Squeezed by Lawsuits, CFPB Drops Support for Dodd-Frank’s Open Banking Initiative

By W.B. King

In what some industry insiders call a sweetheart deal for Wall Street banks, Section 1033 of the Dodd-Frank Act—the open banking clause—has hit a dead end. On May 28, 2025, the Consumer Financial Protection Bureau (CFPB) announced rescinding its open banking rule under section 1033 of Dodd-Frank.

In October 2022, however, the CFPB took a different view. At the time, the Bureau outlined options to “strengthen consumers’ access to, and control over, their financial data as a first step before issuing a proposed data rights rule that would implement section 1033 of the Dodd-Frank Act.”

CFPB’s former director Rohit Chopra noted in a statement: “Dominant firms shouldn’t be able to hoard our personal data and appropriate the value to themselves.” He continued, “The CFPB’s personal financial data rights rulemaking has the potential to jumpstart competition, giving Americans new options for financial products.”

What changed?

For one, legal action was taken against the CFPB and acting Chairman Russell Vought by numerous banks and the Bank Policy Institute (BPI). The lawsuits, including one in the federal district court in Kentucky, posit that CFPB doesn’t have the authority to mandate free, comprehensive data-sharing. Lawsuits suggested the rule also undermines safer, emerging private-sector open banking efforts.

In response to the lawsuit, CFPB stated: “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. To that end, defendants intend to file a motion for summary judgment by May 30th, 2025.”

Among other hurdles for the CFPB is the Trump Administration’s “One Big Beautiful Bill Act,” which, if passed, would result in upwards of 1,400 CFPB job losses. While the District of Columbia Court of Appeals has placed a temporary hold on the initiative, if greenlit, the CFPB would be left with only 200 employees and a diminished operating budget. It also remains unclear whether the Trump Administration will implement some or any rules currently under Section 1033.

Conversely, President Joe Biden’s Administration gave the CFPB the ability to allow consumers to obtain their financial transactional data. “Section 1033 also directs the CFPB to prescribe by rule standards to promote the development and use of standardized formats for information made available to consumers,” the Biden Administration stated in 2024.

Who Should Control Financial Data?

In response to the CFPB declaration to rescind, BPI and the Kentucky Bankers Association released a joint statement. “CFPB has taken the appropriate step of acknowledging Section 1033’s clear legal deficiencies, and we urge the big tech companies to do the same, rather than protracting a legal dispute that endangers consumer financial data. Banks have already made it possible for hundreds of millions of Americans to safely access and share their data – the current rule undermines and disrupts that ecosystem to the benefit of tech companies looking to profit even further from consumers’ data.”

Penny Lee, president and CEO of the Financial Technology Association, took issue with the decision. “Vacating the 1033 rule is a handout to Wall Street banks, who are trying to limit competition and debank Americans from digital financial services,” said Lee in a statement, noting that the 1033 open banking rule was initiated during the first Trump Administration and was backed by broad bipartisan support. “Americans must have the right to control their financial lives, not the nation’s biggest banks.”

This is an ongoing story, with updates expected in the coming weeks.