Consumer Advocates Celebrate New Rule to Simplify Bank Switching
Last month, consumer rights champions were delighted as the Consumer Financial Protection Bureau (CFPB) approved a new regulation designed to simplify the process of switching banks for consumers dissatisfied with their current financial services provider. The rule prevents banks from holding onto a customer’s personal information. However, on Thursday, a group of over a dozen organizations alerted the CFPB that major Wall Street banks are attempting to hinder the rule’s benefits for Americans.
Wall Street Banks Oppose Consumer-Friendly Regulation
A coalition led by the Demand Progress Education Fund sent a letter to CFPB director Rohit Chopra. They highlighted that notable banks such as JP Morgan Chase, Bank of America, Citi, TD Bank, and Wells Fargo are members of the Financial Data Exchange (FDX) board. FDX is seeking to gain standard-setting body (SSB) status from the CFPB, which would grant it regulatory authority over the so-called “open banking rule.”
The advocacy groups argue that allowing banks to set standards represents a significant conflict of interest. They also noted that these banks are part of the Bank Policy Institute, which recently filed a lawsuit against the open banking rule, dismissing it as frivolous and alleging it compromises customer data security.
During a recent panel discussion, Bank of America CEO Brian Moynihan criticized the open banking rule, claiming it would lead to “chaos” by obligating financial institutions to freely share consumer financial data with other providers, potentially increasing fraud risks.
“The American people are fed up with Wall Street controlling every aspect of their lives, and the open banking rule is an opportunity to give all of us some financial freedom.”
These advocacy groups expressed concerns on Thursday that major banks are attempting to “maintain their dominance by making it overly difficult for consumers to switch financial institutions.”
The advocates also highlighted the problematic dual roles of these organizations on both FDX and BPI boards, raising issues about conflicts of interest, interconnected directorships, and potential violations of antitrust laws.
Advocates Urge Rejection of FDX’s Application for SSB Status
When the open banking rule was officially introduced last month, Chopra promised it would “empower people to obtain better rates and services on bank accounts, credit cards, and more,” and assist those “trapped in financial products with unfavorable rates and services.”
A coalition of consumer advocacy organizations, including Public Citizen, the American Economic Liberties Project, and Americans for Financial Reform, urged Chopra to deny FDX’s application for standard-setting authority as long as the banks remain on its board.
Emily Peterson-Cassin, corporate power director at Demand Progress Education Fund, stated, “It is a blatant conflict of interest for the same banks that are suing to obstruct the open banking rule, as it threatens their market control, to also oversee its implementation. The American people are tired of Wall Street dominating every facet of their lives, and the open banking rule offers a chance for real financial autonomy. The CFPB must thwart this attempt by the largest banks to keep us under their control.”
The groups called the open banking rule “a monumental advancement for the cause of providing consumers true autonomy in their financial endeavors.”
They concluded, “For these reasons, it is crucial that SSB status not be granted to an organization whose board members, directly or via a trade association, are litigating to halt the CFPB’s rules, especially when such members might face ethical conflicts due to their dual roles. By denying SSB status to FDX or any other entity with similar conflicts of interest related to Section 1033, the CFPB will help prevent major banks from undermining the open banking regulations.”
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