Federal regulatory body, the Consumer Financial Protection Bureau, unveils significant changes to the Open Banking directive
The Consumer Financial Protection Bureau (CFPB) has announced plans to substantially revise its Open Banking rule, following a court-granted stay of litigation challenging the October 2024 rule.
The original Open Banking rule, issued under Section 1033 of the Dodd-Frank Act, requires financial institutions to provide consumers access to their financial information and to share that data with authorized third parties upon consumer request, without fees. The rule is set to take effect starting in mid-2026 for the largest banks, with deadlines through 2030 for others; institutions with under $850 million in assets are exempt.
However, the rule has faced legal challenges from banking associations, who argue that the law mandates data sharing only with consumers or their representatives who have a fiduciary-like relationship, not third-party companies. In response, the CFPB has decided to pause litigation and revise the rule, with a view to substantially revising it and providing a robust justification.
The CFPB's decision to stay the litigation and revise the rule signals major changes ahead as it seeks to address concerns and update the rule's framework while reaffirming its statutory duty to regulate financial data access.
The CFPB has also engaged in an accelerated rulemaking process to revise the Open Banking rule. The Financial Technology Association, which intervened in the Open Banking case and argued that the existing rule is lawful, will not oppose the CFPB's motion to stay the litigation.
Industry groups such as the American Fintech Council and FDATA have expressed support for the CFPB's decision, with Steve Boms, executive director at FDATA, citing the need for the agency to scrutinize banks' anti-competitive practices. Phil Goldfeder, chief executive officer of the American Fintech Council, expressed encouragement at the CFPB's motion to stay the litigation and the court's decision to grant the request.
The US ecosystem's consideration of Open Banking's future amid regulatory turmoil is a notable development in the case. The CFPB plans to issue an advanced notice of proposed rulemaking within three weeks to begin drafting the new version of the rule. The bureau will file status reports every 90 days to keep the court apprised on the progress of the planned rulemaking.
In summary, the CFPB’s current status is an active pause in litigation combined with a commitment to rapidly rewrite the Open Banking rule, with a new proposed rulemaking expected imminently to substantially revise the October 2024 rule before its phased implementation begins. This approach reflects ongoing regulatory and market dynamics influencing the future of open banking in the U.S.
- The Fintech Association will not oppose the Consumer Financial Protection Bureau (CFPB)'s motion to stay the litigation regarding the Open Banking rule, which mandates financial institutions to share consumer data with authorized third parties.
- Industry groups, such as the American Fintech Council and FDATA, have expressed their support for the CFPB's decision to revise the Open Banking rule, citing the need for scrutiny of banks' anti-competitive practices.
- The CFPB has initiated an accelerated rulemaking process to revise the Open Banking rule, with the intention to issue an advanced notice of proposed rulemaking within three weeks and file status reports every 90 days to update the court on the progress of the planned rulemaking.
- The rewriting of the Open Banking rule marks a significant shift in the future of fintech business, as the CFPB seeks to address concerns and update the rule's framework while reaffirming its statutory duty to regulate financial data access.
