WASHINGTON–In an update on what the CFPB sees ahead for one of its priorities, open banking, Director Rohit Chopra is cautioning that the current standard-setters should not take their place in the market for granted.”
In remarks before the Financial Data Exchange Global Summit in Washington, Chopra said the CFPB’s work in codifying the attributes that standard-setting organizations must demonstrate before being recognized under a proposed final “open banking” rule would will likely be completed by this Fall. That effort will need to be done before its Personal Financial Data Rights Rule is final, he told the group.
Beginning the Process
Once the attributes are codified, the CFPB will then seek standard-setting organizations to begin the process of seeking formal recognition from the Bureau, he explained.
“This will help us recognize standard-setters as quickly as possible, which should help facilitate compliance,” Chopra said.
As CUToday.info reported earlier, the CFPB issued its proposal in October 2023 with a goal of giving consumers control over data about their financial lives and to provide new protections against companies misusing their data.”
As Chopra has stated, the CFPB believes such a rule will “challenge the financial services industry to compete for customers, protect consumers from excessive surveillance, and help people walk away from bad service.”
CU Leaders Urged to Prepare Now
As CUToday.info most recently reported here, credit union leaders are being urged to prepare now for the era of open banking.
During his remarks before the Financial Data Exchange Global Summit, Chopra said the formal feedback the CFPB has received to date it expects the final rule will help identify areas where standards are relevant to the requirements of the final rule.
“The attributes we are considering for standard-setting organizations will not be a surprise to those who read our proposal,” Chopra said. “For example, we are considering whether standard-setting organizations should be balanced, such that no single entity or group of entities dominates decision making.”
Other Areas of Focus
Chopra further said:
- The CFPB will “look closely” at the makeup of the board or group that makes determinations with respect to the setting or modification of standards. “We’ll be looking at your funding structure,” he said. “If the composition suggests favoritism or if funding is dominated by one market participant, that will be a problem.”
- If there is no meaningful way for consumer privacy interests or the interests of small firms to be considered, that could also be a problem. “I urge all interested standard setters in this space to look hard at their practices and procedures to ensure your organization is not simply a puppet for a powerful player,” he said.
In that case, Chopra said recognition as a standard setter could be revoked. “In terms of the process for maintaining recognition, we want to ensure that there are no bait-and-switches or any other mischief,” Chopra vowed. “I expect that CFPB recognition might be revocable or time-limited under certain circumstances.”
- The CFPB would like to eventually recognize more than one standard to allow the market to develop without complete reliance on one set of protocols. “I also recognize that not every standard setter might be ideally suited to create standards for every part of the open banking system, and new standard-setting organizations may need to emerge as the system evolves,” he said.
- Existing standard setters should not take their place in the market for granted, he said. The agency’s “strong preference” remains for market-driven standards, but he said the agency “will not be able to rely on such standards if they are structured to allow incumbents to maintain their market power to the detriment of open banking in the United States.”
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