Will Halting the Consumer Financial Protection Bureau Affect Open Banking?
- The Trump administration has shut down the Consumer Financial Protection Bureau (CFPB)
- The freeze of the CFPB makes enforcement unclear
- There are several reasons why financial institutions should continue their open banking efforts
As the new administration continues to make its adjustments, one major change that is affecting the banking industry is the halting of all activities from the Consumer Financial Protection Bureau (CFPB).
According to an email seen by Reuters:
U.S. Treasury Secretary Scott Bessent, who took over on Monday as President Donald Trump's new acting consumer finance watchdog, has halted virtually all pending activities at the U.S. Consumer Financial Protection Bureau, including investigations, rule making, litigation and public communications, according to an email seen by Reuters.
The Guardian goes on to note that the situation has put financial institutions in "limbo," as many are taking a wait and see approach on rules and regulations -- particularly those finalized recently.
Effects on Open Banking Rule
In October of 2024, The Consumer Financial Protection Bureau (CFPB) finalized a rule for open banking, requiring financial institutions, credit card issuers, and other financial providers to unlock an individual’s personal financial data and transfer it to another provider at the consumer’s request for free.
While the freeze of the CFPB makes enforcement unclear, banking consulting firm CCG Catalyst believe this should NOT halt efforts to deploy open banking technology.
It is unclear what the future of the Consumer Financial Protection Bureau looks like, and that’s raising questions about the enforcement of its regulations, including its open banking rule finalized last year. Enforcement’s absence would lift a looming compliance obligation for financial institutions (FIs), effectively eliminating the need to treat open banking as a compliance task. This possibility could lead many bankers to breathe a sigh of relief — but that would likely be a mistake.
CCG Catalyst notes several reasons why financial institutions should continue their efforts:
- Financial institutions are already installing open banking infrastructures because consumers rxpect their fintech apps to access their data
- Support for open banking infrastructure has become easier with APIs
- APIs are more secure in transfering consumer data
Additionally, CCG Catalyst notes "some institutions embracing open banking as a competitive advantage and backing it up with infrastructure, including extensive developer resources."
While not a new technology, APIs are a staple within the banking industry. FIs, core providers, and fintechs like OrboGraph use APIs to enable utilization of new technologies like AI and machine learning. Banks of all sizes are able to leverage OrboGraph's OrboAnywhere suite through their core providers vs deploying the technologies on-premise.
Financial institutions should not be making decisions based solely on rules and regulations. By recognizing and embracing new technologies, FIs gain an edge on competitors while meeting customer demands.