The Consumer Financial Protection Bureau finalized a rule Tuesday that protects personal financial information and will allow consumers to switch banks or other financial institutions quicker.
The rule requires 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 no cost. Consumers will be able to more easily switch to providers with better rates and services.
The rule will help lower prices on loans and improve customer service across payments, credit, and banking markets, Rohit Chopra, director of the CFPB, said in a statement
“Too many Americans are stuck in financial products with lousy rates and service,” Chopra said. “Today’s action will give people more power to get better rates and service on bank accounts, credit cards, and more.”
The rule applies to bank accounts, credit cards, mobile wallets, payment apps, and other financial products. It aims to address market concentration that limits consumer choice over financial products and services.
Consumers will be able to access, or authorize a third party to access, data such as transaction information, account balance information, information needed to initiate payments, upcoming bill information, and basic account verification information. Financial providers must make this information available without charging fees.
The rule moves the United States closer to having a competitive, safe, secure, and reliable “open banking” system, he said.
The rule will boost competition by giving people more freedom to switch banks or providers and shop around for the best deal. This increased choice will incentivize financial institutions to offer improved products that help them attract new customers and retain old customers, Chopra said.
The new rule also establishes strong privacy protections, requiring that personal financial data can only be used for the purposes requested by the consumer. It ensures that third parties can’t use consumer data for other purposes that benefit the third party, but that consumers don’t want.
It also helps move the industry away from “screen scraping,” a common but risky practice that usually involves consumers providing their account passwords to third parties who use them to access data indiscriminately through online banking portals.
The rule will go into effect in phases, with larger providers providing the free transfer services sooner than smaller ones. The largest institutions are required to comply by April 1, 2026, while the smallest ones will have until April 1, 2030. Some small banks and credit unions aren’t subject to this rule.
“American households often pay more than a hundred dollars per year in checking account fees,” Adam Rust, director of financial services at the Consumer Federation of America, said in a statement. “Too often, customers stay with a checking account that doesn’t fit their needs because it’s just too complicated to switch and risk being charged an overdraft or late fee if they miss a recurring bill.”
For customers who are essentially captive to their current bank, this new rule opens the opportunity to pay less and find an account that offers a better fit for their needs, Rust said.
