CFPB announces a new rule to help you transfer your data

The Consumer Financial Protection Bureau (CFPB) finalized a rule on Oct. 22, to help consumers transfer their information from one financial provider to another, free of charge. This new rule will give consumers more control over their financial data, according to the CFPB. But some groups have spoken out against the CFPB’s final rule, including two U.S. banking groups that have filed a lawsuit that challenges it.

Here’s a summary of the nearly CFPB’s 600-page notice and what you need to know as a consumer, including why some groups are opposed to the rule.

Why is the CFPB issuing this final rule? 

The CFPB’s objective is to activate a dormant legal authority, which was enacted by Congress in 2010, to help give consumers more choice and flexibility to switch institutions and bring their data with them.

“Switching a bank account or credit card now involves the risk of screwing up an auto-debit for a bill or incurring an unwanted fee,” Rohit Chopra, CFPB Director, said in prepared remarks Oct. 22 at the Federal Reserve Bank of Philadelphia.

What do critics of the CFPB ruling have to say? 

The Bank Policy Institute (BPI) and the Kentucky Bankers Association filed a lawsuit on Oct. 22 challenging the CFPB rule. Per the BPI website, the institute alleges the new ruling:

• Requires no oversight of third parties using bank customer data, which increases the likelihood of fraud and scams
• Does not prohibit the potentially unsafe practice of screen scraping
• Fails to hold third parties accountable
• Allows third parties to profit, at no cost, from systems built and maintained by banks

The CFPB’s press release says that the final rule would help move the industry away from screen scraping, which uses a consumer’s log-in information to retrieve data. Rob Nichols, president and CEO of the The American Bankers Association (ABA) says it’s a false premise that consumers lack choices.

“While we are still evaluating the details of the final rule, it is clear that our longstanding concerns about scope, liability, and cost remain largely unaddressed,” Nichols said in a statement. “This is disappointing after so many years of good-faith efforts by parties on all sides to improve consumer outcomes.”

The Independent Community Bankers of America (ICBA) says that nonbank fintechs that store login information and access customer information may not protect the data and consumer privacy like a community bank would, according to an ICBA news release.

Will the CFPB’s new final rule help customers switch banks? 

“Too many Americans are stuck in financial products with lousy rates and service,” Chopra says. “Today’s action will give people more power to get better rates and service on bank accounts, credit cards, and more.”

Better rates and service are important for consumers. But will the CFPB’s new final rule help Americans switch? Customers usually keep their checking account for an average of more than 17 years, according to a Bankrate survey conducted in late 2021.

But the reason people keep their account is not because they’re being held hostage, says Greg McBride, CFA, Bankrate chief financial analyst.

“The top reasons account holders cite are low fees, convenience and good customer service,” McBride says. “The hassle of switching was only cited by 10 percent of account holders and ranked fifth as a reason for having maintained their current account for so long.”

The reasons why people don’t have a competitive yield on their savings account, from a Bankrate survey published in March were:

• Preferred access to a local branch: 45%
• Comfort level with current financial institution: 42%
• Worry about the security of their money: 32%
• Not enough savings to make it worthwhile: 22%
• Uncertainty about ease and speed of money transfer: 13%
• Haven’t gotten around to it: 10%
• The time and effort it takes to open account: 5%
• Something else: 5%
• Don’t know: 5%

While transferring data isn’t listed as a response option in the Bankrate survey, it remains to be seen what impact an easier data transfer process would have on the frequency of consumers switching banks. Even though the rate environment has changed somewhat since March, 17 percent of savers were earning less than one percent APY then and 17 percent weren’t earning any interest.

Consumers earning low rates still have an opportunity to obtain a savings yield that’s outpacing inflation.

What data is covered under this new final rule? 

Data that’s covered under the CFPB rule include at least 24 months of transaction information, such as information on account balances, upcoming bills and Automated Clearing House (ACH) transactions.

When will this rule go into effect? 

It depends on the size of the financial institution. The largest banks will have to follow this final rule by April 1, 2026.

“The 1033 final rule includes some helpful policies and principles of open banking and consumer access to their data, but the devil continues to be in the details of implementation, says Melissa Guidorizzi, partner, Davis Wright Tremaine. “The final rule remains short on those.”

Reasons to switch banks

Some reasons to switch banks could be if you’re not earning a competitive yield or if you’re paying fees. It could also be due to poor customer service, a bank not being convenient to you or a bank not having the features that you’re looking for. Convenience could be physical location or it could be customer service hours.

Sometimes you don’t necessarily need to switch banks. Having a checking account at a brick-and-mortar bank and then having a savings account or certificate of deposit (CD) at a federally-insured online bank can help you get the best of both worlds. This way you can go down to the local bank to talk with a real person and earn a competitive yield that might not be available at the local bank.

It’s always a good idea to compare savings yields at both online federally insured banks and local banks – though generally the former are going to offer more competitive yields. One reason is because these online banks don’t have physical locations, they instead try to attract customers with a higher yield. And of course there’s the fact that these banks don’t have to maintain and staff physical locations.

Bottom line

In the future, it may be easier to move your banking data from one financial institution to another. But there are some groups opposed to the CFPB’s final rule. The CFPB’s final rule could spur some long-awaited progression in the open banking space. Ultimately, it remains unclear whether being able to transfer data is a reason why people don’t switch banks.