The Consumer Financial Protection Bureau has submitted a Section 1033 open banking proposal to the Office of Management and Budget for review, TD Cowen said, a step that typically requires several weeks and points to a likely public release in late August or early September.
Open banking enables consumers to instruct their banks to transfer financial information to third-party financial firms. While the CFPB under the Biden administration previously adopted an open banking rule, its implementation was halted by court action.
TD Cowen expects the forthcoming proposal to reflect a middle ground - allowing consumers to request certain data transfers without being charged while simultaneously offering banks protections from liability when fintech firms do not adequately secure that data. According to the firm, the approach is intended to address two central bank concerns: whether banks can levy fees for transferring consumer data and whether banks remain legally responsible for breaches that originate with nonbank service providers.
For fintech and cryptocurrency platforms, the shape of the rule will influence their competitive position in attracting customers to use their services for payments and account aggregation rather than relying on bank-provided platforms. Open banking is intended to streamline and speed those transitions, but TD Cowen notes this objective becomes more difficult if fintechs are required to pay for access to data or face expanded legal liability for breaches tied to their handling of consumer information.
TD Cowen also highlighted legal uncertainty surrounding the proposal. The firm projects the CFPB will take roughly nine months to process public comments and complete the rulemaking, a timeframe that creates space for judicial challenges ahead of the next presidential election. The firm warned that courts could again block the rule, which would leave the status of data sharing arrangements between banks, fintechs and other financial firms unresolved.
The proposal's review at the Office of Management and Budget marks a procedural step forward, but TD Cowen’s assessment underscores that statutory and judicial dynamics could continue to shape the ultimate outcome and its practical effects on banks, fintechs and crypto platforms.
Summary
The CFPB has sent a Section 1033 open banking proposal to the OMB for review. TD Cowen expects a public proposal in late August or early September that balances consumer fee-free data transfers with bank liability protections. The firm warns the rule could face legal challenges and estimates about nine months for finalization, leaving time for possible court action.
Key points
- CFPB submitted the Section 1033 proposal to the OMB this week; a public proposal is expected in late August or early September.
- TD Cowen expects a compromise rule allowing some consumer-initiated data transfers without fees while giving banks liability protection when nonbank firms fail to protect data.
- The proposal will have implications for banking, fintech and cryptocurrency platforms by affecting how easily consumers can move data and transact on nonbank platforms.
Risks and uncertainties
- Legal challenges - TD Cowen cautions the proposal could face court challenges that may block the rule, impacting banks and fintechs.
- Implementation timeline - The CFPB’s estimated nine-month comment and finalization period creates uncertainty for market participants and could overlap with pre-election litigation windows.
- Operational and commercial effects - If fintechs must pay for data access or take on additional liability, their ability to attract customers and compete with bank platforms may be diminished, affecting the fintech and crypto sectors.