Yahoo Finance Who's the boss? You are, under CFPB's new rule
Consumers will have more control over their financial data and privacy because of a new rule the Consumer Financial Protection Bureau issued on Tuesday.
The Personal Financial Data Rights require financial institutions, credit card issuers, and other financial providers to unlock an individual’s personal financial data and transfer it to another provider at the consumer’s request for free, the CFPB said. Implementation will be in phases with larger institutions required to comply by April 1, 2026, while the smallest covered institutions will have until April 1, 2030. Certain small banks and credit unions are not subject to the rule.
With this new rule, consumers will be able to more easily change financial providers, which will create more competition among providers to win and keep clients' business, the CFPB said. Ultimately, this will help lower prices on loans and improve customer service across payment, credit, and banking markets, it said.
“Rather than constantly create a better product or service, we see 'innovation' on how firms can make it harder to cancel or switch,” said Rohit Chopra, CFPB director, in prepared remarks at the Federal Reserve Bank of Philadelphia. “Rather than advertise the true price up front, we see mysterious junk fees pop up later in the process. Instead of making things simple to work across different brands, we find ourselves buying proprietary plugs, switches, and other accessories that only work with specific products. These types of issues cost consumers billions.”
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What is the Personal Financial Data Rights rule?
The rule allows consumers to access and share data associated with their bank accounts, credit cards, mobile wallets, payment apps, and other financial products, the CFPB said.
Only they, and not third parties, can decide how their data can be used, the agency said. By giving Americans more control over their information, the CFPB said, it expects less “screen scraping,” a practice that typically involves consumers providing their account passwords to third parties who use them to access data through online banking portals.
“With screen scraping, there are risks of overcollection of data, inaccurate data sharing, and the spread of login credentials,” Chopra said.
How does the rule benefit Americans?
Since the rule forces financial companies to allow easier and free transferring of data, Americans will be able to switch to another financial institution with fewer hurdles. This will ignite more competition between companies, which should lead to better rates on products and credit for consumers, the CFBP said.
Consumers with shorter credit histories, like young people, will especially benefit because lenders will be able to use data held by other institutions, such as information on income and expenses, to offer credit or better loan terms, it said.
Americans will also be able to securely share payments information, which can encourage them to “pay-by-bank,” or pay for goods and services by moving money directly from an account to a vendor without using a credit or debit card.
“This could also benefit merchants, who face high fees to accept payments through Visa, Mastercard, and other incumbent payment networks,” Chopra said. “Some merchants have plans to incentivize payments through these alternatives through cashback, discounts, and rewards.”
Companies won’t be able to use consumers' data for their own purpose, which will prevent what the CFPB calls “bait-and-switch data harvesting.” That’s when a company might offer a consumer a loan using consumer data that they also use for targeted advertising that the consumer didn’t want or agree to, for example.
When a person revokes access, a company’s data access ends immediately, and the data should be deleted, the CFPB said. Companies may only access a person’s data for up to a year unless a consumer reauthorizes access.
The rule ensures “consumers are in control of their own financial data,” said National Economic Advisor Lael Brainard in a statement. “The new rule will make it easier for consumers to switch banks and use financial services that better fit their needs, provide greater opportunity for innovative new businesses to compete, and lower costs for consumers.”
Medora Lee is a money, markets, and personal finance reporter at USA TODAY. You can reach her at mjlee@usatoday.com and subscribe to our free Daily Money newsletter for personal finance tips and business news every Monday through Friday morning.
This article originally appeared on USA TODAY: New CFPB rule aims to give Americans more privacy, choice and savings
