The Consumer Financial Protection Bureau (CFPB) has approved the Financial Data Exchange (FDX) as the first standard-setting body in an important step towards implementing open banking in the US.
Released in October 2024, the Personal Financial Data Rights rule requires financial institutions, credit card issuers, and other financial providers to unlock a consumer’s personal financial data and transfer it to another provider at their request for free.
At the time, the CFPB established an application process that outlined the required qualifications to become a recognised industry standard-setting body. These standards can help companies to comply with the CFPB’s new open banking rules.
FDX, a standard-setting organisation operating in the US and Canada with over 200 member organisations, aims to develop, improve and maintain a common, interoperable standard for secure consumer and business access to financial records. Having begun the application process in September 2024, CFPB will now recognise FDX as an industry standard-setting body for five years.
Following the approval, FDX has agreed to self-monitor its policies and practices to ensure that it meets the requirements outlined by CFPB.
Subject to conditions
The CFPB approved the FDX’s application, subject to a number of conditions, including a ban on ‘pay-to-play’, which aims to ensure that FDX develops standards to promote open banking – without favouring certain market players to give them any kind of advantage.
As part of this requirement, FDX will need to ensure that its staff do not have any side arrangements that skew its financial incentives toward particular players in the industry.
FDX will also need to report to the CFPB on the market use of its standards, as well as maintain a publicly available resource where companies can disclose their use of standards as well as any certifications of adherence to standards, for the benefit of open banking participants, regulators, and the public.
Finally, the approval order requires FDX to make any consensus standards that it adopts and maintains freely available to the public, ensuring that non-members have the same access as members.
In June 2024, the CFPB finalised a rule outlining the qualifications to become a recognised industry standard-setting body. The rule identifies the five key qualifications that these bodies must demonstrate in order to be recognised, including openness, transparency, balanced decision-making, consensus, and due process and appeals.
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