The consumer watchdog agency now wants to revise rather than repeal a Biden-era rule giving consumers access to their financial data
- In a sharp turn, the CFPB says it will revise rather than repeal the Biden-era Section 1033 open banking rule.
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The move comes as part of a legal fight with Forcht Bank and banking trade groups challenging the rule's legality.
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An accelerated rulemaking process is planned, with a new draft to be issued within weeks.
In a major reversal, the Consumer Financial Protection Bureau (CFPB) announced today it will undertake a full rewrite of its controversial "open banking rule" rather than scrap it entirely, as many had anticipated. The rule, finalized last year under the Biden Administration, sought to empower consumers by granting them access to their personal financial data and enabling easier data sharing with third-party fintech apps and services.
In light of recent events in the marketplace, the CFPB wrote in a court filing, 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.
Consumer advocates say the tactic is a ruse. "Trump and (OMB Director Russell) Vought betray their MAGA base when they close banking again," said Bart Naylor, financial policy advocate at Public Citizen in an email to ConsumerAffairs. "The rule aimed to open banking to market competition. Reopening the rule is legal jujitsu in the court case."
The announcement was made in a request to stay a lawsuit filed by Forcht Bank, the Bank Policy Institute, and the Kentucky Bankers Association in the U.S. District Court for the Eastern District of Kentucky. The lawsuit, filed the same day the final rule was issued on October 22, 2024, alleged that the CFPB had overstepped its statutory authority. U.S. District Judge Danny C. Reeves granted the stay, noting that the parties and judicial economy are better served by allowing the CFPB time to revise the rule.
"Accelerated" process
The CFPB said it would begin an accelerated rulemaking process, starting with an advanced notice of proposed rulemaking to be issued within three weeks of the July 29 stay request. Officials say they aim to produce a substantially revised final rule that reflects the policy preferences of new leadership and corrects alleged flaws in the original rule.
At the center of the dispute is Section 1033 of the Dodd-Frank Act, which mandates that consumers have access to information about their financial products and transactions. The Biden Administration had interpreted this to mean that consumers should have the right to retrieve and share their financial data, and tasked the CFPB with establishing standards for doing so securely and consistently.
However, opponents, including many in the banking industry, argued the final rule went too far, imposing burdensome requirements on the banks and financial services companies and also exposing sensitive financial data to potential misuse.
The Trump Administration had previously withdrawn the rule during its regulatory rollback campaign, declaring it arbitrary and capricious. Now, with new CFPB leadership in place, the agency appears set on charting a middle path: retaining the core consumer data rights mandate of Section 1033, but rewriting the rule to survive legal scrutiny and align with the current administrations priorities, which will likely be less pro-consumer.
Posted: 2025-08-05 21:11:10
