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Yahoo
5 days ago
- Business
- Yahoo
CFPB to yank ‘unlawful' open banking rule
This story was originally published on Payments Dive. To receive daily news and insights, subscribe to our free daily Payments Dive newsletter. The Consumer Financial Protection Bureau has determined that a 2024 rule authorizing open banking is 'unlawful' and should be scrapped, 15 years after Congress enacted legislation to make it easier for consumers to switch financial institutions, the agency told a federal court. The bureau plans to vacate the rule as part of a lawsuit in Kentucky, the CFPB's chief legal officer, Mark Paoletta, wrote in a federal court filing Friday. 'After reviewing the Rule and considering the issues that this case presents, Bureau leadership has determined that the Rule is unlawful and should be set aside,' the agency wrote in a status report filing. The Bank Policy Institute, which represents most of the large U.S. banks, said Friday in a press release that the bureau had acknowledged the rule's 'clear legal deficiencies.' But Financial Technology Association CEO Penny Lee in a statement Friday called the CFPB decision 'a handout to Wall Street banks, who are trying to limit competition and debank Americans from digital financial services.' The CFPB passed its final rule in October, drawing an immediate lawsuit from the Bank Policy Institute, the Kentucky Bankers Association and Kentucky-based Forcht Bank. The banking groups argued that the rule, under Section 1033 of the Dodd-Frank Wall Street Reform and Consumer Protection Act, imposed heavy compliance costs and did not address liability issues around fraud and misuse of consumers' financial data. The plaintiffs also said the bureau had exceeded its authority under the act in formulating the rule. In late March, U.S. District Court Judge Danny Reeves had stayed the lawsuit for 60 days to allow the bureau – under the leadership of acting director Russell Vought – to review its position on the matter. The agency's move to vacate the rule means 'years of wasted work from banks and fintechs that could have been saved by amending rather than abandoning the rule,' Todd Baker, a senior fellow at the Richman Center for Business, Law & Public Policy at Columbia University, wrote Saturday on LinkedIn. FTA members and other fintechs had hoped that the bureau would choose to revise the rule, addressing areas of contention, rather than vacate it entirely. On May 14, Reeves ruled that the FTA can intervene to defend the lawsuit, finding that its members' interests were not adequately protected by either party in the litigation. The CFPB's move to vacate the rule could make the intervention moot, however. The agency has sought to reduce about 90% of its pre-Trump staff of around 2,000 employees and Vought has requested that Congress slash the bureau's budget as part of a budget bill House Republicans passed last week. The staff cuts remain mired in federal litigation. The bureau said it intends to file for summary judgment in the case by Friday, the same date as the plaintiffs' motion for summary judgment is due. An FTA spokeswoman said Monday the association will then respond to the motions and that the rule remains in effect until Reeves issues a decision. Last week, the Financial Data & Technology Association, which represents about three dozen fintechs, wrote to Vought urging that the CFPB not dismantle the rule. 'Vacating the existing rule and starting from scratch risks prolonging regulatory uncertainty that could stall market development, stifling innovation in critical digital financial technologies, and emboldening incumbents to entrench their positions and legacy technologies rather than compete,' FDATA North America Executive Director Steve Boms wrote. FDATA and some of its members also convened a conference call on May 19 with reporters to discuss the various problems they anticipate if the agency vacates the rule. One primary issue several speakers cited is the CFPB's ability to craft a new rule – as mandated in the Dodd-Frank law – with a minimal staff under Vought's management. The current open banking rule took the bureau five years to enact, beginning in the first Trump administration. Bloomberg Law reported May 8 that the bureau would seek to vacate the rule, citing multiple sources familiar with the strategy. Recommended Reading CFPB issues final rule on open banking Error in retrieving data Sign in to access your portfolio Error in retrieving data Error in retrieving data Error in retrieving data Error in retrieving data
Finextra
7 days ago
- Business
- Finextra
CFPB to ditch open banking rule
The Financial Technology Association (FTA) has hit out at US regulators over plans to rescind open banking rules, calling the move a "handout to Wall Street banks". 1 In a legal filing, the Consumer Financial Protection Bureau (CFPB) says it will petition a court to have the 1033 open banking rule rescinded. The CFPB only published the Personal Financial Data Rights final rule in October, giving Americans the right to instruct their banks to share their financial data with third party providers. However, the plan has long proved unpopular with many in the traditional financial industry and banks have taken advantage of the change in administration to raise concerns about potential liability for data breaches and the ability to charge for access to data. At the beginning of May, reports surfaced suggesting that Wall Street was likely to get its way, with the CFPB looking to amended or eliminated the rule. It is now moving ahead with elimination. Penny Lee, CEO, FTA, says: "Vacating the 1033 rule is a handout to Wall Street banks, who are trying to limit competition and debank Americans from digital financial services. Americans must have the right to control their financial lives, not the nation's biggest banks." For the CFPB, this is the latest example of a starkly different approach under Trump as it scales back its activities and reverses previous positions under acting Director Russell Vought. In March it ditched an interpretive rule declaring that pay-in-four BNPL lenders should be treated in the same way as credit cards. In recent weeks it has also dropped a host of lawsuits, including against JPMorgan Chase, Bank of America and Wells Fargo over fraud on the Zelle P2P payments network. Meanwhile, a rule that would give the watchdog oversight of tech giants such as Apple, Google and X, that offer digital payment apps and wallets has been killed off by the Senate and House of Representatives.
