Latest news with #Dodd-FrankWallStreetReformandConsumerProtectionAct
Yahoo
4 days ago
- Business
- Yahoo
Open banking to survive Trump, fintechs say
This story was originally published on Payments Dive. To receive daily news and insights, subscribe to our free daily Payments Dive newsletter. An open banking trend allowing banks and payments players to more easily share consumer data is likely to advance, regardless of vacillating U.S. regulatory policy, industry lawyers and executives say. The Consumer Financial Protection Bureau had decided to let open banking regulations take effect next year, but those 2026 compliance dates were thrown into question last year when bank groups sued the government to block the CFPB's open banking rule. Then, President Donald Trump's return to the White House ushered in an era of dramatic deregulation in the executive branch. Earlier this month, the CFPB asked a federal judge to rule for the bank plaintiffs against what the agency's new leaders consider an 'unlawful' rule. Despite the multi-pronged effort to kill the bureau rule, there are reasons to believe that the spirit of open banking – if not the actual letter of a law, prescribed by regulators – is likely to carry on, regulatory lawyers and fintech consultants say. 'There are a lot of unknowns, and they will unfold before us, but the bottom line is that this has long been planned as kind of the next step in banking technology,' Stewart Watterson, a strategic adviser with consulting firm Datos Insights, said during a Datos April webinar titled 'Regulatory Chaos and the Future of Open Banking.' 'It's going to move forward with or without mandates, because those things are obviously in question,' said Watterson, a former executive with PNC Bank and JPMorgan Chase. 'It will be messy and it'll be fraught with risk and different types of risks.' The open banking rule gives consumers a right to share their detailed financial data with third parties under the notion that a consumer's ability to easily swap accounts among banks, credit unions or fintechs will spur greater competition for financial services. Former CFPB Director Rohit Chopra described the rule as a way to lower consumers' costs. In their lawsuit, the bank groups say the rule exceeds the bureau's statutory authority, and that it does not allow them to recoup their costs or to properly specify liability for fraud or other misconduct amid the data sharing. The rule stems from Section 1033 of the 2010 Dodd-Frank Wall Street Reform and Consumer Protection Act, and was enacted in October after five years of deliberations. The initial rule was issued during the Biden administration under Chopra, but the Trump administration is dramatically reducing the CFPB's mission and staffing under Acting Director Russell Vought. The bureau has not moved to rescind the rule, so far, as it manages the litigation targeting the rule. Large banks, Watterson added, 'have been investing and working on this for anywhere between five and 10 years' and understand the commercial potential of consumer data sharing in the new marketplace. 'The CFPB deciding to withdraw the rule – the personal financial data rights rule – is not going to stop open banking in the United States,' said industry consultant Peter Tapling. 'The largest financial institutions have been going down that path for years, and that will continue.' The open banking rule codifies a consumer right of financial data sharing into law, said Penny Lee, president and chief executive of the Financial Technology Association, a fintech lobbying group. Without the CFPB's regulatory framework, fintechs fear that 'banks would engage in some anti-competitive behavior, meaning throttling back the information' they provide or 'slowing down the connectivity, or only allowing consumers to be able to permission through one of their apps, or one of their controlled capabilities,' Lee said in a recent interview. Banks' compliance deadlines under the rule are layered from mid-2026 through 2030, with the largest banks required to begin operating within the open banking parameters next year. Financial institutions with less than $850 million in assets are exempt from the rule. A senior JPMorgan Chase executive told Payments Dive last month that the world's largest bank will continue to invest in open banking, despite the uncertainty around the rule. 'Whether it is in terms of the digital experience on JPMorgan or, for that matter, in other parts of the JPMC franchise overall, open banking as a concept is something that we have an investment in, and will continue to invest in,' Chief Technology Officer Sri Shivananda said. Nonetheless, the lack of a common standard for open banking is likely to hinder smaller, community financial institutions, and increase the competitive gulf between large and small players, said Tapling, who is based in Chicago. A federal judge in Kentucky overseeing the bank groups' lawsuit against the CFPB ruled May 14 that the FTA could intervene to defend the lawsuit. That decision adds a motivated, well-resourced party to the litigation at a time when the CFPB is dismantling much of its regulatory infrastructure and back-peddling on cases it brought previously. Despite the legal and regulatory battles, open banking and 'customer-authorized data sharing' has been growing steadily for the past decade, said Adam Maarec, an attorney with McGlinchey Stafford LLP, who advises banks and fintechs, and was a legal executive at several large banks. 