CFPB Reveals Open Banking Rules

The Consumer Financial Protection Bureau (CFPB) has completed its rulemaking process for certain segments of Open Banking.

Open Banking, or Open Finance, addresses the massive amounts of data generated by financial services firms and their customers. In the past, these firms have largely leveraged this information as they like but new rules will give consumers control over this information: who has access to this information and which data with the ability to deny access of the data.

The rule is also said to establish strong privacy protections for consumers, a significant concern of many individuals. It is expected to move the financial services industry away from “screen scraping.”

The CFPB states that the finalized rule will provide more rights, privacy, and security over personal financial data. Going forward, customers will be able to tell financial services firms to share the information with another firm for free – thus speeding up certain processes like getting a loan – or changing to a new provider – like a different bank. Frequently, consumers are hesitant to change  financial services firms due to the effort involved. These rules may expedite the process and benefit consumers by enabling them to more easily access better, less costly services.

CFPB Director Rohit Chopra said the rules will empower consumers to seek better rates and service on “bank accounts, credit cards, and more.”

Many Fintechs embrace the concept of Open Banking as it should help consumers switch from legacy banks, etc. to more modern digital services that may be superior to incumbents.

Penny Lee, CEO and President of the Financial Technology Association (FTA), distributed a comment on the Open Banking rules.

“Today’s rule is a win for consumers, guaranteeing their right to own and securely share their financial data. This rule will increase competition, improve consumers’ choices, and drive momentum for future innovations that benefit consumers – like cash flow underwriting, stronger fraud tools, pay-by-bank, and personalized financial services – while fostering greater trust in the financial ecosystem. While today’s final rule covers account and transaction data, we are hopeful that future rulemakings will allow consumers to unlock more benefits by tapping into other aspects of their financial lives, such as payroll, student loan, investment, and mortgage accounts.”

The CFPB added that Open Banking rules will make the US more competitive with other jurisdictions that have embraced the concept.

The agency noted that this is the CFPB’s first significant rule to accelerate Open Banking in the U.S., and additional rules will follow.

The CFPB highlighted aspects of the rule:

  • Fire fintechs and banks that provide lousy service. People will not have to pay fees or clear hurdles from companies that make it harder to switch providers.
  • Shop for better rates on products and credit
    Make secure payments, including with “pay-by-bank”

Data harvested is banned as the information will only be made available with the customer’s consent.

If a person revokes access from a firm, the rule requires that data access end immediately, and deletion would be the default practice.

Large firms must comply by April 1, 2026, while smaller covered institutions have an additional year – April 1, 2030.

Certain small banks and credit unions are not subject to this rule.

 



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