As the Consumer Financial Protection Bureau (CFPB) continues to push forward with plans to revise its Personal Financial Data Rights rule, a legal battle between one trade group representing fintechs and others advocating for traditional banks has continued to escalate over the rule’s implementation in its existing form.
The Financial Technology Association (FTA) filed a brief urging the U.S. District Court for the Eastern District of Kentucky to reject a bid by the Bank Policy Institute, the Kentucky Bankers Association and Forcht Bank to lift a federal court order staying the rule’s implementation and to indefinitely delay it.
In the brief, the FTA argued the banking trades were asking for “premature judicial intervention that would undermine the notice-and-comment process, short-circuit stakeholder input, and interfere with the CFPB’s ability to arrive at a reasoned decision consistent with the statute.”
The court granted the stay in July at the request of the CFPB on the condition that the bureau would work on a revised version of the rule, providing the court with periodic updates documenting its progress. The bureau published an advance notice of proposed rulemaking in August, requesting stakeholder feedback on several significant potential changes to the rule’s provisions.
The banking associations have argued that the CFPB exceeded its statutory authority when the bureau finalized its data privacy rule, implementing Sec. 1033 of the Dodd-Frank Act, in October 2024. The trade advocates also contended the rule was a threat to account security and consumer privacy.
The FTA contended that the bankers are seeking “premature judicial intervention” that would short-circuit the CFPB’s rulemaking process. The FTA argued the rule is consistent with Congress’s definition of “consumer,” lawfully prohibits data access fees and reasonably balances data security and market innovation.
“They are essentially asking the court to pre-empt the CFPB’s rulemaking and hamstring the agency before it even hears from stakeholders,” FTA President and CEO Penny Lee said in a press release. “That’s not how our regulatory process works, and it’s not how consumers’ rights should be decided. Efforts to delay implementation and seek to charge consumers for their own data are unlawful, anti-competitive, and contrary to the public interest.”
The rule, which is widely viewed as a major step in establishing an open banking system in the United States, would require financial institutions to make consumers’ financial data accessible to customers and authorized third parties. The original compliance dates finalized by the bureau called for its provisions to be phased in from April 2026 through 2030, with differing implementation timelines dependent on an institution’s size.
The FTA argued that concerns expressed about the associated implementation costs for the nation’s largest banks, those with more than $250 billion in assets or $10 billion in receipts, fall flat. While these institutions were given the earliest compliance deadlines for the existing rule, the FTA asserted they are also the best positioned to absorb the associated costs compared to other covered institutions.
The banking trades have argued that the rule’s provisions create unaddressed security risks and impose arbitrary compliance timelines that could force costly changes while the CFPB reconsiders the regulation. The group maintains that an injunction is needed to avoid irreparable harm and provide certainty until new rules are finalized.
The CFPB has declined to take a position on the motion but told the court it is expediting a new rulemaking and will provide progress updates every 45 days, beginning Sept. 12.
For more Dodd Frank Update coverage of matters related to data privacy and the CFPB’s efforts to implement Sec. 1033 of the Dodd-Frank Act, visit the “Data Privacy Vault” – a resource library holding all of our coverage of every volley in the ping-pong match between the finance industry and regulators over how to be protect consumers’ sensitive data in the rapidly evolving virtual financial marketplace.