The Consumer Financial Protection Bureau (CFPB) is facing strong criticism from the Financial Technology Association (FTA) after revealing plans to rescind its landmark open banking rule, known as the 1033 rule.
The move, widely seen as a concession to traditional banks, has sparked accusations that regulators are undermining consumer financial rights and protecting entrenched financial interests, claims Finextra.
The 1033 rule, finalised just last October, was designed to give Americans the right to instruct their banks to share financial data with third-party providers. It was a significant step forward for open banking in the US, potentially increasing competition and innovation in financial services. However, opposition from major banks and traditional financial institutions, who raised concerns about liability risks and data access costs, has led to growing political pressure to roll back the regulation.
In early May, reports began to emerge that the CFPB was preparing to amend or eliminate the rule. That outcome has now been confirmed, with the bureau announcing plans to petition the courts to have the rule vacated.
FTA CEO Penny Lee criticised the decision, saying, “Vacating the 1033 rule is a handout to Wall Street banks, who are trying to limit competition and debank Americans from digital financial services. Americans must have the right to control their financial lives, not the nation’s biggest banks.”
The decision forms part of a wider retreat by the CFPB from consumer protections and FinTech oversight under the Trump-aligned leadership of acting director Russell Vought. In March, the bureau repealed a previous interpretation that classified “pay-in-four” buy now, pay later (BNPL) lenders in the same regulatory category as credit cards.
Additionally, the CFPB has withdrawn several high-profile lawsuits against major banks, including JPMorgan Chase, Bank of America and Wells Fargo, over alleged fraud involving the Zelle peer-to-peer payments network.
Separately, a rule that would have extended CFPB oversight to Big Tech firms offering digital wallets and payment services—such as Apple, Google and X—was recently overturned by both chambers of Congress, marking another rollback of consumer finance oversight.
These developments have prompted concerns that regulatory efforts to modernise the financial system and promote open banking are being steadily dismantled, potentially curtailing innovation and consumer empowerment in the FinTech sector.
Previously, the Consumer Financial Protection Bureau (CFPB) decided to withdraw its lawsuit against Capital One, potentially forfeiting up to $2bn in reimbursements for customers.
The dropped lawsuit is part of a broader shift under the bureau’s new leadership, which appears to be stepping back from a number of pending enforcement actions against financial companies. This move could affect dozens of cases nationally, signalling a significant policy change towards consumer protection enforcement.
The original lawsuit accused Capital One of misleading consumers about the interest rates offered through its “360 Savings” accounts.
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