RSSThe Consumer Financial Protection Bureau last week finalized standards-setting qualifications that companies will use to comply with the bureau’s upcoming open banking rule.
The CFPB outlined the standards to become a recognized industry standard-setting body in a press release. The standards included a detailed guide on how standard-setters can apply for recognition and how the bureau will evaluate applications.
The standards-setting body will be required to use “documented and publicly available policies and procedures, provide adequate notice of meetings, sufficient time to review drafts and prepare views and objections, access to views and objections of other participants, and a fair and impartial process for resolving conflicting views.” An appeals process will be available to handle procedural appeals. Standard-setters will be recognized for a maximum of five years, at which point they will need to reply for re-recognition.
The CFPB is requiring decision-making power to be balanced across consumer and other public interest groups. According to the bureau, standard-setting organizations cannot be “rigged in favor of any set of industry players. The process must be open to all interested parties, including public interest groups, app developers, and a broad range of financial firms with a stake in open banking.”
“Industry standards can be weaponized by dominant firms in order to maintain their market position, undermining competition for all,” said CFPB Director Rohit Chopra. “Today’s rule will prevent these firms from rigging standards in their favor by identifying attributes the CFPB will use to recognize standard setters.”
In March, Chopra said standards-setting organizations must be “fair, open and inclusive” to be recognized by the bureau. Once those attributes are finalized, the CFPB plans to invite standards-setting bodies to seek formal recognition.
The open banking rule, which is expected to be finalized this fall, would require large institutions — banks, credit unions and other companies that hold consumer accounts — to allow customers to request their financial data held with fintechs, other banks and online lenders. Under Section 1033, firms will not be able to use financial data for algorithms for activities such as targeted advertising and marketing. Companies would also be banned from monetizing the data by selling the information to data brokers following the customer-permissioned service.
