The Consumer Financial Protection Bureau (CFPB) has introduced a proposal for the Personal Financial Data Rights rule.
This is aimed at advancing the move to open banking where consumers have more control and protection over their financial data. The rule will prevent financial institutions from retaining exclusive access to an individual’s data and mandates these entities to share data if directed by the individual. By doing so, it promotes competition and empowers consumers to switch to better service providers if they are unhappy with their current ones.
As of now, the manner in which individuals can access their financial data varies across different institutions. Even for those institutions that do share data upon a consumer’s request, the terms are not consistent. This inconsistency allows established players to manipulate information to their advantage, often at the cost of their own clients. It also poses a challenge for newer entities trying to compete.
With the proposed rule in place, consumers can share their transactional data about various financial products, enabling them to explore alternative options without concerns over data misuse. The CFPB rule strictly states that the data should be utilised solely for the benefit of the consumer and not for commercial advantages.
The proposed rule outlines several key rights and protections for consumers:
- Banks and similar providers must offer personal financial data through dedicated digital interfaces that are reliable and free of charge.
- Consumers will possess a legal right to allow third parties to access their financial data, aiding firms in offering better services and products.
- The rule would also ease the process for consumers to switch between service providers, further promoting competition.
- The proposal introduces stringent measures to ensure that the data isn’t misused for commercial interests such as targeted advertising.
- Consumers have the power to revoke data access with immediate effect and by default, third-party access to data would be deleted within a year unless reauthorized by the consumer.
- The rule promotes industry standards that are transparent and inclusive, and its implementation will be phased, targeting larger providers before smaller ones. Certain institutions with no digital interfaces are exempted from these requirements.
CFPB Director Rohit Chopra said, “With the right consumer protections in place, a shift toward open and decentralised banking can supercharge competition, improve financial products and services, and discourage junk fees. Today, we are proposing a rule to give consumers the power to walk away from bad service and choose the financial institutions that offer the best products and prices.”
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