Reversing Course, CFPB Says It Will Issue Revised Open Banking Rule

In a surprise announcement, the CFPB has said it will issue a revised Section 1033 open banking rule rather than simply killing the Biden Administration rule.

“In light of recent events in the marketplace, the Bureau has now decided to initiate a new rulemaking to reconsider the Rule with a view to substantially revising it and providing a robust justification,” the administration said, in requesting a stay of a lawsuit filed by Forcht Bank and banking trade groups in the U.S. District Court for the Eastern District of Kentucky.

The CFPB said that it “seeks to comprehensively reexamine this matter alongside stakeholders and the broader public to come up with a well-reasoned approach to these complex issues that aligns with the policy preferences of new leadership and addresses the defects in the initial rule.”

Judge Danny C. Reeves granted the stay, saying, in part that “the parties and judicial economy are better served if a stay is issued, because it allows time for CFPB to administratively modify the rule with appropriate input from interested parties.”

The CFPB said it plans to engage in an “accelerated” rulemaking, in its request for a stay, filed on July 29. The CFPB said that within three weeks, it plans to issue an advanced notice of proposed rulemaking that will be the starting point for the accelerated process. The CFPB said officials envision the process culminating in a new final rule that substantially revises the rule.

Section 1033 requires the CFPB to issue rules that would allow consumers to obtain transaction data and other information concerning a consumer financial product or service that the consumer obtained from the covered entity.

The Biden Administration’s rule would have had far-reaching implications for financial institutions, fintech companies, and consumers alike. This previously untapped legal authority would have given consumers the right to control their personal financial data and assign the task of implementing personal financial data sharing standards and protections to the CFPB.

In a timeline providing background on the rule, the Biden Administration said that Section 1033 required the CFPB to issue rules that would allow consumers to obtain, “transaction data and other information concerning a consumer financial product or service that the consumer obtained from the covered entity.” The Biden Administration also said that the section directs the CFPB to promote development and use of standardized formats for information made available to consumers.

When the final rule was released on October 22, 2024, it was immediately met with criticism from industry groups. Forcht Bank, the Bank Policy Institute and Kentucky Bankers Association filed a lawsuit the day the final rule was released, seeking injunctive relief, alleging that the CFPB exceeded its statutory authority.

When the Trump Administration took office, the CFPB withdrew the rule, citing the President’s directive to review existing regulations. The CFPB said that the agency had determined that the rule exceeded the CFPB’s statutory authority and was arbitrary and capricious.