'With open banking reaching critical mass, banks and fintechs need to figure out their business and risk management strategies now, no matter what happens with the final rules as they exist today,' Maarec said in an April interview. The bureau has virtually no discretion to avoid an open banking regulatory framework, given the clear language Congress wrote into the law, attorneys said in recent interviews. A full revocation of the rule, without an alternative, 'seems incredibly unlikely' because of Dodd-Frank, said Lauren Quigley, a senior counsel with Dykema in Chicago, who works with banks, fintechs and other financial institutions. 'There arguably has to be something and secondly, prior to the current morass that is around open banking, there was broad bipartisan support, both during the first Trump administration, throughout the Biden administration and even now,' Quigley said in an interview this month. Said Maarec: 'I doubt the 1033 rules will go away entirely.' The timing of work on any new rule, however, could be prolonged, given the five years the bureau took to formulate the open banking measure and the 90% CFPB staff reduction Vought has pursued. Despite an interest in open banking, 'the status quo is favorable to banks in a lot of ways,' Maarec said. 'Different banks view this in different ways, depending on their position in the market across various products,' he said. 'Some banks have a lot to lose and some have a lot to gain. It depends on their product mix and tech strategy.' Quigley said banks fall into three general categories in terms of their approach to open banking: those that have identified 'beneficial use cases' and are forging ahead, regardless of the rule's status. those that are largely ambivalent and don't see a 'use case' for it, she said, and are pursuing technology investments and partnerships only because of the requirement. smaller financial institutions that have a longer compliance deadline, years away, that 'are just biding their time at this point,' she said. 'A larger bank just simply has more resources to throw at a complicated implementation structure, whereas community based financial institutions need to rely more on vendors,' said Brandy Bruyere, a partner with the law firm Honigman, who advises financial institutions. One of the rule's main effects is an effort to end the practice known as 'screen scraping,' in which a consumer shares account information with a new financial services provider to log in, letting it gather data on behalf of the customer. That practice is rife with inefficiencies, errors and fraud, according to industry experts, with banks and others making gradual progress in recent years to build more secure data-sharing interfaces, known as application programming interfaces, or APIs. Many banks have created APIs 'that share data within their own comfort levels,' Maarec said. 'I think the banking industry would prefer the status quo where they can still sort of exercise their own large degree of control.' The campaign to end screen scraping would be hindered or stalled if the CFPB walks away from an open banking rule, panelists said May 19 at a media briefing convened by the Financial Data & Technology Association. Regardless of the CFPB or litigation, consumer trends, technology and market competition will likely determine open banking's long-term fate in the U.S. 'I don't think we've ever seen an advancement in financial technology, products or services that has ultimately been rolled back,' Quigley said. The industry is 'knocking on the door, we're there, and I don't know that we come back from the precipice, regardless of if the rule goes away.' Lynne Marek contributed to this article. Recommended Reading FTA CEO says open banking central to fintechs' work
Yahoo
03-06-2025
- Business
- Yahoo
CFPB seeks to end open banking case
This story was originally published on Payments Dive. To receive daily news and insights, subscribe to our free daily Payments Dive newsletter. The Consumer Financial Protection Bureau followed through Friday on a plan to let its open banking rule die. The federal agency filed a motion for summary judgment in U.S. District Court for Eastern Kentucky in a case brought by bank groups last year challenging the rule. In its Friday filing, the CFPB conceded the rule was unlawful. The rule 'unlawfully seeks to regulate open banking by mandating the sharing of data with 'authorized third parties,'' the CFPB's 27-page filing asserted. The rule also unlawfully prohibits financial institutions providing the data from instituting fees for sharing the data and unlawfully sets deadlines for compliance without a consensus on how standards will be developed, the filing said. The CFPB's position is an about-face by the Trump administration on the open banking rule