CU Trade Groups Criticize ‘Open Banking’ Rule
Nearly 90% of all credit unions are exempt from the rule, but officials worry it could cause more CUs to merge.
The CFPB on Tuesday published its final rule on how banks and credit unions share data to allow open banking that would apply to about 10% of the nation’s credit unions by 2030.
America’s Credit Unions and the Defense Credit Union Council (DCUC) criticized the rule as an unfunded mandate that puts credit union reputations at risk from actions of financial providers beyond their control.
The rule includes tiered exemptions and delayed implementation of the rule for smaller banks and credit unions — one of the requests of NAFCU and CUNA shortly before their Jan. 1 merger to become America’s Credit Unions.
The Consumer Financial Protection Bureau rule sets asset thresholds that are based on the average of each of the four quarters from the third quarter of 2023 through the second quarter of 2024.
CU Times did not make that averaging calculation, and instead used assets at June 30 from the NCUA and pulled from Callahan’s Peer Suite. That data showed nearly 90% of the nation’s 4,594 credit unions would be exempt from the rule. It showed as of June 30 there were:
- 21 credit unions with more than $10 billion in assets that would start reporting April 2027.
- 131 credit unions with $3 billion to less than $10 billion that would start reporting April 2028.
- 162 credit unions with $1.5 billion to $3 billion in assets that would start reporting April 2029.
- 193 credit unions with $850 million to $1.5 billion in assets that would start reporting April 2030.
- 4,087 credit unions with less than $850 million in assets that are exempt.
A CFPB news release said the rule is designed to move the nation closer to having a “competitive, safe, secure and reliable ‘open banking’ system.” It is part of the CFPB’s efforts to finally activate Section 1033 of the Consumer Financial Protection Act, a dormant legal authority enacted by Congress in 2010.
The rule is designed to ensure consumers can access and share data from their bank accounts, credit cards, mobile wallets, payment apps and other financial products. Consumers will be able to access, or authorize a third party to access, data such as transaction information, account balance information, information needed to initiate payments, upcoming bill information and basic account verification information.
Financial providers must make this information available without charging fees.
America’s Credit Unions President/CEO Jim Nussle said the group appreciates the CFPB’s exclusion of small credit unions. However, he said concerns remain about downstream fraud and the challenge of maintaining the software to handle the data handoffs without charging fees.
“The CFPB reduces one of the most valuable assets of a financial institution, its data, to a commodity, which will likely put even greater competitive pressure on credit unions to merge,” Nussle said.
DCUC sent a letter to the CFPB Tuesday warning that the rule puts credit unions’ reputations at risk if information it shares is misused by a third party.
Jason Stverak, DCUC’s chief advocacy officer, said the CFPB must consider the “real-world impact” of the rule.
“The rule’s promotion of third-party access risks undermining trust-based relationships and cooperative principles between credit unions and their members, potentially diverting them to competing services,” Stverak said.
One CUSO executive said the CFPB rule will help credit unions by removing barriers consumers face when trying to open an account at a credit union.
Matt Denham, co-founder and head of product and payments at Prizeout, which operates a CUSO called Prizeout Partners that provides credit card rewards programs, said the rule will help potential members overcome the difficulty of moving accounts locally.
“With this ruling, customers will find it much easier to switch to credit unions that offer better rates, products and personalized experiences,” Denham said. “CUSOs will also play a key role by equipping credit unions with the technology and resources to enhance their offerings, making it easier for them to scale, innovate and compete with the big banks.”