WASHINGTON–With the Trump administration telling a court it will drop the CFPB’s open banking rules, much of the market is being thrown into flux.

Late last week, the CFPB told the U.S. District Court in Kentucky it will be rescinding the rule, which was the subject of a lawsuit.

“After reviewing the rule and considering the issues that this case presents, Bureau leadership has determined that the rule is unlawful and should be set aside,” the CFPB stated in a court document. “To that end defendants intend to file a motion for summary judgment by May 30th, 2025, the date that this court had set for plaintiffs in its March 27th order.”

Open banking, already routine in some other countries, gives consumers control of their data and allows it to be shared with third parties with permission. Rule 1033 was enacted in October 2024 and went into phased enforcement in January of this year.

Now What?

But now, what the CFPB’s move will mean for the financial landscape and the environment in which credit unions compete is much more uncertain. 

That includes a recalibration and rethinking of partnerships both banks and credit unions have built with fintechs, in addition to the development of internal projects, according to analysts.

Meanwhile, trade groups on opposite sides of the issue have, not surprisingly, offered opposite responses to the CFPB’s decision.

“The CFPB has taken the appropriate step of acknowledging Section 1033’s clear legal deficiencies, and we urge the big tech companies to do the same, rather than protracting a legal dispute that endangers consumer financial data,” the Bank Policy Institute said in a statement. “Banks have already made it possible for hundreds of millions of Americans to safely access and share their data — the current rule undermines and disrupts that ecosystem to the benefit of tech companies looking to profit even further from consumers’ data.”

Taking a position on the opposite side of the issue was the Financial Technology Association, which represents fintechs.

A ‘Handout to Wall Street Banks’

 “Vacating the 1033 rule is a handout to Wall Street banks, who are trying to limit competition and debank Americans from digital financial services,” Penny Lee, president and CEO of organization said in a statement. “Americans must have the right to control their financial lives, not the nation’s biggest banks. As an intervening party in the ongoing litigation, FTA will continue to defend open banking and Americans’ freedom to access the financial services they want to use. We remain committed to building a financial system that is inclusive, innovative, and centered on the needs of everyday Americans.”

CU Experience

Earlier this year, during America’s Credit Unions’ GAC, two people from outside the U.S. whose countries have enacted open banking, offered their thoughts for U.S. CUs.

The Cost of Open Banking

Alysia Smith, government relations manager at the Customer Owned Banking Association (COBA) in Australia, warned American credit union professionals about the expense that comes with the government requiring financial institutions to implement open banking laws—which allow consumers to share their financial data with third-party developers.

A Piece of Advice

“If I can give you one piece of advice—if open banking does continue along (in the United States), please push your legislators at the same time to be implementing a consumer awareness style campaign. Because open banking is not realizing the competitive benefits that were promised, because our consumers are not aware of it,” said Smith. “In fact, one of our credit unions has an anecdote that it would have been more cost efficient for them to take every customer who had signed up to open banking in their credit union down to the dealership and buy them a brand-new car than implement open banking.”

Poland’s Rafal Matusiak echoed Smith’s comments, saying it has not led to more competition to produce more financial products or services in Poland, either.  

“In my opinion, apart from some improvements for people using financial services—for example the ability to view all their accounts using one online banking system—I have not noticed any major revolution,” said Matusiak.