Technology is playing an ever-expanding role in the world of real estate finance. This expansion is only accelerating with the proliferation of emerging technology solutions in the mortgage space and other segments of the financial services sphere.
Artificial intelligence (AI) and open banking are no longer novel concepts, and the more they become woven into the fabric of the financial ecosystem, the more imperative it is for institutions to adapt their processes and compliance programs accordingly.
Dodd Frank Update has been following these developments and regulatory proposals aiming to address what still feels to many like the Wild West. We spoke with industry insiders with expertise regarding both legal and business opportunities and risks inherent in this changing landscape.
One of the most universal necessities the financial industry is asking for with respect to data privacy standards and open finance is certainty. This is especially true with respect to equitably allocating liability among financial institutions and the third-party providers tasked with securing the digital platforms needed to meet customer demand for the ability to perform financial transactions remotely and safely.
This need for certainty has led to a call for industry-led standards-setting bodies. The Consumer Financial Protection Bureau’s (CFPB) recent final rule outlining qualifications for any organization interested in being recognized as an industry standard-setting organization (SSO), combined with its Personal Financial Data Rights Rule, implementing Sec. 1033 of the Dodd-Frank Act, are major steps forward toward a world where open banking is as common as an ATM.
Husch Blackwell Partner Christopher Friedman, who specializes in helping financial services institutions navigate complex regulatory and compliance issues, told Dodd Frank Update the CFPB’s proposal contains elements that are distinct from approaches employed in other parts of the world that have integrated open banking systems.
“The CFPB’s approach to open banking SSO selection is notably more hands-on compared to Europe’s,” he said. “The CFPB’s process resembles a rulemaking procedure, involving public comment and input, with the final decision resting with the bureau. Europe’s process is more decentralized and market-driven.”
Under the CFPB’s framework, the bureau will be able to exert indirect control over SSOs through its authority to revoke SSO status within the five-year term, Friedman noted, adding that the rule’s standards — openness, balance, due process and appeals, consensus, and transparency — are broad, giving the CFPB significant influence over the standard-setting process.
Dodd Frank Update also spoke with FDX Managing Director Don Cardinal and Conforma Compliance Group Managing Partner Al Pitzner. Download your free copy of the Real Estate Compliance Outlook in-depth report to read the full story.