ARTICLE 5: New CFPB regulations on the U.S. Banking Industry

https://www.consumerfinance.gov/about-us/newsroom/cfpb-finalizes-personal-financial-data-rights-rule-to-boost-competition-protect-privacy-and-give-families-more-choice-in-financial-services/On

By Grayson O'Hara

October 22nd, 2024, the Consumer Financial Protection Bureau issued a new rule that gives consumers more control, privacy, and security over their financial data. This new rule will be instituted in the U.S. banking industry and the economy. The goals of this new regulation are to encourage competition, lower loan prices, and improve customer service across all financial products. This is done by giving consumers more of a say and an easier way to switch banks, credit cards, and payment providers if they want better rates. Before this ruling, there wasn’t much regulation on how the customer could exit a bank service, making it hard and costly to switch banks for a better rate. This now makes it easier, which will lead to more competition among banks as they will have to offer better rates than their competitors if they want to retain their customers. It also supports the development of an open banking system in the U.S., making it easier for customers to access and use their own money.

The four key features of this new rule are: Data Accessibility, Privacy Protections, Revocation and Deletion, and Phased Implementation. They are addressing data accessibility and privacy protection by limiting third-party use of consumer data and making data sharing secure and fee-free. It also allows users to revoke access easily and immediately. While they are implementing this rule, it won’t go into effect until around April 2026 or April 2030.

This article stood out to me because of the implementation of this new regulation in light of recent events. This rule by the CFPB allows for more transparency in the U.S. banking industry. Switching to a service with better rates is now going to be easier. This will create competition between the banks because they will want to roll out incentives for keeping their customers even when they have a higher rate. After all, before this rule, just the process of switching providers was such a daunting task for consumers that it deterred them from getting the better rate. This then led to less incentive for the companies to retain their customers.

The data privacy regulation is also interesting to see because it comes in light of the rise of AI in the U.S. banking industry. It feels almost like a response to the uncertainty that has been brought about by the use of AI with people’s assets. The idea of AI being able to access people’s accounts is something that is still heavily disputed, but this new regulation seems to put more restraints on banks' use of AI in their accounts. I think it’s really important that the CFPB and U.S. banks use these regulations to limit the possible downfalls of letting AI access this data. And, while this regulation doesn’t directly mention AI, it feels as though it has some sort of connection to the rise of AI.