The top US watchdog agency for consumer financial protection has unveiled long-awaited rules, reports Reuters. These rules are intended to drive a shift toward open banking. And spur competition, allowing consumers to control and share their own data when shopping for services.
The new rules also aim to govern relations between the burgeoning world of financial technology companies that offer consumer apps for an expanding array of services. And the sometimes competing interests of traditional banks that can be hesitant to grant access to their customers’ accounts and data.
Financial Protection across Open Banking
US Consumer Financial Protection Bureau (CFPB) Director Rohit Chopra has commented on the transition to the new rules. These allow mobile phone users to switch providers while keeping the same number. He said the coming change should help bring US payments systems more in line with advances in other developed countries. He also said the rule incorporates strong privacy protections and consumer choices. “A company that ingests (a) consumer’s data can use the data to provide the product or service the consumer asked for, but not for unrelated purposes the consumer doesn’t want.”
New banking rules from the CFPB
First proposed a year ago, the new regulations were 14 years in the making. They were originally called for in the 2010 Wall Street reforms enacted following the 2008 financial crisis.
According to the CFPB, as the rules take effect, consumers will be able to transfer their data between banks free of charge and without obstacles. They will also be able to borrow on better terms. For example, by allowing lenders to issue loans using data held by other financial institutions. And to make payments directly from their bank accounts rather than by card – using open banking.
Neobanking consumers will also be able to revoke access to their data immediately, according to the CFPB. Ahead of the announcement, CFPB officials said the agency had made some changes to the version originally proposed in response to concerns from industry and public comment. It is now sparing banks with less than $850 million in assets from having to provide data, for example.
Companies will have more time than originally proposed to come into compliance. Larger financial technology companies will have until 2026, while the smallest will have until 2030.
- Neobanking
