RSSThe Consumer Financial Protection Bureau plans to scrap the Section 1033 rule on open banking, the bureau announced on May 23.
The status report was filed in a lawsuit brought against the CFPB by the trade group Bank Policy Institute. The CFPB and BPI filed a joint motion to stay proceedings in late March, opening the door for bureau leadership to revise the rule. Two days later, the court granted a 60-day extension.
“Bureau leadership has determined that the rule is unlawful and should be set aside,” according to the CFPB.
Finalized last year under the Biden administration, Section 1033 would have required financial institutions offering checking accounts, prepaid cards, credit cards and digital wallets to give consumers access to their personal financial data. The rule was intended to allow customers to more easily share or transfer the data to another provider.
Under Section 1033, firms would not have been allowed to use financial data for algorithms for activities such as targeted advertising and marketing. Companies would have been banned from monetizing the data by selling the information to data brokers following the customer-permissioned service. The rule would have also barred firms from holding onto personal financial data indefinitely or using the data to train AI “that manipulates consumer behavior.”
Both the American Bankers Association and Independent Community Bankers of America criticized Section 1033 after it was finalized last year. Though the ICBA said it supported consumers being able to access their financial data and share it with third parties, the association was concerned about the impact of Section 1033 on data security and impact on community banks. The association had called for exemptions for banks with less than $850 million in assets.
