Regulatory Influencer: US Consumer Financial Protection Bureau Makes Progress on Open Banking

June 6, 2024
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On June 5, 2024, the Consumer Financial Protection Bureau (CFPB) issued a final rule establishing minimum requirements for a standard-setting body to receive CFPB recognition; thereby, allowing them to issue consensus open banking standards when the Personal Financial Data Rights rule is finalized.

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On June 5, 2024, the Consumer Financial Protection Bureau (CFPB) issued a final rule establishing minimum requirements for a standard-setting body to receive CFPB recognition; thereby, allowing them to issue consensus open banking standards when the Personal Financial Data Rights rule is finalized. 

Key Considerations

According to the CFPB and the final rule, industry standard-setters that operate in a fair, open, and inclusive manner play a crucial role in ensuring a safe, secure, and competitive data access framework. The CFPB notes that although federal regulations could quickly become obsolete, industry-led standard-setting would be better able to keep pace with changes in the market and technology. Therefore, the CFPB issued this final rule to identify the attributes that a standard-setting body must demonstrate to be recognized by the CFPB. The final rule also includes procedures for standard-setters to apply for recognition. 

According to the final rule, standard-setting bodies must possess the following attributes: 

  1. Openness; which will be evaluated by reviewing whether the standard-setting body’s sources, procedures, and processes are open to all interested parties, and whether those interested parties can meaningfully participate in standards development on a non-discriminatory basis. 
  2. Balance; which will be evaluated by the CFPB reviewing whether the standard-setting body’s decision-making power is balanced across all interested parties at all levels of the standard-setting body. 
  3. Due process and appeals; which will be evaluated based on whether the standard-setting body uses documented and publicly available policies and procedures, and provides a fair and impartial process for resolving conflicting views. The CFPB will also consider whether the standard-setting body provides an appeals process for the impartial handling of appeals. 
  4. Consensus; which will be evaluated based on whether the standards development processes will proceed by consensus, defined as a general agreement but not unanimity. 
  5. Transparency; which the CFPB will consider based on whether the procedures or processes for participating in standards development and for developing standards are transparent to the participants and publicly available.
     

Why should you care?

The Personal Financial Data Rights rule, commonly referred to as the open banking rule, has been highly anticipated ever since the CFPB released the proposed rule in October 2023. The issuance of this final rule indicates that progress is being made towards finalizing the Personal Financial Data Rights Rule and the implementation of open banking in the United States. 

With the adoption of an open banking framework, the US seeks to provide consumers with greater control over their financial data and additional protections against companies misusing that data. Open banking also promotes innovation and competition by forbidding financial institutions from hoarding a person’s data and requiring financial institutions to share that data, with the person’s consent, with other companies offering better products and services.

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