By Katanga Johnson and Hannah Lang

(Reuters) – Five individuals with direct knowledge say that privacy concerns have prevented the U.S. from implementing its long-awaited “open banking” rule, which would dramatically increase competition in consumer finance and expand Americans’ financial access.

Consumer Financial Protection Bureau’s (CFPB), rule will allow customers to share financial information with third parties. Switching to lower-cost service providers would be easier with this rule.

In July 2021, the White House urged CFPB to develop an open banking rule to support broader competition. Two sources claim that lawmakers as well as fintech companies have also been pressing the agency to speed up.

Open banking, according to these advocates, will enable non-banks such as technology companies to compete more effectively with traditional banks. It will also lower the costs of financial services and make financial access easier for many millions of Americans.

However, the CFPB continues to grapple with data privacy and consumer privacy concerns. The five sources stated that the rule has created a number of issues for the CFPB. They spoke on condition they would not be identified in order to talk about the confidential process.

Rohit Chopra (CFPB Director) is worried about the potential use of the data by Big Tech firms. These companies have a history of using personal data from consumers to enrol their services.

Discussions on the rule were not reported previously.

Lisa Ledbetter of Reed Smith, a law partner, stated that the director at CFPB is trying balance three issues. Lisa has been talking to clients in banking and fintech about these issues.

They include: how to monitor big tech’s impact on the marketplace, how consumers can control their privacy, security and data protection, as well as how to promote competition.

A source within the agency said that the CFPB feels the need to make the rule, but it is still trying to find the “right balance”

Chopra was a Federal Trade Commission Commissioner from 2018-2021 and took a hard stance against Big Tech companies’ data privacy practices. Four sources claimed that Chopra is now taking the time to meet with interested parties.

A spokesperson for the CFPB stated that “We are continuing with this rulemaking priority.” This rulemaking initiative is focused on protecting consumer privacy rights.

According to the spokesperson, “Effective consumer control over where and how their data is used is vital for a true competitive landscape.”

PANEL REVIEW

According to fintechs, open banking will allow for a wide range of payments, investments, lending, financing, and money-saving apps. One example is that Americans can share data from their bank accounts, debit cards, and credit card transactions with an app, which will then offer tips for avoiding costly fees.

Open banking allows consumers to pay less and receive better services. Accelerate the CFPB ()Penny Lee, the Chief Executive Officer of Financial Technology Association said that rulemaking is a key part of their mission.

Although banks don’t oppose this rule, they want to restrict its reach. They argue that open banking could expose consumers’ personal data because fintechs lack the same strict cybersecurity and privacy standards than traditional businesses.

The five individuals said that banks would be reluctant to share customer data because it can prove costly to protect and maintain.

Europe, Britain, as well as other countries have already adopted open banking laws. The U.S. Congress mandated open banking after the 2009 financial crisis, but the CFPB only issued https://www.consumerfinance.gov/about-us/newsroom/consumer-financial-protection-bureau-releases-advance-notice-proposed-rulemaking-consumer-access-financial-records an ‘advance notice of proposed rulemaking’ seeking feedback on a potential rule in October 2020.

People said that the small-business panel review is the next step. According to a spokesperson for the agency, the panel review will be conducted by the CFPB “by the year’s end”.

Small Business Regulatory Enforcement Fairness Act (CFPB) requires that the CFPB seeks feedback from small businesses on new regulations.

The panel is open to small banks, data brokers, and fintech firms. However, the agency has yet to determine who will be there, according five people.

After submitting a report, the panel must give notice to the CFPB within 60 days. The agency will then issue a draft of the rule.