The Consumer Financial Protection Bureau on Friday asked a federal court to vacate its rule on financial data sharing, citing the rule’s “numerous legal infirmities.”
The 2024 rule implemented Section 1033 of the Dodd-Frank Act, which requires banks and other financial institutions to make a consumer’s financial information available to them or a third party at the consumer’s direction. The rule required data providers to maintain a “developer interface” and forbid the charging of any fees. It also banned third parties from using consumer data to advertise products the consumer didn’t request and required businesses to delete personal information once customers have revoked access to that data.
The Kentucky Bankers Association joined the Bank Policy Institute and other plaintiffs in challenging the rule, arguing it jeopardized consumers’ privacy and account security.
The rule was implemented under the CFPB’s prior leadership. In separate court filings last week, both the plaintiffs and CFPB asked the U.S. District Court for Eastern Kentucky to vacate the rule. The CFPB cited numerous issues with rule, including that it unlawfully prohibited data providers from recovering any fees to offset the burden of compliance. The bureau also said the sought to regulate open banking by mandating the sharing of data with “authorized third parties,” whereas Section 1033 is limited to ensuring that consumers – and potentially the fiduciaries of individual consumers – can access their own data.
“In light of the president’s directive to review existing regulations, the bureau’s new leadership has considered the rule and the arguments set forth in plaintiffs’ complaint and amended complaint and has concluded that the rule exceeds the bureau’s statutory authority and is arbitrary and capricious,” the CFPB said in its court filing.
