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The US Consumer Financial Protection Bureau (CFPB) is backing away from its earlier push to scrap a key open banking regulation, instead asking a federal court to pause litigation so it can develop a revised version of the rule.
In a filing submitted Tuesday July 19 to a federal court in Lexington, Kentucky, the CFPB said that it plans to undertake a new rulemaking process to substantially revise the regulation, which governs consumer access to personal financial data.
This shift comes after the agency had previously argued that the rule should be vacated in its entirety.
“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 filing says.
According to the filing, the CFPB “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.”
The CFPB now intends to leave the current rule in place while it works on a replacement, and said that it wants to reexamine the matter alongside stakeholders and the public to arrive at a new approach that better reflects the policy preferences of current leadership and addresses concerns about the original version.
“The Bureau plans to engage in an accelerated rulemaking process. To that end, within three weeks, the Bureau plans to issue an advanced notice of proposed rulemaking that will serve as the starting point of an accelerated rulemaking process that the Bureau envisions culminating in a new final rule that substantially revises the Rule under review.”
The rule, finalised in October 2023 under the Biden administration, was quickly challenged by bank lobbying groups such as the Bank Policy Institute.
These groups argued the CFPB had exceeded its legal authority and that the regulation could heighten fraud risks.
In May, the Financial Technology Association (FTA), a fintech trade group, was allowed to intervene in the case to defend the rule.
According to the CFPB’s latest filing, the FTA does not oppose the agency’s request to stay the litigation.
The banking groups, however, remain opposed to putting the case on hold.
While not directly referenced, the decision comes after JPMorgan’s reported move to inform fintech firms that it intends to start charging for access to its customers’ financial data, which risks destabilising many fintech business models.
In a leaked memo from the US banking giant, it warned that “aggregators are accessing customer data multiple times daily, even when the customer is not actively using the app.”
“These access requests are massively taxing our systems,” the memo warned.
