US consumer watchdog proposes new financial data sharing rules in competition boost

Boosting Competition: Proposal Unveiled for Easier Data Transfer in US Financial Services

By Douglas Gillison

(Reuters) – In a much-anticipated move that would foster healthy competition between banks and fintechs, the Consumer Financial Protection Bureau (CFPB) has introduced a draft rule aimed at facilitating easier data migration for US consumers.

This initiative, known as open banking, would empower customers with “the power to walk away from bad service” and seamlessly switch providers, according to CFPB Director Rohit Chopra.

Presently, customers confront a maze of different conditions imposed by lenders when it comes to accessing their financial data. This lack of standardized industry norms creates substantial obstacles for customers, as highlighted by the CFPB.

Enabling open banking would usher in a new era of growth for various financial services and apps, including payment solutions, investment platforms, lending services, financing options, and money-saving tools, claim fintech firms. For instance, individuals could effortlessly share their bank account details, as well as debit and credit card transaction data with an app, which in turn could provide valuable tips on minimizing costly fees.

While Europe, Britain, and other nations have already implemented open banking regulations, the United States has lagged behind due to the aftermath of the global financial crisis of 2007-09. As part of the Dodd-Frank Wall Street reform law, Congress mandated banks to furnish customers with their data upon request, including transaction histories, costs, and usage. The CFPB has been tasked with establishing rules for standardized data sharing.

In July 2021, the White House urged the CFPB to expedite the rulemaking process as part of President Joe Biden’s overarching agenda to promote competition. Fintech firms and lawmakers have also been exerting pressure on the agency to accelerate the implementation of the rule. Notably, the CFPB unveiled the draft rule jointly with the White House National Economic Council.

Last year, Reuters reported that the CFPB was grappling with the challenge of addressing consumer privacy and data protection concerns arising from the rule, particularly in relation to how Big Tech companies might utilize the data.

(Reporting by Douglas Gillison; editing by Michelle Price and Chizu Nomiyama)