The CFPB is planning to repeal its Section 1033 Open Banking Rule, according to a filing in a federal lawsuit challenging the rule. On the same day the Final Rule was issued, the Banking Policy Institute (BPI) and Kentucky Bankers Association filed a lawsuit in the U.S. District Court for the Eastern District of Kentucky seeking injunctive relief, alleging that the CFPB exceeded its statutory authority.
"After reviewing the Rule and considering the issues that this case presents, Bureau leadership has determined that the Rule is unlawful and should be set aside," the CFPB said, in a status report filed in the U.S. District Court for the Eastern District of Kentucky. The CFPB said it would file a motion for a summary judgment in the case by May 30.
The rule implements Section 1033 of the Dodd-Frank Act. It would have significantly expanded consumer access to their financial data. The rule would have had far-reaching implications for financial institutions, fintech companies, and consumers alike. This previously untapped legal authority would have given consumers the right to control their personal financial data and assign the task of implementing personal financial data sharing standards and protections to the CFPB.
Even though the CFPB is withdrawing the current rule, Section 1033 requires the CFPB to issue rules that would allow consumers to obtain, "transaction data and other information concerning a consumer financial product or service that the consumer obtained from the covered entity," according to a Biden Administration timeline providing background on the rule. "Section 1033 also directs the CFPB to prescribe by rule standards to promote the development and use of standardized formats for information made available to consumers," according to a Biden Administration timeline providing background on the rule.
It is unclear how the Trump Administration will implement the requirements contained in Section 1033—or if the administration intends to implement it at all.
The Kentucky Bankers Association and BPI applauded the administration's decision to kill the rule.
"CFPB has taken the appropriate step of acknowledging Section 1033's clear legal deficiencies, and we urge the big tech companies to do the same, rather than protracting a legal dispute that endangers consumer financial data," they said, in a joint statement. "Banks have already made it possible for hundreds of millions of Americans to safely access and share their data – the current rule undermines and disrupts that ecosystem to the benefit of tech companies looking to profit even further from consumers' data."
However, the Financial Technology Association blasted the decision to withdraw the rule.
"Vacating the 1033 rule is a handout to Wall Street banks, who are trying to limit competition and debank Americans from digital financial services," said Penny Lee, President and CEO of the Financial Technology Association. "Americans must have the right to control their financial lives, not the nation's biggest banks."
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