White House Drops Data Broker Plan - Sensitive Data at Risk

Data Broker Regulation Rolled Back by Trump Administration

A high-ranking official within the Trump administration has reversed a proposed regulation. This regulation aimed to prevent data brokers from the sale of sensitive personal and financial details of American citizens, including Social Security numbers.

CFPB's Prior Intentions

The Consumer Financial Protection Bureau (CFPB) announced in December 2024 its intention to address a loophole within the Fair Credit Reporting Act (FCRA). The FCRA is the federal law designed to safeguard personal data gathered by consumer reporting agencies.

This proposed rule would have ensured data brokers were subject to the same regulations as other entities covered under the FCRA. Compliance with the law’s established privacy standards would have been mandatory.

Rule Withdrawal and Justification

The rule’s withdrawal was officially documented in the Federal Register early Tuesday. Russell Vought, the CFPB’s acting director and also the director of the White House’s Office of Management and Budget, stated the rule did not align with the Bureau’s current understanding of the FCRA.

News of this change was initially reported by Wired on Wednesday.

The Data Broker Industry

Data brokers operate within a multi-billion dollar industry. Their business model centers on the collection and sale of access to extensive amounts of Americans’ personal and financial information.

This data is frequently sold to a diverse range of entities, including other companies, law enforcement, and intelligence agencies. Often, this transfer occurs without the explicit consent of the individuals whose data is being utilized.

Security Risks and Data Breaches

The accumulation of large datasets inherently presents security vulnerabilities. In the past year, at least two data brokers experienced security breaches.

These breaches resulted in the exposure of millions of Social Security numbers online and the theft of substantial user location data, tracking the movements of millions of individuals.

Recent FTC Actions

Throughout 2024, the Federal Trade Commission (FTC) has taken action against several data brokers. These actions involved prohibitions on collecting and sharing data without proper consent, following accusations of unlawful tracking practices.

Advocacy for Regulation

Privacy advocates have consistently urged the government to leverage the Fair Credit Reporting Act to regulate the activities of data brokers.

Industry Lobbying and Influence

The CFPB’s decision to rescind the rule followed a communication from the Financial Technology Association (FTA). This industry lobby group, representing non-bank fintech companies, had requested Vought, in his role as the White House’s budget director, to withdraw the CFPB’s proposed rule.

The FTA argued that the rule would negatively impact financial institutions’ ability to identify and prevent fraudulent activities.

The CFPB has not yet responded to requests for further comment.