Industry bodies seeking to set standards for consumers to share their banking data will have to include consumer advocates and small companies alongside banks and larger financial firms in their decision-making and voting processes, a top US regulator said.
Industry standard-setting bodies approved by the Consumer Financial Protection Bureau are poised to play a vital role in establishing the day-to-day expectations of the open banking environment under the agency’s closely watched plan.
A final rule published on the CFPB’s website late Tuesday and subsequently taken down said the agency will require each member of the standard-setting body, including consumer advocates, to have have balanced voting rights, even if a member plays more than one role in the open banking ecosystem.
“This final rule clarifies that if a participant plays multiple roles, the weight of that participant’s role will be factored into the balance consideration,” the CFPB said, finalizing some parts of the open banking plan.
Small market participants must also be represented, and the standard-setting bodies’ “sources, procedures, and processes” will be open to all interested parties, not just members, the final rule said.
“Such open-source materials would not truly be open unless they were made available outside the standard-setting body’s membership,” the CFPB said.
The rule, required by Section 1033 of the Dodd-Frank Act, will make it easier for consumers to access their bank and credit card data at no cost and move it to fintech apps such as Wealthfront or Venmo.
Doing so will open up the market for new products and services and increase competition by allowing customers to more easily switch banks and other providers, the CFPB says.
The banking system already has groups trying to set standards for consumer data-sharing, such as the Financial Data and Technology Association North America. Those groups are expected to be among those that seek CFPB certification.
Certification
Industry standard-setting bodies will have to reapply for CFPB certification every five years under its final rule.
The CFPB’s initial proposal, released in October 2023, suggested a three-year certification.
A five-year certification will allow a standard-setting body’s decisions to last longer as the industry intially gears up to comply with the open banking system, the CFPB said.
The CFPB also retains the right to obtain information from standard setting bodies and their members under the rule.
CFPB Director Rohit Chopra foreshadowed some changes in appearance before industry groups in recent months.
The CFPB would look closely at a standard-setting body’s composition, funding, and other characteristics to ensure that some sectors of the industry aren’t favored over others, and that consumer rights are considered as well, Chopra said at an industry conference in March.
“If the composition suggests favoritism or if funding is dominated by one market participant, that will be a problem,” Chopra said.
But having uniform standards for developer interfaces and customer communications set by industry rather than CFPB policymakers would make open banking work better for consumers, he said.
Representatives for the CFPB didn’t immediately respond to requests for comment Tuesday.
The CFPB’s final rule on open banking standard-setting bodies is set to take effect 30 days after publication in the Federal Register.
The CFPB is expected to release a rule finalizing other parts of the open banking plan in the fall.
Read More: Open Banking Standards to Include Consumer Voice, CFPB Says (1)