Trump Killed the CFPB's "Open Banking" Rule. Now Big Banks Are Crushing Your Favorite Finance App.
Bogus new fees are meant to crush competition, despite what Wall Street says
By Ashley Nowicki, Policy Analyst, and Morgan Harper, Director of Policy and Advocacy
This October, JPMorgan Chase unveiled its new $3 billion headquarters, which includes a Michelin-starred restaurant, coffee that can be sent straight to an employee’s desk, a “signature scent”, and other high-end perks that “pushes [the] boundaries … of leisure, entertainment, [and] lifestyle,” according to the building’s architect. Yet at the same time, JPMorgan Chase CEO Jamie Dimon says the company needs to charge third party applications like Venmo fees to access consumer accounts – claiming that maintaining the digital infrastructure is too expensive for the nation’s richest, largest bank.
If this sounds absurd, it should. Big banks like JPMorgan Chase are flush with profits, all the while making this and other spurious arguments against allowing consumer access to data, not because of costs, but to impose red tape and charge everyone a junk fee. This charge will hinder potential competition and allow the big banks to fatten their bottom line. The over 100 million consumers using “open banking” for everything from investment to bill-paying apps, unaware of the financial shenanigans, will be none the wiser.
Last year, the Consumer Financial Protection Bureau (CFPB) under Rohit Chopra and the Biden administration finalized its “open banking” rule that was over a decade in the making, requiring financial institutions, credit card issuers, and other providers to hand over a person’s financial data and transfer it to any other provider at the customer’s request – for free. This would, the CFPB said, give consumers “greater rights, privacy, and security” over their personal data, boost competition, and improve customer service across financial products.
Despite the fact that some banks had allowed third party access because of “anticipated regulatory action” and “consumer demand”, within hours of finalizing the rule, banking industry groups filed lawsuits to block it. The Trump administration initially sided with the banks in the lawsuit. Then it gets confusing. The Trump administration has all but destroyed the CFPB, firing employees and kneecapping all Congressionally mandated work to protect the public and refusing to fund the agency. Now, what remains of the CFPB under Trump has decided to undertake yet another open banking rulemaking.
Large banks like JPMorgan Chase are exploiting this regulatory uncertainty to propose these exorbitant fees that favor large companies over startups and limit consumer choices. It’s ironic because, until recently, the largest financial institutions routinely allowed third-party providers to access their data at no charge, as long as the consumer consents. This free access permitted apps to build businesses, including to help consumers with financial management. But since access was not legally required, big banks continued to control the terms of the arrangement. That’s why JPMorgan Chase and other large banks are trying to shut the door to legally sanctioned open banking – right when they were about to lose their power.
The Big banks’ arguments for putting a stop to open banking are so spurious, they can easily be dismissed. First, the CFPB’s rule had been over a decade in the making, with bipartisan support in Congress and across administrations, signaling to industry the policy direction the U.S. was heading.
Second, the biggest banks claim that third parties want to exploit customer data, and that open banking “jeopardizes the safety and soundness of the banking system,” threatening data security. These concerns ring especially hollow from institutions that have presided over some of the largest data breaches in history. In reality, consumers explicitly authorize these connections to access budgeting apps, payment tools, and investment platforms. Moreover, the original CFPB framework would actually strengthen protections by replacing today’s inconsistent patchwork system with standardized safeguards.
Third, the banks insist they deserve compensation for access to consumers data. But under Dodd-Frank, banks are just custodians of this information – not the owner. What open banking really jeopardizes is banks’ control over data and its ability to monetize this access. And the fees won’t prohibit access – it will just act as yet another barrier for consumers and third-party companies.
Big banks’ motives here are apparent. Since the government was going to mandate open banking – and therefore competition – the largest banks are resisting it. It’s already standard practice in the UK, Singapore, and Australia, where it has driven innovation and improved consumer outcomes because companies have to offer better rates and features to keep their business.
By comparison, when dominant players can use their market position to rewrite rules and build moats that protect them from competition – like they can in the United States – it’s not just bad for innovation, it raises consumer prices and restricts consumers’ economic freedom.
Mandated and robust open banking represents a rare chance to create real competition in an industry dominated by a handful of big banks. Innovation depends on entrepreneurs having open access to existing financial infrastructures rather than negotiating one-off deals with banking giants who have every incentive to say no.
Congress must act to secure Americans’ right to control and share their financial information and pass a law granting consumers immediate access to their banking data, and put a stop to the practice of charging applications for access to consumer information necessary to provide financial services. Fee-free open banking offers a path toward an American financial system that embodies the country’s commitment to innovation and competition and gives consumers greater ability to control their own financial futures.