CFPB Director Warns Firms Against Manipulating Standards to Deter Open Banking
CFPB Director Rohit Chopra warned that anti-competitive behavior by industry participants will not be allowed to impede the CFPB's required shift to open banking.
In his remarks at the Financial Data Exchange Global Summit, Mr. Chopra discussed the proposed mandatory shift to open banking, referring to the CFPB's proposed rule on consumer-authorized access to financial data. (See previous coverage.) Mr. Chopra emphasized the importance of standard-setting as the CFPB finalizes the rule. He said that the CFPB is discussing how to set relevant industry standards, including data standards and sharing protocols, to ensure an "open and interoperable system."
Mr. Chopra warned of the dangers that can exist if these standards are developed by industry participants. He said the CFPB must be vigilant that standard-setting "does not skew to benefit dominant firms and their prevailing market power." He expressed concern that incumbents may work together to restrict consumer access to data through bank-owned ventures. Mr. Chopra warned that such practices not only hinder the advance to open banking but may violate civil and criminal laws.
Mr. Chopra also discussed how the CFPB expects to recognize standard-setting organizations. In advance of the CFPB finalizing its open banking rule, he reported that the CFPB plans to codify what attributes standard-setting organizations must demonstrate to be recognized under the rule and will then invite standard-setting organizations to begin the process of seeking formal recognition from the CFPB. According to Mr. Chopra, this step "will help [the CFPB] recognize standard setters as quickly as possible, which should help facilitate compliance." Mr. Chopra anticipates identifying the areas where standards are relevant to the requirements of the final rule. On the process for maintaining recognition, Mr. Chopra said he expects that CFPB recognition might be revocable or time-limited under certain circumstances. He said that he would like to recognize more than one standard and acknowledged that not every standard setter might be positioned to create standards for every part of the open banking system. He noted that new standard-setting organizations may need to develop as the system evolves.
He highlighted that the CFPB strongly prefers market-driven standards but said that the CFPB "will not be able to rely on such standards if they are structured to allow incumbents to maintain their market power to the detriment of open banking in the United States." He also stated that if the CFPB "is unable to identify standard-setting organizations, [it will provide] more detailed guidance."
Commentary
Mr. Chopra's remarks provide important guideposts for standard-setting organizations.
He is urging these organizations to (i) increase their focus on data standards and sharing protocols issues now, (ii) to be ready to engage with the CFPB and (iii) to prepare for applying for recognition from the CFPB even before the rule is finalized this fall. He communicated these steps to help ensure that market-driven standards support the regulatory framework for the open banking sector going forward, rather than on pure micromanagement or prescriptive technical details from the CFPB.
Although focusing on the role of standard setters and standard-setting, Director Chopra’s remarks provide another instance in which the CFPB has committed to a timeframe in which to release its open banking final rule. According to Director Chopra, the CFPB plans to issue the final rule this fall (he had suggested the same in remarks delivered to coincide with the issuance of the proposed rule). Currently, the CFPB is "in the process of finalizing these rules, by reviewing feedback to [its] proposal, coordinating with [its] sister components within the Federal Reserve System, and thinking through enforcement with other financial regulators."