The Consumer Financial Protection Bureau yesterday proposed its long-awaited open banking rule, which is intended to increase competition among financial services institutions for consumers’ business and would require institutions to share information with each other at the request of consumers.
The Notice of Proposed Rulemaking can be accessed by clicking here.
The rule is a response to a number of issues, some which are relatively new as fintechs become more prevalent in the industry, and some that are more long-term, such as the issues that consumers often have when it comes to switching from one bank to another. To try and keep everyone happy, the CFPB is making concessions to both banks and fintech companies in the proposed rule. For example, banks are happy that the proposed rule would now hold fintech companies to the same data governance standards as financial institutions, while fintechs are happy that it is going to be easier for consumers to switch financial institutions and take their data with them.
“Today, we are proposing a rule to give consumers the power to walk away from bad service and choose the financial institutions that offer the best products and prices,” CFPB Director Rohit Chopra said.
Chopra likened the proposed rule to the Federal Communications Commission’s policy allowing consumers to switch wireless carriers but take their cell phone numbers with them. Now, financial institutions won’t be able to lure consumers in with aggressive incentives and introductory offers and then count on those consumers not switching when those incentives and offers expire because it’s too complicated to do so.
“It is often really daunting for a consumer to switch banks, in part because it’s difficult to take their financial transaction history data to a new bank,” White House National Economic Council Director Lael Brainard said on a call with reporters, according to a published report. “Today’s rule will help ensure financial companies compete based on service quality and pricing.”
Companies that are authorized by consumers to access their data would also have to agree to not collect or use data to advance their own commercial interests through actions like targeted ads.
