The news: The Consumer Financial Protection Bureau (CFPB) will reportedly ask a US court in Kentucky to vacate the 1033 open banking rule it published last year, per Bloomberg Law.
Slash and burn: The CFPB has long been in the Trump administration’s crosshairs, and acting Director Russell Vought has moved swiftly to undo many Biden-era policies.
But the open banking rule seemed to be on safer ground. It had received endorsements from congressional Republicans: Then-Chairman of the House Financial Services Committee Rep. Patrick McHenry called it “a promising step forward” that was “similar to Republicans’ Data Privacy Act.”
Back to the drawing board: The CFPB indicated earlier this week that it wanted to revise the rule. In February it joined plaintiffs in asking the Kentucky court for a stay to consider next steps.
Vacating the rule, rather than following the typical notice-and-comment process, would immediately scramble all the plans that banks and fintechs alike had made to comply with the new rules—erasing what clarity they had for how to access and move consumers’ private data in and out of legacy banks.
Our take: Banks’ biggest win from vacating 1033 won’t be the chance to offer input on new rules—it will be the delay in any rules at all.
It can easily take well over a year from when an agency initiates the rulemaking process to a rule publishing in the Federal Register—and that’s when an agency is fully staffed and operational.
The CFPB is neither of those things. Vought has halted all activity not directly mandated by law, and a potential 80% reduction in force would hamstring any effort to get the open banking ball rolling anytime soon.