New CFPB Rule Gives Consumers More Control Over Their Financial Data

Demystifying the New Personal Financial Data Rights Rule

Consumer control over personal financial data and privacy is set to increase thanks to a new regulation by the Consumer Financial Protection Bureau.

Understanding the Personal Financial Data Rights

According to the Consumer Financial Protection Bureau, the Personal Financial Data Rights will compel financial institutions, credit card issuers, and other finance providers to freely transfer an individual’s personal financial data to another provider if the consumer requests it. The rule will be implemented in phases, with larger institutions obligated to conform by April 1, 2026, and the smallest covered institutions given until April 1, 2030.

Breaking Down the Benefits of the New Rule

With this rule in effect, consumers’ switching to alternative financial providers should become more straightforward, leading to boosted competition among providers. This competition should encourage providers to improve their customer service and offer more competitive loan rates, thereby benefiting consumers.

Junk fees and proprietary accessories that only work with specific products are just a few examples of the issues Rohit Chopra, CFPB director, hopes this rule will address.

How Does the Personal Financial Data Rights Rule Work?

This rule empowers consumers to access and share data linked to their bank accounts, credit cards, payment apps, and other financial products. Only they, and not third parties, can decide how their data is used, reducing the risk of overcollection of data, inaccurate data sharing, and the spread of login credentials.

How Could This Rule Impact Americans?

As a result of this rule, it should become easier and cheaper for Americans to switch between financial institutions. This feature should encourage competition and ultimately lead to lower rates on financial products and improved customer service.

• Consumers with shorter credit histories, such as young people, stand to benefit significantly as lenders will be able to use data from other institutions to offer credit or better loan terms.
• Americans will also gain the ability to securely share payments information. This data can encourage them to “pay-by-bank,” or pay for goods and services by transferring money directly from an account to a vendor without using a credit or debit card.
• Companies will not be allowed to use consumers’ data for their own purposes, which will prevent what the CFPB calls “bait-and-switch data harvesting.”
• When a person revokes access, a company’s data access ends immediately, and the data must be deleted. 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. “This rule will make it easier for consumers to switch banks, use financial services that better fit their needs, provide greater opportunity for innovative new businesses to compete, and lower costs for consumers.”