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The Consumer Financial Protection Bureau laid more groundwork Wednesday for its open banking rule, inking the qualifications necessary for the industry’s eventual standard setters, which will include consumer groups, app developers and financial companies.
Wednesday’s rule identifies the qualities such standard-setting bodies must have to be recognized by the CFPB, and how to apply for such recognition.
Industry standard-setting organizations must not be rigged in favor of industry players and must have transparent and publicly available decision procedures. Decisions made by standard setters must be balanced and by consensus, with due process and appeals.
“Industry standards can be weaponized by dominant firms in order to maintain their market position, undermining competition for all,” said CFPB Director Rohit Chopra in a prepared statement. “Today’s rule will prevent these firms from rigging standards in their favor by identifying attributes the CFPB will use to recognize standard setters.”
The regulator proposed its long-time-coming open banking rule last October, aimed at improving competition in the banking sector by requiring financial services firms to share data with other companies upon a consumer’s request.
The open banking rule, for which the CFPB has the authority to issue and establish, based on Section 1033 of the Dodd-Frank Act, prohibits financial institutions from “hoarding a person’s data,” making it simpler for consumers to break up with banks that provide bad service, the bureau said.
Under the rule, banks would be required to make personal financial data freely available to consumers through “safe, secure, and reliable” digital interfaces.
Wednesday’s rule also includes a mechanism for the revocation of a standard setter’s recognition. Additionally, it inked a five-year limit on recognition, at which point standard setters must apply for re-recognition. The mechanisms “will ensure recognized standard setters’ ongoing adherence to the attributes codified by the CFPB today,” according to the bureau.
In March, Chopra said at the Financial Data Exchange Global Summit that “dangers exist when more powerful players weaponize industry standards. We have to be vigilant that standard-setting does not skew to benefit dominant firms and their prevailing market power.”
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