CFPB and open banking: Searching for a solution while creating new problems

On October 19, 2023, the Consumer Financial Protection Bureau (CFPB) released its proposed rule, Required Rulemaking on Personal Financial Data Rights, better known as “open banking.”

The premise behind the CFPB’s open banking rule is that consumers need additional power over their financial information and that the consumers are victimized by an inability to switch financial services providers without incurring errors to their finances, fees, and damage to their credit rating.

This proposed open banking rule can be read as part of the CFPB’s larger goal of eliminating so-called “junk fees” in part by fostering competition through the decentralization of the United States financial system.

What does open banking require?

The primary obligation of financial institutions under the open banking rule is to comply with a consumer’s request to send the consumer’s financial information to an authorized third-party financial services provider. That information must be in a usable, electronic form.

 

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