A new Executive Order could help open the door for the portability of consumer financial data.
Definitive regulation for open banking may be on the horizon in the US. On July 9, 2021, President Biden issued an Executive Order on Promoting Competition in the American Economy (the Order), which contains a section on banking and consumer finance that encourages the Consumer Financial Protection Bureau (CFPB) to issue rules on consumer financial data portability.
The Order’s request to the CFPB could help foster competition and reduce market concentration among banking institutions by simplifying personal data portability for consumers and making open banking functionality more readily available.
Open banking generally refers to the ability of consumers to control their financial data by allowing third-party financial service providers to access dispersed personal data through the use of either credential sharing and “screen scraping” or application programming interfaces, which allow systems and applications to communicate in a more prescribed way without credential sharing.
In 2010, Congress authorized the CFPB under Section 1033 of the Dodd-Frank Act to help ensure that consumers have access to the information in their financial accounts and the ability to leverage that data in their records. Since then, the CFPB has:
- Published non-prescriptive principles on consumer-authorized access and use of consumer financial account data
- Fielded opinions from consumer groups, fintechs, trade associations, financial institutions, and data aggregators during a symposium on the state of the developing market for data access services based on consumer-authorized use of financial data
- Issued an advance notice of proposed rulemaking on consumer-authorized third-party access to financial records (discussed in this Latham blog post)
- Included the availability of electronic consumer financial account data in its Spring 2021 rulemaking agenda
Nonetheless, no official statement or final rulemaking has resulted from these actions.
But that may soon change. With regard to open banking, the Order states:
The Director of the Consumer Financial Protection Bureau, consistent with the pro-competition objectives stated in section 1021 of the Dodd-Frank Act, is encouraged to consider … commencing or continuing a rulemaking under section 1033 of the Dodd-Frank Act to facilitate the portability of consumer financial transaction data so consumers can more easily switch financial institutions and use new, innovative financial products
Open banking could be a boon for consumers, as well as fintechs offering innovative banking solutions and other financial products leveraging the vast possibilities of open banking in the US. Whether the CFPB will take the Order to heart and issue long-awaited rulemaking that puts consumers in control of their personal data remains to be seen.