PROVIDENCE – The Consumer Financial Protection Bureau is working to accelerate the shift to open banking through a new personal data rights rule intended to jump-start competition and protect financial privacy, announced Rohit Chopra, the federal agency’s director.
Open banking allows customers to share account data to access services from another financial services provider.
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“New digital banking technologies have the power to expand and open market access for American consumers and emerging businesses,” Chopra said. “In a more competitive market, Americans will be able to earn higher rates on their savings, pay lower rates on their loans and more efficiently manage their finances.”
The new technologies, and the competition they can fuel, have not yet reached their full potential, he said. Consumers continue to encounter obstacles when trying to switch banks or apply for loans.
Chopra said the CFPB is formalizing an unused legal authority enacted by Congress in 2010 to give consumers the right to control their personal financial data. Those rights will become a practical reality after the CFPB implements a rule that sets expectations for the market.
“We expect to solicit comments on our formal proposal in a few months and finalize in 2024,” he said.
The agency will not micromanage open banking, he said. Fair standards developed by the market to leverage the rule will be critical to the creation and maintenance of an open banking system, “in which consumers can vote with their feet – and exercise their data rights without being trapped by powerful incumbents and without losing control of their data.”
“Standard-setting organizations must not skew to the interests of the largest players in the market,” Chopra said. “They must reflect the full range of relevant interests – consumers and firms, incumbents and challengers, and large and small actors. 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 owned by them.”
