Page 22 - GS241101

CoverStory

"To make our banking and payments market more com- "Retailers need to pay close attention to developments
petitive, it needs to be open and decentralized using a with open banking and the potential it offers as an al-
common set of data standards, free of powerful gatekeep- ternative to the costly way payments are currently pro-
ers and middlemen that can impose private regulations cessed," Stephanie Martz, general counsel at the National
and extract fees," he said. Retail Federation, said in a statement.

The Dodd-Frank Act, which created the CFPB, contains a Rehashing the retail industry's ongoing issues over Visa
provision (known as Section 1033) that, according to the and Mastercard interchange fees, and the impact of those
CFPB, gave it authority to establish such portability rules. fees on small businesses and the subsequent cost of goods,
But the agency has been mired in controversy from the Martz suggested that open banking "could cut out these
get-go, including a legal tussle over its funding, which middlemen and create competition that would benefit
comes from the Federal Reserve. small businesses and consumers alike."

The CFPB said compliance with the new rule would be The NRF does have concerns around how open bank-
implemented in phases, with the largest firms compelled ing will play out in the United States, however. The trade
to comply by April 1, 2026; the smallest firms would have group gave a thumbs down to a proposal by the Financial
four additional years. Data Exchange (FDX) to be the nation's open banking stan-
dards setter. The CFPB put out a call for a private sector
Opponents wasted no time letting their opinions be standards setter in June, along with a set of qualifications
known about the CFPB's efforts to establish implementing it said would need to be met to be assigned the task. To
regulations for Section 1033. date, FDX has been the only organization to apply.
The Bank Policy Institute, a bank advocacy group, and FDX, a subsidiary of the Financial Services Information
the Kentucky Bankers Association filed a lawsuit in U.S. Sharing and Analysis Center (FS-ISAC), is a standards
District Court in Kentucky on the day the rule was an- body made up of financial institutions, financial technol-
nounced. Coming in at 56 pages, the lawsuit argues that ogy firms, payment networks and other stakeholders in
the CFPB overstepped its authority and that the rule jeop- the financial sector. Members include most of the largest
ardizes consumers' privacy, financial data and account se- banks in the United States and Canada, as well as Visa,
curity. The court has been asked to halt implementation. Mastercard and Discover, in addition to companies like
Amazon.com.
"Claiming the authority of a provision of the Dodd-Frank
Act enacted more than 14 years ago, the bureau now seeks In a comment letter submitted to the CFPB, the NRF took
to jettison [a] developing, industry-driven system and re- issue with the fact that FDX, in its application, stated that
place it with a complicated, costly and fundamentally in- only members may participate in the standards-setting
secure data-sharing framework," the legal filing states in process. "Data standards for an inclusive open banking
part. system should be constructed with input from all inter-
ested parties at all levels. Instead, FDX will prioritize the
Chopra balked at the lawsuit. During an appearance at the needs of its members," the NRF complained.
Money 20/20 conference he said "I haven't read their law-
suit, and I don't think they read the rule," according to a The CBA appears to disagree. In a 2023 comment letter to
report published by Payments Dive. the CFPB it said a financial services industry standards-
setting body, such as FDX, would be the "most efficient
Consumer Bankers Association President and CEO Lind- way to facilitate both innovation and interoperability" for
sey Johnson said in a statement the "rule severely misses open banking.
the mark." Johnson described as "inaccurate" CFPB asser-
tions that the rule set is necessary to increase marketplace What's the lowdown?
competition. "Indeed, the consumer credit card and de- The CFPB's notice of its personal financial rights rule is
posit account markets specifically are highly competitive, general, leaving the details to a 594 page Federal Regis-
and the CFPB should not rely on mischaracterizations of ter notice. The announcement highlights consumer rights
the marketplace to justify the necessity of this rulemak- and protections, such as:
ing," she said.
• The ability to easily fire fintechs and banks that
Merchants see silver lining, maybe provide lousy service;

Merchants appear to be rallying behind the new CFPB • Making secure payments, including pay-by-bank;
rule, characterizing it as a pathway to avoiding conten- • Banning bait-and-switch data harvesting; and
tious credit and debit card fees.
• Simple and immediate revocation of access to as
well as the deletion of existing data when a cus-
tomer says so.

22