Court Battle Could Reshape Consumer Financial Data Landscape

The fight over the CFPB’s status and, in particular, the future of Open Banking Rule 1033 is on. A Washington, D.C.-based trade group, the Financial Technology Association (FTA), is seeking to intervene in a lawsuit challenging the Consumer Financial Protection Bureau’s (CFPB) final rule on personal financial data rights, commonly known as Rule 1033. The FTA’s move comes amid upheaval at the CFPB, raising questions about the agency’s ability to defend the rule.

The lawsuit, filed by Forcht Bank, the Kentucky Bankers Association, and the Bank Policy Institute, challenges the CFPB’s Rule 1033 finalized on Oct. 22. The plaintiffs argue that the CFPB exceeded its statutory authority and acted arbitrarily in creating the rule, which requires banks to share consumer data with consumers and authorized third parties through developer interfaces. They specifically take issue with the CFPB’s interpretation of the term “consumer,” the requirement to disclose payment initiation information, the delegation of authority to private standard-setting organizations (SSOs), and the ban on banks charging access fees.

The FTA disagrees. It argues that its members, including companies like Plaid, Ribbit Capital, Stripe and Wise, would be directly affected by a judgment vacating the rule. These companies rely on the ability of consumers to access and share their financial data to provide services such as streamlined access to credit, new payment options, and financial advisory services. The FTA contends that the rule fosters competition, innovation and greater consumer choice in the financial services market.

“The section 1033 rule will be an important catalyst for competition by empowering consumers to choose products and services that best meet their financial needs,” reads a quote from FTA member Stripe.

The CFPB’s final rule largely mirrored its proposed rule from Oct. 31, 2023, which the FTA had supported. The FTA has stated that it supports the incorporation of a recognized SSO to issue qualified industry standards because prescriptive technical requirements issued by the regulator would fail to keep pace with technological change.

The motion to intervene comes during a period of uncertainty at the CFPB. Following the departure of Director Rohit Chopra on Feb. 1, Russell Vought was appointed acting director. Vought then directed CFPB staff to cease work on proposed rules, suspend effective dates of finalized rules, halt investigative work and refrain from engaging in litigation beyond requesting a pause in proceedings. This action by Vought has raised questions about the CFPB’s commitment to defending the rule.

The FTA argues that the CFPB might not adequately represent its specific interests, which are focused on the economic and legal interests of its member businesses, rather than the broader public interest of a government regulator. The FTA also notes that it does not fully agree with all aspects of the final rule, having urged the CFPB to take additional steps to facilitate additional secure sharing of consumer data.

The FTA is seeking to intervene as a matter of right under Federal Rule of Civil Procedure 24(a) or, alternatively, for permissive intervention under Rule 24(b)(1). The FTA asserts that its motion is timely and that its members will be harmed if the rule is vacated. The case is in the early stages of litigation, with cross-motions for summary judgment on the horizon. The court has set a briefing schedule for cross-motions for summary judgment.

The FTA was last active on the CFPB front in October when it filed a lawsuit challenging the CFPB’s final interpretive rule on pay-in-four buy now, pay later (BNPL) products, saying the rule “oversteps legal bounds.” The CFPB ruled May 22 that BNPL vendors are credit card providers and must provide some key legal protections and rights delivered by conventional credit cards, such as the consumer’s right to dispute charges and demand a refund from the lender.