Its been a bad week for the CFPB…on the 21st October The Financial Technology Association (FTA), representing major BNPL (Buy Now, Pay Later) providers, filed a lawsuit against the US Consumer Financial Protection Bureau (CFPB) to block a new rule that applies credit card protections to the BNPL market.
Now, The Bank Policy Institute (BPI) and Kentucky Bankers Association have filed a lawsuit against the CFPB, challenging its new rule under Section 1033 of the Dodd-Frank Act.
The rule, which governs consumer financial data access, has raised concerns over privacy and security.
Banks argue that the rule exposes consumers to risks by allowing third parties to access sensitive data without sufficient oversight or accountability.
The lawsuit highlights issues such as the increased risk of fraud, inadequate safeguards for data protection, and the reliance on unsafe practices like screen scraping.
BPI President Greg Baer emphasised that while banks support consumer control over financial data, the rule compromises security, allowing third-party entities to access bank customers’ data without proper regulations.
“BPI supports a competitive marketplace where consumers control how their personal financial data is used and with whom it is shared, so long as their data remains protected,” Baer said.
“Unfortunately, the CFPB delivered a rule that treats sensitive financial data with as little care as a consumer’s web browsing history.
If left unchallenged, technology companies subject to little to no oversight will have access to very sensitive information, like how much is in your account and where you spend your money.
Banks have a responsibility to protect customers and their data, and this rule compromises these responsibilities, putting bank customers at risk.”
Additionally, the lawsuit criticises the CFPB for imposing an unreasonable implementation timeline, which could force banks to comply with standards that are not yet fully defined.
The banking industry is seeking a regulatory framework that protects consumer data while fostering competition in a secure environment.
Ultimately, the lawsuit reflects growing concerns about the balance between consumer access to financial data and the need for strong protections against potential security breaches.
As banks fight for a more secure regulatory framework, this legal battle could shape the future of data sharing in the financial sector.
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