By Douglas Gillison
(Reuters) – U.S. consumers can now seamlessly transfer their data between financial services providers thanks to the highly anticipated Consumer Financial Protection Bureau (CFPB) proposal unveiled on Thursday. This groundbreaking open banking draft rule aims to enhance competition between fintechs and banks.
In a statement, CFPB Director emphasized that this rule would empower customers by providing them with “the power to walk away from bad service” and facilitating the process of switching providers.
The CFPB highlights the current challenge faced by consumers in accessing their financial data due to varying lender policies and the absence of industry standards, resulting in a negative impact on customers.
Open banking is expected to revolutionize the industry by fueling growth in payment, investment, lending, financing, and money-saving services and apps, according to fintech companies. For instance, Americans could opt to share their bank account, debit, and credit card transaction data with an app that would in turn offer valuable tips on avoiding costly fees.
While Europe, Britain, and other countries have already implemented open banking laws, the United States is catching up. Following the global financial crisis of 2007-09, Congress mandated the rule in the Dodd-Frank Wall Street reform law. This provision requires banks to provide customers with access to their data, including transaction histories, costs, and usage, upon request. The CFPB is responsible for establishing rules for standardized data sharing.
In July 2021, the White House called upon the CFPB to expedite the rulemaking process as part of President Joe Biden’s larger initiative to promote competition. Fintechs and lawmakers have also urged the agency to accelerate the implementation of the rule. The White House National Economic Council and the CFPB jointly unveiled this rule.
Last year, Reuters reported that the CFPB was grappling with the challenges of consumer privacy and data protection created by the rule, particularly concerning the potential use of data by Big Tech companies.
(Reporting by Douglas Gillison; editing by Michelle Price and Chizu Nomiyama)
