?

While there are alternatives to banks - local credit unions are great - a lot of us end up with a bank by default and then struggle to switch, even though the banks give us progressively worse service, collectively rip us off for billions in junk fees, and even defraud us. But because the banks keep our data locked up, it can be hard to shop for better alternatives. And if we *do* go elsewhere, we're stuck with hours of tedious clerical work to replicate all our account data, payees, digital wallets, etc.

That's where the new CFPB order comes in: the Bureau will force banks to "share data at the person’s direction with other companies offering better products." So if you tell your bank to give your data to a competitor - or a comparison shopping site - it will have to do so...or else.

Banks often claim that they block account migration and comparison shopping sites because they want to protect their customers from ripoff artists. There are certainly plenty of ripoff artists (notwithstanding that some of them run banks). But banks have an irreconcilable conflict of interest here: they might want to stop (other) con-artists from robbing you, but they *also* want to make leaving as painful as possible.

Instead of letting shareholder-accountable bank execs in back rooms decide what the people you share your financial data are allowed to do with it, the CFPB is shouldering that responsibility, shifting those deliberations to the public activities of a democratically accountable agency. Under the new rule, the businesses you connect to your account data will be "prohibited from misusing or wrongfully monetizing the sensitive personal financial data."

This is an approach that my EFF colleague Bennett Cyphers and I first laid our in our 2021 paper, "Privacy Without Monopoly," where we describe how and why we should shift determinations about who is and isn't allowed to get your data from giant, monopolistic tech companies to democratic institutions, based on privacy law, not corporate whim.

The new CFPB rule is aimed squarely at reducing switching costs. As CFPB Director Rohit Chopra says, "Today, we are proposing a rule to give consumers the power to walk away from bad service and choose the financial institutions that offer the best products and prices."

The rule bans banks from charging their customers junk fees to access their data, and bans businesses you give that data to from "collecting, using, or retaining data to advance their own commercial interests through actions like targeted or behavioral advertising." It also guarantees you the unrestricted right to revoke access to your data.

The rule is intended to replace the current state-of-the-art for data sharing, which is giving your banking password to third parties who go and scrape that data on your behalf. This is a tactic that comparison sites and financial dashboards have used since 2006, when Mint pioneered it.

A lot's happened since 2006. It's past time for American bank customers to have the right to access and share their data, so they can leave rotten banks and go to better ones.

The new rule is made possible by Section 1033 of the Consumer Financial Protection Act, which was passed in 2010. Chopra is one of the many Biden administrative appointees who have acquainted themselves with all the powers they already have, and then *used those powers* to help the American people.

It's pretty wild that the first digital interoperability mandate is going to come from the CFPB, but it's also really cool. As Tim Wu demonstrated in in 2021 when he wrote Biden's Executive Order on Promoting Competition in the American Economy, the administrative agencies have sweeping, grossly underutilized powers that can make a huge difference to everyday Americans' lives: