CFPB Plans Rescind Open Banking Rule Amid Industry Backlash

The Consumer Financial Protection Bureau (CFPB) has announced plans to rescind its open banking rule, known as the 1033 rule, which had granted Americans the right to instruct banks to share their financial data with third-party providers. This decision has drawn sharp criticism from the Financial Technology Association (FTA), which condemned the move as a "handout to Wall Street banks" seeking to limit competition and restrict consumer control over their financial data. The rule, finalized in October 2024, was seen as a significant step toward promoting competition and innovation by standardizing data-sharing protocols between banks and fintech companies. The CFPB's reversal is viewed as part of a broader regulatory shift under acting Director Russell Vought, including the rollback of previous consumer protections and the dropping of lawsuits against major banks. The bureau cited legal concerns and challenges to the rule's authority as reasons for its decision, while critics warn that abandoning the rule could stifle fintech innovation and entrench the dominance of traditional financial institutions. The CFPB plans to petition a federal court to vacate the 1033 rule, signaling a possible end to the mandated open banking framework in the U.S.