crafted by the agency's former director, Rohit Chopra, during the Biden administration. The agency had put the rule in place last October to give consumers more control over sharing their financial data, such as bank account information, with other financial service providers. The move toward open banking was an attempt to let consumers opt to send their financial data to other financial institutions or any one of a number of young fintechs offering new digital financial services. Open banking has already gained traction in Europe and advocates have pushed for it in the U.S. for years, leaning on Section 1033 of the Dodd-Frank Wall Street Reform and Consumer Protection Act. The Bank Policy Institute, which represents most of the big U.S. banks, and the Kentucky Bankers Association brought the lawsuit against the CFPB last October, along with Kentucky-based Forcht Bank, immediately after the rule was finalized the same month. A week before the agency's latest filing last month, the bureau's chief legal officer, Mark Paoletta, signaled the CFPB's plans in a court filing. 'After reviewing the Rule and considering the issues that this case presents, Bureau leadership has determined that the Rule is unlawful and should be set aside,' the agency wrote in a May 23 filing. The federal agency's filing echoed arguments made by plaintiffs in a longer, 50-page filing Friday also seeking summary judgment and outlining arguments against the rule. That court filing argued that the agency exceeded its authority in establishing the rule; that the framework for the mandated data-sharing was 'arbitrary and capricious'; and that the rule was unlawful for a number of reasons, including that banks wouldn't be allowed to charge fees for application programming interfaces they would provide to facilitate the data-sharing. The Financial Technology Association, which supports the rule, was last month granted leeway by U.S. District Judge Danny C. Reeves to intervene in the case and defend the CFPB open banking rule. The trade group, which represents companies that would benefit from the third-party data-sharing, said in a statement Friday that it will continue to fight to protect the rule. 'Americans must have a right to securely control and share their financial data to access the apps and services of their choice,' FTA CEO Penny Lee said in the statement. 'FTA will continue to defend this right and work to uphold Americans' financial freedoms. The FTA's members include digital payments pioneer PayPal, neobank Chime and financial technology provider Block. The association contended in its statement that big banks are trying to limit competition and short-change consumers' control of their data. It also noted that the rule was initially put forward during the first Trump administration with 'broad bipartisan support.' The Financial Data and Technology Association's North America arm also protested the bureau's court arguments against the rule. That association, which represents the fintech Plaid, processing giant Fiserv and other fintechs, said in a Friday statement that it 'strongly' rejects the CFPB claim that Dodd-Frank doesn't allow for the sharing of consumers' data with third-parties. Recommended Reading CFPB to yank 'unlawful' open banking rule Error in retrieving data Sign in to access your portfolio Error in retrieving data Error in retrieving data Error in retrieving data Error in retrieving data
Miami Herald
28-05-2025
- Business
- Miami Herald
Target profits boosted by $593M payout in antitrust credit card settlements
Target's latest quarterly profits would have been much worse if it had not received $593 million in settlements from an antitrust lawsuit against Visa and MasterCard that was filed a dozen years ago. "When you look at the numbers, the profits don't look too bad," said Neil Saunders, managing director of GlobalData Retail. "If you take [the settlement money] out, operating income is down by about a third, and net income is down by over half. That shows you the true picture of the real slide in profitability at Target, and that's a real issue for them." The Minneapolis-based retailer disclosed the settlements, which were reached in March and April, in its first quarter earnings report last week. Target and several large retailers, including Kohl's and Macy's, sued Visa and MasterCard in 2013, claiming anticompetitive practices drove up the cost of fees that merchants pay when customers use credit or debit cards. Most of the more than 30 retailers have now settled the lawsuits, which were an effort by large retailers to break the control Visa and MasterCard exerted over card-based payments. The plaintiffs argued in the lawsuit that true competition among banks would result in lower swipe fees and fairer merchant agreements. Bolstered by the $593 million settlement, Target's first quarter earnings grew 10% to $1 billion, or $2.27 a share. However, comparable sales fell 4% and, not counting the one-time boost, adjusted earnings were $1.30 a share when Wall Street analysts were expecting $1.65. Target's Chief Financial Officer Jim Lee acknowledged the settlement's impact on the company's first