The long-awaited rule aims to protect consumers against companies using their data. ACA International is considering comments on the rule, which are due by Dec. 29, 2023.
10/25/2023 1:40 P.M.
2.5 minute read
The rule is aimed at driving competition and enabling consumers to have greater control over their financial data while protecting them from data misuse and surveillance.
Under the rule, financial institutions would be prohibited from “hoarding” consumers’ financial data. Instead, they would be compelled to share this data with other companies upon the consumer’s request, giving consumers access to better financial products and services. Additionally, the rule would offer consumers the freedom to sever ties with banks providing subpar services and safeguard against the misuse of their sensitive financial data.
“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.”
The proposed rule seeks to standardize access to data and its terms, fostering a more level playing field for both established and emerging financial institutions, according to the bureau.
Additionally, under the rule consumers would have the authority to share data about their financial accounts, credit cards and digital wallets. The rule also ensures that consumers can access their data without incurring any additional charges and enforces the legal right for individuals to share their financial data with third parties.
The rule also addresses privacy concerns by permitting third parties to only use data for the specific purpose authorized by the consumer and gives consumers the right to revoke access to their data, with immediate termination and data deletion as the default practice.
The CFPB has opened comments on the proposed rule until Dec. 29, 2023.
The CFPB is subject to a rulemaking step that is unique among financial regulators. The CFPB is required to convene a panel of small companies that represent their markets before releasing a proposed regulation in order to get their feedback.
As part of that requirement, the bureau released an outline of proposals and alternatives under consideration by the Small Business Advisory Review Panel as well as a summary and discussion guide of those proposals.
As described in the outline, the CFPB is considering proposals, for example, that would help consumers who want to choose a new provider to transfer their account history to a new company.
The proposed rule was expected this fall, and the bureau is expected to finalize it in 2024 and move to implementation.
According to a client alert from Brownstein Hyatt Farber Schreck LLP, the proposal will have wide impacts on financial institutions and third parties if finalized.
ACA International is considering submitting comments on the proposed rule. Members with input to inform possible comments can contact ACA’s advocacy team at [email protected].