The Consumer Financial Protection Bureau laid further groundwork for open banking rules on Wednesday, approving the qualifications needed for the industry’s final standard-setters, which include consumer groups, app developers and financial companies.
Wednesday’s rules outline the qualities a standard-setter must have to be recognized by the CFPB and how to apply for such recognition.
Industry standard setting organizations must not be manipulated to favor industry participants and must have transparent and publicly available decision-making procedures. Decisions by standard setters must be based on balanced consensus with due process and appeal.
“Industry standards can be weaponized by dominant companies to maintain their market position and undermine competition for all companies,” CFPB Director Rohit Chopra said in a prepared statement. “By specifying the attributes the CFPB will use to recognize standard setters, today’s rule will prevent these companies from manipulating standards to their own advantage.”
Regulators proposed long-awaited open banking rules in October, aiming to improve competition in the banking sector by forcing financial services firms to share data with other companies at consumer request.
Under Section 1033 of the Dodd-Frank Act, the CFPB has the authority to issue and enact open banking rules that would prohibit financial institutions from “accumulating personal information” and make it easier for consumers to break away from banks that provide poor service.
The rule would require banks to make personal financial data freely available to consumers through “safe, secure and trusted” digital interfaces.
Wednesday’s rule also includes a mechanism for revoking accreditation of a standard-setter. It also imposes a five-year limit on accreditation, after which the standard-setter must apply for reaccreditation. The agency said this mechanism “will ensure that accredited standard-setters continue to adhere to the attributes codified by the CFPB today.”
In March, Chopra said at the Financial Data Exchange Global Summit:“There is a danger when more powerful players weaponize industry standards. We must be vigilant against standard setting favoring dominant companies and their market power.”
