CFPB Proposes Personal Financial Data Rights Rule
Last week, the Consumer Financial Protection Bureau (CFPB) proposed a Personal Financial Data Rights Rule, which it says will promote a shift toward open banking where consumers have more control over their financial data and would have more protections against companies trying to misuse that data. The Bureau also says the rule would promote competition by requiring companies to share data at the consumers’ direction with other companies offering better products.
“With the right consumer protections in place, a shift toward open and decentralized banking can supercharge competition, improve financial products and services, and discourage junk fees,” said CFPB Director Rohit Chopra. “Today, we are proposing a rule to give consumers the power to walk away from bad service and choose the financial institutions that offer the best products and prices.”
Politico noted that the proposed rule comes amidst a power struggle seen in recent years between traditional banks and fintech startups over how consumer data is shared. As more consumers utilize apps that offer payment and budgeting services, the CFPB is making efforts to streamline the current patchwork data-sharing system.
Under the CFPB’s proposed rule, consumers would have access to their data without any junk fees through safe and reliable digital interfaces. Consumers would also have a legal right to share their data with third parties, making it easier to switch providers and walk away from bad service.
Additionally, the rule would protect the interests of both consumers and financial firms through meaningful consumer control, robust protections preventing misuse of data and unchecked surveillance, fair industry standard-setting, and a move away from risky data collection practices.
The requirements under the proposal would be implemented in phases, and larger providers would be subject to them first. Small community banks and credit unions with no digital interface would be exempt from the rule’s requirements.