The US Consumer Financial Protection Bureau (CFPB) is taking steps to dismantle one of the cornerstone policies of the Biden-era financial reform agenda: the 1033 Open Banking rule.
CFPB moves to scrap US Open Banking rule
In a move that has drawn swift backlash from fintech advocates and Open Finance proponents, the Bureau is preparing to petition a federal judge to vacate the rule — a highly unusual legal manoeuvre that sidesteps the traditional rulemaking process under the Administrative Procedure Act (APA).
A Foundational Principle
Finalised only in October 2023, the rule granted Americans the right to instruct their financial institutions to share data with third-party providers — a foundational principle of Open Banking.
By enabling consumers to connect bank and credit card accounts with digital financial services, the regulation aimed to enhance competition, foster innovation, and rebalance power between incumbent banks and fintechs.
But the rule has faced strong resistance from major US banks, who cite concerns about liability for data breaches and the inability to charge fees for data access.
Now, under the leadership of acting CFPB Director Russ Vought, the agency is executing a sharp pivot.
Reports suggest the Bureau will attempt to use the courts — rather than the APA’s notice-and-comment procedure — to vacate the rule, just as it did recently with a cap on credit card late fees.
This approach, if successful, would clear the way for a new version of the rule that allows banks to charge for data access and limits their liability for third-party misuse.
Critics Calling Foul
The Financial Technology Association (FTA), a trade group representing fintech firms, condemned the CFPB’s decision, labelling it a “handout to Wall Street banks.”
FTA CEO Penny Lee warned that the move could stifle innovation and restrict consumer choice: “Americans must have the right to control their financial lives, not the nation’s biggest banks.”
The CFPB’s decision also appears to reflect broader regulatory retrenchment.
The Bureau has recently dropped several high-profile lawsuits — including actions against JP Morgan Chase, Bank of America and Wells Fargo related to fraud on the Zelle peer-to-peer network — and reversed its stance on Buy Now, Pay Later regulation.
A proposed rule to bring Big Tech firms like Apple and Google under digital payment oversight has been shelved by Congress.
Law Suit Filed
Meanwhile, the rule’s legal fate remains uncertain.
The Bank Policy Institute filed a lawsuit against the Open Banking rule on the day it was finalised, alleging that it exceeded the CFPB’s statutory authority and violated the APA.
If the court vacates the rule, it could entrench the status quo — strengthening the position of major banks, who may become more aggressive in limiting third-party data access.
Yet the CFPB may struggle to replace the rule anytime soon.
The agency reportedly plans to lay off as much as 90% of its staff — a drastic cut that raises serious questions about its ability to carry out complex rulemaking.
With stakeholders now preparing for legal battles, the future of Open Banking in the US hangs in the balance.
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