Seeking to modernize financial data privacy laws and give consumers more control how their data is used, how can we prepare for this new legislation?
Recently, the Data Privacy Act of 2023 (H.R. 1165) introduced in February by Patrick McHenry (R-NC), the committee Chair, made it through the House Financial Services Committee.
The legislation, according to its sponsors, seeks to modernize financial data privacy laws and provide consumers with greater control over how their data is used.
The bill is designed to be an amendment to the Gramm-Leach-Bliley Act. From here, it will go to the House floor for a vote, but it’s not yet clear when that will happen.
Interestingly, the amendment speaks to the way data should be protected by financial institutions by striking the words “of its customers” in Section 501 of the Gramm-Leach-Bliley Act and replacing it with “of individuals with whom such financial institution has a customer or consumer relationship.”
The bill defines consumer relationship as: “situations in which a financial institution obtains nonpublic information from an individual with whom the financial institution does not have a customer relationship.
If the bill passes, financial institutions will be responsible for carefully guarding information they obtain that relates to their customers and those who are not their customers. Non-lawyers might refer to this group as everyone.
This could be a top priority to mortgage lenders who take complete loan applications for up to twice as many applicants as actually become their customers, due to loan fallout during the origination process.
This could be a great reason for lenders to consider compressing their tech stacks. Instead of having consumer data in the LOS and a separate POS, it may now make sense to do more processing with fewer platforms.
The modern LOS already has robust data protection built in and it can now do all of the things that external POS software was designed to do. POS developers know this, which is why they have been moving deeper into the digital loan origination space.
Protecting data that resides in a single platform is much easier than protecting that information across a range of software systems. To find out more about how your customer’s and non-customer’s data is protected in MCP, reach out to us today.
By Joe Camerieri, EVP, Sales & Strategy at Mortgage Cadence
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