CFPB Issues Rule on Qualifications for Open Banking Standards Setting Organizations

The CFPB issued a final rule laying out the necessary qualifications for organizations to be recognized as standards setting organizations in connection with personal financial data rights meant to promote open banking.

The CFPB previously proposed a separate, yet-to-be-finalized rule on personal financial data rights.  That proposed rule would give consumers the right to transfer their financial data held by one financial institution to another.  In turn, the CFPB believes that this could make it easier for consumers to switch institutions if they are dissatisfied without losing their accumulated financial history information.  This financial data would need to be maintained in standardized formats and be securely transferrable across institutions.

The new standard setting rule would allow organizations to be recognized by the CFPB as designated standard setting organizations for the technical and related requirements governing these standardized data formats and the secure transfer of data between institutions.  In order to be recognized, a prospective standard setting organization would need to demonstrate:

• Openness – Relevant information must be available to the public and to interested stakeholders, and they must be able to meaningfully participate in standards development on a non-discriminatory basis.

• Balance – Decision-making power must be balanced across all interested parties, including large and small entities, and no single interest or set of interests can dominates decision-making.

• Due Process and Appeals – The organization must use documented policies and procedures, provide adequate notice of meetings and standards development with sufficient time for review and comment, and a fair and impartial process for resolving conflicting views and appealing any determinations.

• Consensus – Standards must be developed by consensus (i.e., general agreement, though not necessarily unanimity), and comments and objections must be considered using fair, impartial, open, and transparent processes.

• Transparency – Procedures or processes for participating in standards development must be transparent to participants and publicly available.

The rule also contains information on the application process and what information would need to be included in an application for recognition as a standards setting body.  Recognition by the CFPB would last for five years (absent revocation) and could be renewed thereafter.