LEXINGTON, Ky.–The banking groups that have filed suit against the CFPB over its open banking rules are only attempting to stop the rule to restrict competition, according to a motion filed by the Financial Technology Association.
In addition, the CFPB’s position is the lawsuit exists for no other purpose than to “overturn the prior Administration’s actions,” according to the motion that is asking a federal judge to grant summary judgment in support of the 2024 rule.
The banking groups’ “true concern is that allowing consumers to unlock and leverage their banking data opens opportunities for other financial-services providers to compete with banks,” the FTA said in its motion, which also requests that U.S. District Judge Danny Reeves rule against the plaintiffs’ motion for summary judgment and in favor of the FTA’s position, according to a report by Payments Dive.
‘Short Circuiting’ Process
The CFPB is “improperly short-circuiting notice-and-comment requirements” by asking the court to find the open banking rule unlawful, the FTA stated n its brief, Payments dive reported. The brief adds that the Bureau’s “newfound objections to the rule are pure policy arguments that are its own responsibility to rectify, to the extent lawful, as part of the ordinary rulemaking process.”
The lawsuit was brought in October of 2024 by the Bank Policy Institute, which represents most of the big U.S. banks, and the Kentucky Bankers Association, along with Kentucky-based Forcht Bank.
It was filed immediately after the CFPB finalized the rule as part of Section 1033 of the 2010 Dodd-Frank Wall Street Reform and Consumer Protection Act.
About Open Banking
As the CU Daily has reported, open banking, which is in place in many other countries, gives consumers a right to share their own personal data with third parties, with proponents saying it will provide greater competition and ultimately benefit consumers.
For obvious reasons, open banking has the support of fintech.
In a released statement, Penny Lee, CEO of the FTA, said, “This rule is grounded in longstanding legal authority and reflects a bipartisan commitment to modernizing how Americans manage their financial lives. We urge the Court to uphold the rule and reaffirm Americans’ rights to securely share their financial data.”
30 Days to Reply
While the Trump administration has largely shut down the CFPB and watered down many of its rules, it has not to date rescinded the open banking rule.
In a late May filing, the CFPB said it agreed with the plaintiffs that the rule “unlawfully prohibits financial institutions from imposing fees for sharing the data and wrongly sets compliance deadlines without a consensus on how standards will be developed.”
The FTA disagrees with that position.
The plaintiffs and CFPB have 30 days to file replies, with the FTA allowed to file a response in late August.