quarter performance, noting the operating margin rate of 6.2% included about 250 basis points of benefit from the settlement. With the settlement money in hand, analysts say Target needs to shift focus back to the sales floor, where lingering economic uncertainty, rising costs and weakened discretionary spending continue to challenge profitability. Target declined to comment on the specifics of the settlements it reached in March and April, respectively, with Visa and MasterCard. The federal judge sealed details of Target's settlement, but court documents from March 27 and April 17 say the retailer "fully settled all of its claims" against MasterCard and Visa. The lawsuits were filed after big retailers rejected a $7.25 billion class-action settlement in 2013, which was the biggest of its kind at the time. Target and other major companies then filed their own separate lawsuits. The rejected settlement said merchants in 2012 had paid $30 billion in interchange fees, also known as swipe or merchant fees. The original class-action lawsuit was brought in 2003, challenging the "honor all cards" rule, which forced merchants to accept debit cards, which carried high signature-based fees, if they accepted credit cards. The Dodd-Frank Wall Street Reform and Consumer Protection Act was then amended in 2010 to rein in debit card interchange fees charged by large banks. But the amendment applied only to debit cards, not credit cards, and didn't prohibit Visa or MasterCard from continuing non-price-related rules that restrict competition. However, the 2013 Target lawsuit argues interchange fees actually increased after this settlement. American Signature, Chico's, and Premium Brands Services and Lane Bryant all reached settlements with Visa following Target's settlement. Other companies including Macy's, Gap and Marathon Petroleum are continuing to push forward with a trial set for October. Visa says it has not done anything wrong, arguing the retailers contract with companies that collect the fees and then pay credit card companies. Therefore the retailers don't directly pay the fees to Visa, it says. Copyright (C) 2025, Tribune Content Agency, LLC. Portions copyrighted by the respective providers.
Yahoo
28-05-2025
- Business
- Yahoo
CFPB to yank ‘unlawful' open banking rule
This story was originally published on Payments Dive. To receive daily news and insights, subscribe to our free daily Payments Dive newsletter. The Consumer Financial Protection Bureau has determined that a 2024 rule authorizing open banking is 'unlawful' and should be scrapped, 15 years after Congress enacted legislation to make it easier for consumers to switch financial institutions, the agency told a federal court. The bureau plans to vacate the rule as part of a lawsuit in Kentucky, the CFPB's chief legal officer, Mark Paoletta, wrote in a federal court filing Friday. 'After reviewing the Rule and considering the issues that this case presents, Bureau leadership has determined that the Rule is unlawful and should be set aside,' the agency wrote in a status report filing. The Bank Policy Institute, which represents most of the large U.S. banks, said Friday in a press release that the bureau had acknowledged the rule's 'clear legal deficiencies.' But Financial Technology Association CEO Penny Lee in a statement Friday called the CFPB decision 'a handout to Wall Street banks, who are trying to limit competition and debank Americans from digital financial services.' The CFPB passed its final rule in October, drawing an immediate lawsuit from the Bank Policy Institute, the Kentucky Bankers Association and Kentucky-based Forcht Bank. The banking groups argued that the rule, under Section 1033 of the Dodd-Frank Wall Street Reform and Consumer Protection Act, imposed heavy compliance costs and did not address liability issues around fraud and misuse of consumers' financial data. The plaintiffs also said the bureau had exceeded its authority under the act in formulating the rule. In late March, U.S. District Court Judge Danny Reeves had stayed the lawsuit for 60 days to allow the bureau – under the leadership of acting director Russell Vought – to review its position on the matter. The agency's move to vacate the rule means 'years of wasted work from banks and fintechs that could have been saved by amending rather than abandoning the rule,' Todd Baker, a senior fellow at the Richman Center for Business, Law & Public Policy at Columbia University, wrote Saturday on LinkedIn. FTA members and other fintechs had hoped that the bureau would choose to revise the rule, addressing areas of contention, rather than vacate it entirely. On May 14, Reeves ruled that the FTA can intervene to defend the lawsuit, finding that its members' interests were not adequately protected by either party in the litigation. The CFPB's move to vacate the rule could make the intervention moot, however. The agency has sought to reduce about 90% of its pre-Trump staff of around 2,000 employees and Vought has requested that Congress slash the bureau's budget as part of a budget bill House Republicans passed last week. The staff cuts remain mired in federal litigation. The bureau said it intends to file for summary judgment in the case by Friday, the same date as the plaintiffs' motion for summary judgment is due. An FTA spokeswoman said Monday the association will then respond to the motions and that the rule remains in effect until Reeves issues a decision. Last week, the Financial Data & Technology Association, which represents about three dozen fintechs, wrote to Vought urging that the CFPB not dismantle the rule. 