Dive Brief:
- Consumer Financial Protection Bureau Director Rohit Chopra said on Sunday that a lawsuit filed over the agency’s open banking rule finalized earlier this month is an obstacle to increasing competition among financial institutions.
- Some banks are concerned about competing with smaller players and don’t want to change the status quo, Chopra said during a question and answer session at the annual Money 20/20 conference in Las Vegas. “It’s not a big surprise that some of the largest players are the ones who want to slow and stop it,” he said.
- The director further questioned the litigants’ understanding of the final rule. “I haven’t read their lawsuit, and I don’t think they read the rule,” the CFPB director said during a question-and-answer session, noting that the 56-page lawsuit was filed shortly after the CFPB released the nearly 600-page rule on open banking.
Dive Insight:
Chopra’s comments provided the federal agency’s first public response to the lawsuit, which was filed by banking groups on Oct. 22, the same day the CFPB released its long-awaited rule 1033 governing open banking.
The rule regulates the sharing of granular financial data — such as the activity in a consumer’s checking or savings account — between consumers and financial institutions. For instance, open banking allows consumers to turn over their spending and savings histories if they are trying to apply for a loan, a credit card, or other financial services.
Letting consumers share financial information will spur more competition among financial institutions, which benefits consumers, Chopra said.
Credit card holders, for example, can more easily switch cards if they can share the gritty details about how much they save versus how much they spend, giving a card issuer more information than they could glean from a credit check, he told a gaggle of reporters after the conference question-and-answer session.
However, The Bank Policy Institute, the Kentucky Bankers Association and Lexington, Kentucky-based Forcht Bank — the groups behind the Oct. 22 lawsuit — say rule 1033 will put consumers and the banking industry at risk. The lawsuit also accuses the CFPB of overstepping its legal authority.
Spokespeople for those groups did not respond to requests for comment.
Attorneys who follow the financial services industry expect to see more lawsuits challenging government regulations after the Supreme Court overturned the Chevron Doctrine in June, and suspect that industry groups stand a greater chance of success in derailing laws imposed on their industries.
The high court’s decision doesn’t make Chopra more concerned about cases against his agency, he told the reporter group. The CFPB is legally mandated to issue regulations on subjects like personal data rights, Chopra said.
The agency doesn’t have the power to unilaterally decide that it won’t follow those laws, he said. It would be “deeply inappropriate” for the agencies like the CFPB not to follow through on such statutes, he added.
