The Consumer Financial Protection Bureau will propose open banking regulations in the next few months and plans to finalize the rule in 2024, Director Rohit Chopra said June 12 in a blog post.
Chopra said the rule, which the CFPB is required to issue under Section 1033 of the Dodd-Frank Act, will ensure a more competitive environment and give consumers the ability to control their own financial data. Open banking enables consumer-authorized sharing of financial data with third parties through the use of application program interfaces.
The CFPB outlined proposals for the rule in October. The plan requires 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. The rule doesn’t include requirements on data sharing to auto loan, student, mortgage and other credit accounts.
To Chopra, open banking has not reached its potential as consumers continue facing obstacles in switching banks or applying for loans. The industry continues to grow: According to Statista, the number of open banking users worldwide is projected to increase at an average annual rate of nearly 50 percent through 2024.
“In consumer finance, powerful firms have sometimes looked to manage emerging technologies through utilities, networks, or standard-setting organizations skewed to their interests — or even controlled by them,” he added.
Bank and credit union trade groups have called on nonbanks to face similar open banking requirements. “Banks have long been leaders in the fields of privacy, security and dispute processes for their customers; recent entrants to the financial services industry must be held to similar standards,” the American Bankers Association stated.
Andrew Morris, senior counsel for research and policy at National Association of Federally-Insured Credit Unions, said his group “supports an approach that issues ‘appropriate exemptive relief, scales back the technically prescriptive aspects of the outline and allows credit unions to exercise appropriate judgment before granting third-parties access to member data.”