Dive Brief:
- The Financial Technology Association can intervene in a lawsuit bank trade groups brought seeking to quash a Consumer Financial Protection Bureau rule outlining a new U.S. open banking system, a federal judge ruled on Wednesday.
- The association argued that the bureau was unlikely to defend its members’ interests in a case brought by banking groups over implementation of the open banking rule. “While it is still uncertain whether the CFPB will defend the Rule in issue, it seems that, at the minimum, the FTA’s interests are likely not protected by the current parties,” U.S. District Judge Danny Reeves in Lexington, Kentucky, wrote in the ruling.
- Neither the CFPB nor the plaintiffs – the Bank Policy Institute, the Kentucky Bankers Association and Kentucky-based Forcht Bank – opposed the FTA’s motion to intervene in their briefs filed Monday.
Dive Insight:
As an intervenor, the association will be able to defend the open banking rule at a time when the CFPB has been reordering its enforcement priorities, settling lawsuits against it and abandoning litigation the bureau had brought under the Biden administration.
The court ruling “gives the fintech industry a seat at the table to defend Americans' financial data rights, ensuring that the big banks cannot dictate the future of open banking,” Penny Lee, the FTA’s president and CEO, said Thursday in an emailed statement.
Due to the CFPB’s dramatic changes under its acting director, Russell Vought, the open banking rule and its associated deadlines are in question. Under the Trump administration, the CFPB has vacated or de-prioritized enforcement across numerous rules and past guidance.
On May 8, Bloomberg Law reported that the bureau will seek to vacate the Biden-era rule through the banks’ litigation in Reeves’ court, citing multiple unnamed sources familiar with the legal strategy. The CFPB would then rework the bill, allowing banks to charge fees and give them liability protections, Bloomberg reported.
In October, the CFPB issued a final rule to implement section 1033 of the 2010 Dodd-Frank Wall Street Reform and Consumer Protection Act. The three bank groups sued immediately in the Eastern District of Kentucky to enjoin the rule, arguing that the bureau had exceeded its authority.
Open banking is designed to let consumers more easily access and transfer their financial data to another bank or financial services company for free. Regulators and other proponents say the rule would spur competition and provide financial consumers with alternatives that might offer better services and rates. Fintechs and other financial startups see a robust market opportunity arising from open banking.
Banks argue that the law imposes costs that they’re not allowed to recoup and does not suitably specify data protections of a third party when a bank transfers customer data.
The banks’ compliance deadlines under the CFPB rule are layered from 2026 through April 2030, with the largest banks required to begin operating within the open banking parameters next year, absent a court injunction halting the rule, or the CFPB seeking to vacate or rework it.
