Dive Brief:

• Banking groups suing to block an open banking rule are trying to restrict competition, the Financial Technology Association said Sunday in a motion that asks a federal judge to grant summary judgment supporting the 2024 rule. Meanwhile, the Consumer Financial Protection Bureau is merely using that lawsuit, in which it agrees with the bank industry plaintiffs, “to overturn the prior Administration’s actions,” the association contended.
• The banking groups’ “true concern is that allowing consumers to unlock and leverage their banking data opens opportunities for other financial-services providers to compete with banks,” the FTA said in its motion, which also requests that U.S. District Judge Danny Reeves rule against the plaintiffs’ motion for summary judgment and in favor of the FTA’s position.
• The CFPB is “improperly short-circuiting notice-and-comment requirements” by asking the court to find the open banking rule unlawful, according to the FTA’s brief. The bureau’s “newfound objections to the rule are pure policy arguments that are its own responsibility to rectify, to the extent lawful, as part of the ordinary rulemaking process,” the FTA said in its motion.

Dive Insight:

The Bank Policy Institute, which represents most of the big U.S. banks, and the Kentucky Bankers Association brought the lawsuit against the CFPB last October, along with Kentucky-based Forcht Bank, immediately after the rule was finalized the same month. 

The rule stems from Section 1033 of the 2010 Dodd-Frank Wall Street Reform and Consumer Protection Act, and was enacted after years of deliberations. 

The open banking rule gives consumers a right to share their detailed financial data with third parties under the notion that a consumer’s ability to easily swap accounts among banks, credit unions or fintechs will allow increased consumer choice and spur greater competition for financial services.

“This rule is grounded in longstanding legal authority and reflects a bipartisan commitment to modernizing how Americans manage their financial lives,” Penny Lee, the FTA’s chief executive, said in a Sunday press release. “We urge the Court to uphold the rule and reaffirm Americans’ rights to securely share their financial data.”

In a May 14 ruling, Reeves allowed the FTA, which represents fintech players such as Block, Intuit and Stripe, to intervene in the case to defend its members’ interests. 

The bureau filed a brief soon after urging Reeves to void the rule, which “unlawfully seeks to regulate open banking by mandating the sharing of data with ‘authorized third parties,’” the CFPB asserted. 

The Trump administration has dramatically reduced the CFPB’s mission and staffing under Acting Director Russell Vought. However, the bureau has not moved to rescind the rule, so far, as it manages the litigation targeting the rule.

The agency also agreed with the plaintiffs that the rule unlawfully prohibits financial institutions from imposing fees for sharing the data and wrongly sets compliance deadlines without a consensus on how standards will be developed, the CFPB said in its May 29 court filing.

The FTA took issue with those assertions too. “The CFPB correctly concluded that without a ban on access fees, banks could well leverage the power to impose such fees to obstruct the open-banking scheme,” the fintechs said in their Sunday motion.

The association’s argument rests partially on the Supreme Court’s landmark 2024 Loper Bright ruling, which found that U.S. district courts owe no deference to executive branch agency’s statute interpretations. 

“The CFPB’s newly expressed statutory-interpretation arguments are entitled to no deference … because the CFPB’s position does not ‘reflect careful consideration’; has never been expressed by the CFPB before now; is inconsistent with the agency’s prior views; is an “about-face”; and has never been articulated in rulemaking or enforcement,” the FTA wrote in its filing.

The CFPB did not immediately respond Monday to an email seeking comment.

Fintechs’ efforts to connect with consumers and offer free access to banking information “have struggled in light of banks’ obvious incentives to restrict competition,” the FTA wrote. “Vacating the Rule — and adopting the atextual constraints on the CFPB’s authority Plaintiffs endorse — would place consumers’ right to control their financial data at risk, while ceding market control to incumbent banks.”

The CFPB position represents a departure on the open banking rule under the second Trump administration. The bureau first began work in earnest on the rule during Trump’s first term, which continued during the Biden administration.

The banks’ compliance deadlines under the open banking rule are layered from 2026 through 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 vacating or reworking it.

The plaintiffs and CFPB have 30 days to file replies, with the FTA allowed to file a response in late August before Reeves issues his decision, according to the FTA.