WASHINGTON — The Consumer Financial Protection Bureau’s data-collection program does not invade individuals’ privacy, is a vital regulatory tool, and mimics techniques in wide use by the private sector, the agency’s director said Tuesday.
‘‘The big banks know more about you than you know about yourself,’’ director Richard Cordray told the Senate Banking Committee. At a hearing, he faced criticism about the initiative.
The bureau is collecting data to improve its rule-writing and supervisory work, sometimes through purchasing it from credit bureaus like Experian. It is also requesting large amounts of information from major banks in areas such as checking account overdrafts and credit cards.
Senator Mike Johanns, Republican of Nebraska, highlighted potential violations of privacy.
‘‘To many people, this is going to sound downright creepy,’’ Johanns said. ‘‘People are going to be bothered by the fact that there’s this federal agency that’s collecting data on the behavior of people like you and me and everybody else who’s paying off a mortgage, who’s paying credit card bills every month.’’
Cordray said the bureau does not monitor people and guards data carefully. Consumers, though, do sometimes share personally identifiable information, as when they file complaints.
‘‘The notion that we’re tracking individual consumers or invading their privacy is quite wrong,’’ Cordray said.
Cordray emphasized the bureau needs this information to do the work, such as cost-benefit analysis, that Congress has ordered. He also said the private sector has fully embraced data analytics, often labeled ‘‘Big Data.’’
Republican Senator Michael Crapo of Idaho complained that he ‘‘specifically’’ asked the agency about its data collection last month, but learned more about the subject from an April 17 article published by Bloomberg News.
‘‘The responses I received downplayed the nature and extent of the issue,’’ Crapo said.
Crapo said that private-sector data collection is fundamentally different from the bureau’s activities. ‘‘Nobody in the private sector has the power that the federal government has,’’ Crapo said. ‘‘The power of the government is behind this data collection.’’
Cordray said the Federal Reserve sometimes purchases data for its own work on consumer finances. The goal is to establish a starting point for where the market stands, he said. ‘‘There are times where as we examine institutions, we have to begin by getting a baseline of data to calibrate what is going on,’’ he said.
In its first 21 months, the bureau has secured $425 million in relief for 6 million consumers wronged by financial service providers, Cordray said.
‘‘We also imposed penalties on the companies to deter such activity in the future,’’ Cordray said.
The bureau, created by the 2010 Dodd-Frank Act, has taken enforcement actions in areas including credit-card add-on products such as credit monitoring, and mortgage insurance.