October 20, 2023

CFPB issues 1033 proposal on data rights, open banking

CFPB logoThe CFPB Thursday issued a proposed rule to implement section 1033 of the Dodd-Frank Act related to personal financial data rights. The proposal would require financial institutions and others to share information – at a customer’s request and at no cost – with other businesses that offer competing products.

In addition, companies would be prohibited from using consumers’ accessed data for targeted advertising, and customers would have to reauthorize access every year and would be able to revoke access at any time. The bureau did make some changes to address concerns raised by NAFCU and others related to due diligence, vetting, and reasonable denials of third-party requests.

CFPB Director Rohit Chopra said the proposal would “give consumers the power to walk away from bad service and choose the financial institutions that offer the best products and prices.”

“NAFCU appreciates efforts to promote consumer choice in the financial services marketplace so that the value of institutions like credit unions that practice relationship banking can be recognized by even more consumers. However, this rule has the potential to invite rapid expansion of nonbank access to sensitive consumer account information,” said NAFCU Vice President of Regulatory Affairs Ann Petros. “The rule could also pose more systemic risks to the banking sector. It could facilitate rapid and unpredictable movements of deposits, expand data security and data privacy concerns, and drive further consolidation within the credit union industry through extraordinary compliance costs and the obligation to provide – at no charge – data to third parties.”

The bureau outlined proposals for the rulemaking in October 2022, of which NAFCU argued many under consideration presented significant challenges for credit unions – both technical and competitive in nature, that could lead to “enormous compliance costs and ultimately distort the financial sector’s competitive landscape.”

As the bureau also works to understand data broker practices and considers proposals for a Fair Credit Reporting Act (FCRA) rulemaking, NAFCU has called on the CFPB to ensure the section 1033 rulemaking accounts for gaps in data aggregator supervision.

NAFCU will continue to work with the bureau on its efforts to balance consumer protections while ensuring a reasonable regulatory environment for credit unions.