NEWS: In a recent court filing, the CFPB said that it will soon ask a federal trial court in Kentucky to formally void the Bureau’s “open banking” rule.
“After reviewing the rule and considering the issues that this case presents, Bureau leadership has determined that the rule is unlawful and should be set aside,” the CFPB wrote. “To that end defendants intend to file a motion for summary judgment by May 30th, 2025, the date that this court had set for plaintiffs in its March 27th order.”
Background
The CFPB finalized its “open banking” rule last fall, and we published a Compliance Courier about it at the end of October.
The rule – formally known as the personal financial data rights rule – was designed to give consumers control over their financial data by requiring banks, credit unions and certain fintechs to share account information (like transaction history, and account balances) with authorized third parties as long as consumers gave consent. The goal was to let consumers add or switch providers to access better rates, receive better terms, and find services that best suit their needs.
When the rule was proposed, The League submitted a comment letter to the CFPB on behalf of Wisconsin’s credit unions, voicing concerns about the privacy of members’ information and the impact the rule would have on credit unions’ operations.
The rule provided for compliance dates to be phased in over time, with larger providers required to comply in spring 2026 and smaller providers in spring 2030. But compliance has been stayed in recent months. The Kentucky Bankers Association and other parties filed a federal lawsuit to stop the rule. They and the CFPB jointly asked the court to stay the case and the rule’s compliance dates “to allow the CFPB and the Acting Director time to consider” the rule. The court granted the motion the day it was filed.
The CFPB’s new announcement came in a court filing in that Kentucky litigation.
“Open banking” debate isn’t over
Notwithstanding this development, Section 1033 of the Dodd-Frank Act statutorily requires the CFPB to establish an “open banking” rule. Unless Congress rescinds that requirement, the CFPB will need to renew its effort to create a new “open banking” framework that balances consumer protection with technological advances.