The US consumer finance watchdog has unveiled a new strategy aimed at replacing the Biden-era Open Banking regulations.

Following this announcement, a federal judge temporarily halted a lawsuit initiated against the US Consumer Financial Protection Bureau (CFPB) that sought to invalidate the Open Banking rules. The CFPB was granted permission by the court to replace the contested rules established under former President Joe Biden with updated guidelines.

Details of the Open Banking Rules Rewrite

According to reports from Reuters, the CFPB’s decision to revise these regulations marked a turnaround. Previously, the agency had suggested that the courts should rescind the rules. The bureau now plans to provide customers with enhanced control over their financial data and promote faster development in this area.

Under President Joe Biden’s administration, the CFPB introduced regulations designed to oversee data sharing between fintech companies and traditional banks. These measures also aimed to allow consumers to easily transfer personal data between providers without cost. Proposed under the 2010 Dodd-Frank Wall Street reform legislation, these rules were intended to cut costs and increase service offerings for customers.

Fears from financial institutions about liability for data breaches, fees associated with data access, and preventing misuse of such data have led the CFPB to reconsider the rulemaking process. This was first noted in May when the agency informed the courts that it believed these regulations exceeded its legal authority and recommended their scrapping.

CFPB officials stated they would initiate a new rulemaking to reconsider the existing rules with the goal of significantly revising them and offering a compelling justification. They also planned to start an accelerated rulemaking process within three weeks.

The Financial Data and Technology Association (FDATA) responded to these developments by issuing this statement: The CFPB’s request for a stay in litigation highlights, considering recent market changes, that the agency must continue to closely examine banks’ attempts to impose punitive fees on consumers who wish to share access to their financial data. We’re pleased the CFPB acknowledged that financial institutions will exploit regulatory uncertainty and that consumers should retain the right to access and manage their own financial information.”