'Vacating the existing rule and starting from scratch risks prolonging regulatory uncertainty that could stall market development, stifling innovation in critical digital financial technologies, and emboldening incumbents to entrench their positions and legacy technologies rather than compete,' FDATA North America Executive Director Steve Boms wrote. FDATA and some of its members also convened a conference call on May 19 with reporters to discuss the various problems they anticipate if the agency vacates the rule. One primary issue several speakers cited is the CFPB's ability to craft a new rule – as mandated in the Dodd-Frank law – with a minimal staff under Vought's management. The current open banking rule took the bureau five years to enact, beginning in the first Trump administration. Bloomberg Law reported May 8 that the bureau would seek to vacate the rule, citing multiple sources familiar with the strategy. Recommended Reading CFPB issues final rule on open banking Error in retrieving data Sign in to access your portfolio Error in retrieving data Error in retrieving data Error in retrieving data Error in retrieving data
Yahoo
17-05-2025
- Business
- Yahoo
FTA to defend open banking in court
This story was originally published on Payments Dive. To receive daily news and insights, subscribe to our free daily Payments Dive newsletter. The Financial Technology Association can intervene in a lawsuit bank trade groups brought seeking to quash a Consumer Financial Protection Bureau rule outlining a new U.S. open banking system, a federal judge ruled on Wednesday. The association argued that the bureau was unlikely to defend its members' interests in a case brought by banking groups over implementation of the open banking rule. 'While it is still uncertain whether the CFPB will defend the Rule in issue, it seems that, at the minimum, the FTA's interests are likely not protected by the current parties,' U.S. District Judge Danny Reeves in Lexington, Kentucky, wrote in the ruling. Neither the CFPB nor the plaintiffs – the Bank Policy Institute, the Kentucky Bankers Association and Kentucky-based Forcht Bank – opposed the FTA's motion to intervene in their briefs filed Monday. As an intervenor, the association will be able to defend the open banking rule at a time when the CFPB has been reordering its enforcement priorities, settling lawsuits against it and abandoning litigation the bureau had brought under the Biden administration. The court ruling 'gives the fintech industry a seat at the table to defend Americans' financial data rights, ensuring that the big banks cannot dictate the future of open banking,' Penny Lee, the FTA's president and CEO, said Thursday in an emailed statement. Due to the CFPB's dramatic changes under its acting director, Russell Vought, the open banking rule and its associated deadlines are in question. Under the Trump administration, the CFPB has vacated or de-prioritized enforcement across numerous rules and past guidance. On May 8, Bloomberg Law reported that the bureau will seek to vacate the Biden-era rule through the banks' litigation in Reeves' court, citing multiple unnamed sources familiar with the legal strategy. The CFPB would then rework the bill, allowing banks to charge fees and give them liability protections, Bloomberg reported. In October, the CFPB issued a final rule to implement section 1033 of the 2010 Dodd-Frank Wall Street Reform and Consumer Protection Act. The three bank groups sued immediately in the Eastern District of Kentucky to enjoin the rule, arguing that the bureau had exceeded its authority. Open banking is designed to let consumers more easily access and transfer their financial data to another bank or financial services company for free. Regulators and other proponents say the rule would spur competition and provide financial consumers with alternatives that might offer better services and rates. Fintechs and other financial startups see a robust market opportunity arising from open banking. Banks argue that the law imposes costs that they're not allowed to recoup and does not suitably specify data protections of a third party when a bank transfers customer data. The banks' compliance deadlines under the CFPB rule are layered from 2026 through April 2030, with the largest banks required to begin operating within the open banking parameters next year, absent a court injunction halting the rule, or the CFPB seeking to vacate or rework it. Recommended Reading How open banking will shape the future of payments Error in retrieving data Sign in to access your portfolio Error in retrieving data Error in retrieving data Error in retrieving data Error in retrieving data
