On February 25, a federal judge in the United District Court for the Eastern District of Kentucky approved a joint motion between the CFPB and banking trade groups to pause litigation over the agency’s 1033 open banking rule. The lawsuit challenges the CFPB’s rule requiring banks to allow consumers to share deposit and credit card account information with third-party fintech providers.
The banking trade groups argue that the CFPB’s regulation surpasses its authority under Section 1033 of the Dodd-Frank Act, contending that the rule places an excessive regulatory burden on banks while disproportionately benefiting fintech companies. The lawsuit was filed in October 2024, the same day the CFPB finalized the rule.
The rule (previously discussed here) establishes a framework requiring financial institutions to allow consumers to securely share account data with external fintech services. Under the rule, data providers must make the following covered data available: (i) transaction details; (ii) account balances; (iii) information for initiating payments to or from a Regulation E account; (iv) available terms and conditions; (v) upcoming bill details; and (vi) basic account verification information, such as name, address, email, phone number, and, if applicable, account identifier.
The rule requires data providers to authenticate consumers before sharing requested information and honor data requests from third parties as authorized by the consumer. They must also offer a way for consumers to revoke third-party data access and keep records of any denied data requests. Data providers need written policies to ensure compliance and must retain records for three years.
Putting It Into Practice: The agreed upon litigation pause delays the lawsuit challenging the rule (previously discussed here), but does not alter the compliance deadlines, the first of which remains set to begin on April 1, 2026. The pause allows time for the CFPB, under Acting Director Russel Vought, to assess the open banking rule and determine whether it aligns with the new administration’s policy objectives. The rule had bipartisan support so it will be interesting to see what happens. We will keep monitoring this space for developments.