CFPB to scrap ‘unlawful’ open banking rule

Payments Dive reported Tuesday that Mark Paoletta, the CFPB’s chief legal officer, confirmed in a federal court filing on Friday that the reason for vacating the rule stemmed from an immediate lawsuit from the Bank Policy Institute, the Kentucky Bankers Association and Kentucky-based Forcht Bank. The suit was filed shortly after the passage of the rule in October under the Biden administration.

“After reviewing the rule and considering the issues that this case presents, Bureau leadership has determined that the rule is unlawful and should be set aside,” the CFPB stated in a court document released on Friday.

“To that end defendants intend to file a motion for summary judgment by May 30th, 2025, the date that this court had set for plaintiffs in its March 27th order.”

The banking groups argued that the rule, created under Section 1033 of the Dodd-Frank Act, would be expensive to follow and didn’t clearly address who’s responsible for fraud or misuse of consumer financial data. They also claim the agency overstepped its authority in writing the rule.

The CFPB is undergoing several shakeups. The newly passed budget reconciliation bill, H.R. 1 — dubbed the One Big Beautiful Bill Act — includes measures to significantly cut funding for the bureau.

The Trump administration has also proposed cutting more than 1,400 CFPB jobs, leaving only 200 in place. But the District of Columbia Court of Appeals has temporarily blocked the plan.