A federal judge in Kentucky has temporarily blocked the enforcement of a rule from the U.S. Consumer Financial Protection Bureau (CFPB) designed to simplify the process for consumers switching financial service providers. U.S. District Judge Danny Reeves issued the ruling on March 6, 2024, pausing compliance deadlines for the so-called “open banking” rule, which was challenged by a coalition including Forcht Bank, the Kentucky Bankers Association, and the Bank Policy Institute.
The decision comes as the CFPB, now under leadership aligned with the administration of former President Donald Trump, aims to revise the consumer data-sharing regulation. This move reflects a broader effort to curtail the authority of the CFPB, with some officials advocating for the agency’s dissolution.
Judge Reeves’s ruling allows for a reevaluation of the rule that was finalized in 2023 under the administration of President Joe Biden. The open banking rule aimed to facilitate consumer access to financial data from various accounts and services without incurring costs. According to the banking groups involved in the lawsuit, the regulation overreaches the agency’s authority and imposes significant financial burdens on banks.
In his ruling, Reeves noted that the plaintiffs are likely to prevail in demonstrating that the CFPB exceeded its authority. He stated, “The plaintiffs and their members are being compelled to incur expenses that would be unrecoverable and unnecessary.” The injunction will remain in place until the CFPB completes its reconsideration of the rule.
The Bank Policy Institute and the Kentucky Bankers Association expressed their approval of the judge’s ruling. In a joint statement, they emphasized that the decision protects banks from the need to allocate resources toward a regulation that is currently under revision.
This ruling highlights ongoing tensions between regulatory bodies and the banking sector, especially as the CFPB navigates leadership changes and evolving political landscapes. The outcome of the agency’s reassessment will be critical for consumers and financial institutions alike as they adapt to changes in data-sharing practices.
