/>iOn July 29, the U.S. District Court for the Eastern District of Kentucky granted the CFPB’s request to stay litigation challenging its open banking rule. The rule (previously discussed here) aimed to establish industry-wide standards for data access and sharing between banks, fintechs, and consumers. The Bureau stated that it intends to revise the rule through an accelerated rulemaking process.
Finalized in October 2024, the rule was designed to implement Section 1033 by requiring financial institutions to provide consumers and third parties authorized by consumers with access to account information through secure, standardized APIs. Shortly after it was finalized, the rule was met with a lawsuit by banking groups alleging that the CFPB exceeded its statutory authority and unlawfully compelled data sharing with non-fiduciary entities. Under new CFPB Acting Director Russ Vought, the CFPB disavowed the rule, declaring it unlawful.
Following months of litigation delays, the Bureau has once again switched sides and stated that while the rule in its current form is unlawful, it now plans to rewrite the rule on an “accelerated” basis and expects to start next month.
Putting It Into Practice: In recent weeks, at least one large bank announced it had planned to charge aggregators for account access, citing the data infrastructure strain and elevated fraud risks associated with excessive data pulls. But the uproar from this announcement likely put pressure on the Bureau to work out a compromise between the banking and fintech industries. It is now working to revise the rule under an incredibly compressed timeline. Market participants should continue monitoring the Bureau’s rulemaking and prepare for potential revisions to the rule.
