(Bloomberg) – American consumer watchdog looks expected to tear up the controversial rules about customer financial data sharing and start all over again – but as employees dry up, potential budgets and all the same thorny issues.
The Consumer Financial Protection Agency is likely to scratch its open banking rules, which require banks to share their customers’ deposit accounts and credit card information when they provide their customers’ deposit accounts and credit card information for free with fintech companies. While the move is ostensibly a victory for big banks, including JPMorgan Chase & Co, lobbying for the measure, it could reopen the struggle and risk expanding its scope when the fate of CFPB is in doubt.
“Open banks have two sides to each other, consumers are somewhere in the middle,” Dan Murphy, who managed the CFPB’s open banking program during the Biden administration and is now an independent consultant, wrote in a post on Friday. “Do you want banks to charge fees for data access consumers receive? Good luck explaining to FinTech. Want fintech to do everything they want to do with what they want to receive to the data consumers receive? Wish you explain this to the bank.”
Going back to the drawing board on the rules (finalized in a nearly 600-page document late last year) could alienate many issues. Even if banks are crowded with people in open banking, they believe that the necessary data sharing arrangements will defraud fraud and take on greater responsibility, but some people once implemented it will appreciate the clarity of clarity and make investments comply. Financial Data Exchange said last month that 114 million secure customer connections have been established between existing fintech, banks and other financial companies, up from 76 million a year ago.
“Millions of dollars have been spent,” said Cathy Brennan, a partner at law firm Hudson Cook LLP.
Representatives of the CFPB did not immediately respond to a request for comment.
Bloomberg reported earlier this month that the agency is inclined to fully evacuate the rule and aims to rewrite it. But how it returns it is unclear. It would be a boon for these companies if the CFPB allows banks to charge fees for sharing data and limit their liability for breaches. But watchdogs can also expand the scope of measures, requiring banks to share data on other financial products other than deposit accounts and credit cards.
Meanwhile, FinTech believes that open rules give consumers and enhance the ability to compete, and it has been pushing for products including auto loans and mortgages.
JPMorgan CEO Jamie Dimon objected to the open-ended measures, saying at an October meeting that it posed risks to customers and payment systems.
His bank also made a private push, and the Biden administration reviewed the rules more frequently than other large banks, a person familiar with the matter said. PNC Financial Services Group. CEO Bill Demchak said in an October 2023 revenue call that customer data must be shared “safely”.
Representatives for PNC and JPMorgan declined to comment.
Re-engineering the rules raises potential problems for smaller banks. Currently, companies with assets of less than $850 million have to comply. Reconfiguration increases the likelihood of the threshold being scratched.
Questions about whether CFPB has the ability to overhaul the measures. The rule took years to complete – passed about October after the regulation was introduced into it. A pair of bank hall groups, including the Institute of Bank Policy, then immediately sued the CFPB to stop it.
“Protecting consumers is not negotiable, and the current rules exert unacceptable risks on the personal data that most Americans are most sensitive,” Paige Pidano Paridon, executive vice president of BPI, said in a statement Tuesday. “This is with one industry winning another, which is about ensuring that American consumers and their data are protected.”
The Industry Group Financial Technology Association has filed a motion to interfere with its lawsuit and seek to defend the CFPB’s open banking rules if the institution chooses not to do so. By trying to block the rule, banks will prevent competition and limit consumers’ ability to use the apps and services of their choice, the FTA said in February.
A federal judge in Kentucky is expected to decide whether the FTA can defend the rule by the end of the month. Both the CFPB and the bank’s plaintiff said they do not object to the FTA in a lawsuit defending the open banking rules in a court application on Monday.
Under Trump, the agency has been restricted and its work is responsible for overseeing financial companies. The bid for CFPB acting director Russell is currently litigating the bid for about 1,700 employees.
Amid uncertainty, many senior CFPB staffers voluntarily left the agency, including Biden-era general counsel Seth Frotman and Banking Liaison Murphy. The way the lawsuit goes is unclear, but even if opponents of the Vought cut win, the agency’s budget is likely to tip over under legislation proposed by House Republicans.
The agency’s fate further shrouded the agency’s fate on Friday, announcing Trump’s draft pick to the agency’s Jonathan McKernan was headed to the Treasury Department.
Dan Quan, senior consultant for technical issues at CFPB, said it took more than five years to write open-ended rules in terms of terms. He said that rewriting with bone workers will be daunting.
“It is impossible to do this rule,” Quan said.
Even if the CFPB is able to finalize new rules that meet bank concerns, Fintechs may head to court to argue that the agency is beyond its authority in the rewrite, said Todd Phillips, assistant professor of legal studies at Georgia State University.
“If they were to rewrite the rules, it would eventually go back to court,” he said.
(Update with the company, Hall group comment paragraph 11.)
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