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Laying the foundation for open banking in the United States

New digital banking technologies have the power to expand and open market access for American consumers and emerging businesses. In a more competitive market, Americans will be able to earn higher rates on their savings, pay lower rates on their loans, and more efficiently manage their finances. But the new technologies, and the competition they can fuel, have not yet reached their full potential. Consumers continue to encounter all too familiar obstacles when trying to switch banks or apply for loans.

The CFPB is working to accelerate the shift to open banking through a new personal data rights rule intended to break down these obstacles, jumpstart competition, and protect financial privacy. To do this, the CFPB is formalizing an unused legal authority enacted by Congress in 2010. This authority gives consumers the right to control their personal financial data. These rights will become a practical reality after the CFPB implements a rule that sets expectations for the market. We expect to solicit comments on our formal proposal in a few months and finalize in 2024.

But the agency must not micromanage open banking. Fair standards developed by the market to leverage our rule will be critical to the creation and maintenance of an open banking system in which consumers can vote with their feet -- and exercise their data rights without being trapped by powerful incumbents and without losing control of their data.

Our proposal will recognize that the CFPB must resolve certain core issues because system participants are deadlocked or because existing approaches do not put consumers fully in the driver’s seat. But many of the details in open banking will be handled through standard-setting outside of the agency. Properly pursued, such standards can allow open banking to evolve as new technologies emerge, new products develop, and new data security challenges arise.

To thrive, standard-setting organizations must not skew to the interests of the largest players in the market. They must reflect the full range of relevant interests — consumers and firms, incumbents and challengers, and large and small actors. In consumer finance, powerful firms have sometimes looked to manage emerging technologies through utilities, networks, or standard setting organizations skewed to their interests – or even owned by them.

Control of the open banking system by such players threatens competition and the consumer’s control of their own financial affairs. While the CFPB intends for the market to play a significant role in developing and maintaining open banking standards, it will pay close attention to any attempts to limit consumers’ exercise of their data rights, particularly where such attempts proceed from coordinated efforts by dominant firms.

As the CFPB expects fair standards to play a critical role in open banking, our proposed rule will seek to take appropriate account of that role. We continue to encourage those seeking to develop industry open banking standards in the United States to discuss their plans with the CFPB so that those standards appropriately allow consumers to exercise their personal financial data rights.

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