A federal court today issued an order preventing the Consumer Financial Protection Bureau from enforcing its rule on financial data sharing while the bureau reassesses the regulation.
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 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 in May, both the plaintiffs and CFPB asked the U.S. District Court for Eastern Kentucky to vacate the rule. The CFPB has since issued an advance notice of proposed rulemaking seeking public input as it drafts a replacement for the rule.
In his order, District Judge Danny Reeves enjoined the CFPB from enforcing the 2024 rule until it has completed its reconsideration of the regulation.
“Ultimately, the CFPB is currently engaged in rulemaking to reconsider the rule considering the plaintiffs’ concerns about its lawfulness,” he wrote. “Nevertheless, the plaintiffs and their members are being compelled to incur expenses that would be unrecoverable and unnecessary if the new rule substantially revises the existing requirements or if the current rule is vacated.”
ABA responds
The court order affirms the serious concerns raised by the American Bankers Association and other stakeholders regarding the rule’s legal foundation, scope and impact on consumer privacy and data security, ABA President and CEO Rob Nichols said in a statement.
“The court’s decision provides a necessary pause for the bureau to engage meaningfully with stakeholders and address the rule’s significant flaws while ensuring banks don’t have to invest time and resources to comply with an overbroad and legally flawed rule that is actively undergoing substantial revision,” he said. “In the meantime, consumers will continue to reap benefits achieved without regulation thanks to industry standard-setting, innovation and partnerships that prioritize security, transparency and consumer control.”
ABA last week sent a comment letter to the CFPB offering the following recommendations to make the revised data sharing rule more effective than the 2024 version.
