CFPB's Open Banking rule decision prompts FTA's criticism

Regarding the CFPB’s move, the FTA claimed that it weakens efforts to facilitate competition and consumer empowerment in the financial sector. The agency’s decision underlines a shift in the regulatory landscape, with questions arising about the future of data-sharing and financial innovation in the US.

The FTA’s view on the matter

Initially planned to scale consumer control over financial data, the Open Banking rule intended to allow individuals to share their banking information more securely with third-party providers, including fintech apps, to access modern financial products and services. With the standardisation of data-sharing protocols, the CFPB’s regulation aimed to facilitate competition, enabling smaller fintech companies to participate in the market together with traditional financial institutions. Additionally, advocates claimed that it would also diminish costs and equip consumers with more choices, such as budgeting tools and alternative lending options.

Despite this, the CFPB decided to drop the rule, leading to substantial debate from the industry. The FTA, which focuses on supporting fintech innovation, argues that this reversal concentrates on the interests of large banks, which have previously opposed Open Banking initiatives. Criticisers mention that these institutions benefit from keeping control over customer data, restricting the ability of fintech companies to provide alternatives.

Furthermore, the FTA’s view on the matter underlines broader concerns within the fintech sector that dropping the Open Banking rule could result in diminished innovation and the dominance of established participants in the financial industry. At the time of writing, the CFPB did not yet offer a detailed explanation about its decision, however, sources mention that regulatory priorities may be changing under new leadership or in response to political pressures.

Recently, the FTA also announced its plans to defend the Open Banking rule, obtaining permission from a federal judge to intervene in a lawsuit involving bank trade groups aiming to repeal the regulation. The association reasoned that the bureau was not inclined to safeguard its members’ interests in a case brought up by banking groups over the implementation of the Open Banking rule.