The US consumer finance watchdog, the CFPB, has launched a new initiative aimed at revising Biden-era Open Banking regulations.
This development follows an order by a federal judge who halted a lawsuit against the CFPB seeking to invalidate these Open Banking rules. The agency sought this pause to replace the contested rules with updated versions that align better with current needs.
According to Reuters, the CFPB’s decision to remake these regulations is seen as a shift in strategy from its earlier stance of recommending that the courts scrap the rules. Instead, it plans to enhance customer control over financial data and expedite developments in this area.
Background on Open Banking Regulations
When Joe Biden was president, the CFPB introduced regulations meant to manage data sharing between fintech companies and traditional banks. These rules were designed to enable easier transfers of personal data among providers free of charge, aiming to reduce costs and increase consumer services.
Banks expressed concerns about liability for data breaches, fees associated with accessing data, and the potential misuse of information, leading the CFPB to reconsider these rules in May. At that time, the bureau claimed the regulations went beyond its legal authority and suggested they be eliminated.
The CFPB now intends to launch a fresh rulemaking process aimed at significantly revising the existing guidelines and ensuring robust justifications for any changes. This new approach will also accelerate the implementation of updated regulations within three weeks.
In response, Steve Boms, Executive Director of the Financial Data and Technology Association (FDATA), commented, “The CFPB’s decision to seek a stay in litigation highlights the agency’s ongoing assessment of banks’ attempts to charge exorbitant fees for consumer data access. We are pleased that the CFPB recognized the need to protect consumers’ rights to their financial data.”
Industry Reaction
A recent article on The Paypers discussed how the CFPB’s new direction and industry reactions have implications for the US financial sector. This piece delved into the broader context of these regulatory changes and their impact on fintech and banking.
