The Consumer Financial Protection Bureau (CFPB) is considering revisiting a Biden-era rule that allows customers to share their sensitive bank data with third-party fintech companies. The open banking rule enables customers to share their deposit account and credit card information with fintechs such as Betterment or PayPal Holdings Inc.’s Venmo service. Banks have expressed concerns about potential liability for data breaches and the ability to charge for access to data.
They also want to block companies that abuse their access to customer data from the open banking system. It remains uncertain whether the administration will seek to amend the existing rule or eliminate it entirely. Supporters of the regulation worry about further delays to its implementation.
Acting CFPB Director Russell Vought recently fired most employees in the agency’s rulemaking unit as part of a workforce reduction plan. This move, which affected 1,500 of the agency’s approximately 1,700-member workforce, has been temporarily halted by a federal appeals court.
Cfpb reconsiders open banking risks
The open banking rule, mandated by Section 1033 of the Dodd-Frank Act, was immediately challenged by the Bank Policy Institute and other plaintiffs when it was finalized in October. The CFPB is expected to make a move to reopen the rule before the May 30 deadline for the Bank Policy Institute to file its motion for summary judgment in the case. Fintech companies have also been seeking changes to the rule, particularly expanding the open banking ecosystem to include more products such as auto loans and mortgages.
However, they do not want the original rule to disappear. The CFPB’s expected move highlights a split between Vought and others at the bureau who aim to eliminate the agency. Mark Calabria, a senior official at the Office of Management and Budget detailed to the CFPB, stated that the open banking rule needed revisiting to address issues like data breach liability.
Republican lawmakers are considering significant cuts to CFPB funding, which could hinder the agency’s ability to staff its rulemaking office adequately and fulfill its other statutory mandates. Along with rewriting the open banking rule, the CFPB under Vought has stated it would rework a rule requiring small business lenders to collect and report borrowers’ demographic data. However, the agency’s capacity to accomplish these rulemakings and other mandated tasks remains doubtful given its limited staff and budget.
