The Consumer Financial Protection Bureau (CFPB) recently advanced a Notice of Proposed Rulemaking to implement section 1033 of the Dodd-Frank Act (1033 NPRM) following lengthy discussions about the most effective way to harmonise a wide range of policy interests. This move could have extensive implications for consumer financial institutions. Orrick, Herrington & Sutcliffe LLP reports on this development to provide an insight into this often complex sphere of law.
Section 1033 of the Dodd-Frank Act entails that consumer financial institutions – subject to CFPB-prescribed rules – grant consumers access to non-confidential data connected to their financial product or service in a machine-readable format. The intended aim is to advance the principle of “open banking” and foster an environment where consumers have greater control over their financial information, thereby supporting the growth of a more competitive and innovative market.
While these legislations might deliver significant benefits to consumers, they may present challenges for consumer financial institutions. Firms will have to grapple with the task of adapting their current systems and operations to comply with these new requirements. Specifically, the ‘machine-readable’ aspect of the data sharing mandate may require banks and other lenders to adjust their existing technological infrastructure and implement new data handling practices. Additionally, adherence to this proposed rule would certainly mean an increased focus on consumer consent and data protection measures, adding another layer of complication to the task.
The CFPB’s proposed rule to implement section 1033 of the Dodd-Frank Act highlights the keen interest of the regulator in promoting transparency in financial operations for consumer benefit. As the legal landscape evolves with the advent of open banking, ongoing review and adaptation will be crucial for consumer financial institutions in order to remain in compliance with relevant regulations and continue delivering high-quality service to their customers.