CFPB to reportedly revisit Open Banking rule

CFPB finalised its key regulation in October 2024, allowing consumers to share financial data with third-party fintech companies. The anticipated move follows growing pressure from banks and fintechs, along with internal disruptions triggered by sweeping staff cuts under acting CFPB Director Russell Vought.

The rule, rooted in Section 1033 of the Dodd-Frank Act, permits consumers to authorise access to their deposit and credit card account data through platforms like Venmo and Betterment. However, concerns from banks over liability for data breaches, fees for data access, and the ability to block misuse have prompted the CFPB to consider reopening the rulemaking process, according to sources familiar with the matter.

Industry stakeholders are concerned that revisiting the rule could delay implementation and create uncertainty. ‘Reopening this rulemaking means stalling financial innovation and prolonging uncertainty for both businesses and consumers,’ said Steve Boms, CEO of FDATA North America. 

In October 2024, The Paypers sat down with Steve to find out more about the CFPB's new rule, which aimed to strengthen data privacy, expand Open Banking, and reshape bank-fintech ties.

CFPB staff cuts

The CFPB’s capacity to amend the rule is in question after Vought’s April workforce reduction eliminated the majority of the agency’s rulemaking unit – part of a broader plan that cut roughly 1,500 of its 1,700 employees. A federal appeals court temporarily blocked the cuts following legal challenges from employee unions.

Legal challenges to the rule are also ongoing. The Bank Policy Institute (BPI) filed suit shortly after the rule’s finalisation. The Financial Technology Association (FTA), representing firms like PayPal and Plaid, attempted to intervene to defend the rule but was denied by a federal judge in February. A hearing in the case is scheduled for Monday, 12 May 2024, with a CFPB decision expected before BPI’s 30 May filing deadline.

Meanwhile, the CFPB is operating under financial strain. The House Financial Services Committee recently voted to slash its funding by 70%. Though the Supreme Court upheld the agency’s independent funding structure, a steep budget cut could hinder the CFPB’s ability to revise the Open Banking rule or fulfill other mandates, such as implementing demographic reporting requirements for small business lending.

The leadership uncertainty continues as Jonathan McKernan, Trump’s nominee to lead the CFPB, awaits Senate confirmation amid procedural delays. With limited staff and mounting demands, the agency faces significant obstacles in navigating complex regulatory changes.