Federal regulators want to make it less of a pain to change your bank — but first, it looks like they’ll have to win a battle in court.
On Tuesday, the Consumer Financial Protection Bureau (CFPB) unveiled the final version of its highly anticipated open banking rule, which aims to create more competition between financial services companies by making it simpler for customers to transfer their personal data between them.
The measure is in part designed to relieve some of the common headaches familiar to anyone who has ever tried to move their checking account or upgrade to a better credit card — a process that can require manually resetting a number of automatic bill payments and may mean losing years’ worth of transactions history.
Those kinds of inconveniences are known to keep many consumers from shopping around for better deals. One survey found that the average American has had the same checking account for more than 17 years; about 10% of consumers say they haven’t switched mostly because of the hassle involved.
During a speech in Philadelphia, CFPB Director Rohit Chopra said the agency’s new regulation, officially known as rule 1033, would help remove some of those “roadblocks.” Under the measure, banks, credit card issuers, and payment apps will be required to provide customers electronic access to their account data, including by giving third parties of their choice permission to collect it — making it seamless for fintech firms and other institutions to plug in and transfer over key information.
“That means you can more easily walk away from mediocre products or services,” Chopra said. He compared the changes to rules that allowed cell phone customers to take their numbers with them when they changed service providers, which made jumping to a new plan far easier.
The rule has drawn fierce criticism from banks, however, who argue that it will be unfairly expensive for them to implement and expose customers to serious fraud risks. On Wednesday, industry groups filed a federal lawsuit in Kentucky aiming to halt the regulation, accusing the CFPB of “overstepping its statutory mandate.”
Read more: How to switch banks: A step-by-step guide.
For many consumers, the new open banking rule might not seem to change much at first glance. According to the CFPB, at least 100 million Americans already let third parties access their various financial accounts, using apps like Plaid to connect their banks and brokerages to personal budgeting software and services like TurboTax. That’s led some to downplay the significance of the agency’s new regulation.
