The Moment of Truth in Open Banking: Section 1033

You’ve heard about the October Surprise. The term refers to politics, to a bombshell or report that turns a race on its head. And sometimes the event brings clarity – the determination of the Direction of the race and who the ultimate winner could be.

In financial services and especially in the brave new world of open banking in the USAwe could have a surprise in October to: By the end of the month, there could be a final rule from the Consumer Financial Protection Bureau (CFPB) regulating how financial data must be made available to consumers and third parties — At the same time, how this data is formatted and distributed is standardized.

Depending on where you look, some observers expect the Section 1033 rule to be released soon, perhaps by the end of October. perhaps later in autumn.

Reached From PYMNTS on Wednesday, the CFPB declined to comment on the timeline.

And yet the pendulum swings one way or another, It will have some real implications for banks.

The absence of a rule would leave things in a state of anticipation and creation Headwind to wider acceptance of open banking.

Issuing a rule, at least as banks claim, would trigger a battle to meet a time frame that some critics say is a problem unrealistic short runway.

At a high level, Section 1033 has been around for some time. It was part of the Dodd-Frank Wall Street Reform and Consumer Financial Protection Act passed in 2010. The abbreviation is to call it “Rule 1033” or “Section 1033” and the longhand is the “Personal Financial Information Rights Rule.”

Back about A year ago, the CFPB proposed a rule implementing Section 1033, in which banks and non-depository institutions would share different aspects of Customer level But data, including but not limited to transaction information and account balances, would touch everything from credit cards to traditional checking accounts.

The proposed rules would Banks must share this data in a standardized format via APIs. There is hope for the third parties who access the data permitted by the consumer Information will help shape the design and delivery of personalized, digital financial services products and innovations.

The consumers, as the CFPB has said Announcement of the proposed rule last year, have a choice, as office director Rohit Chopra explains: “go away from bad service.”

Through In the months that followed, the CFPB also opened the doors for companies to apply to become standard setters and help establish open banking data sharing practices. The deadline for comments on this topic was Wednesday (October 16th). Beyond FDX’s initial application, a visit to the CFPB website at the time of this writing doesn’t reveal it other submissions.

Banks are weighing up

The timing of the final rule will be important, because it takes effect 60 days after issuance. The Federal Register and Proposed Rule, The guidelines available here detail that depending on the asset size of the banks or the return on sales (annualized) of the non-depository institution (e.g. FinTechs), the compliance time frame can be up to four years (for smaller and non-custodial ones banks). -Depository institutions) or just a few months for the largest players who presumably have the resources to work with new formatting or system requirements.

The banks charge fees — according to this Letter from trade groups and The Clearing House – The Updating everything from publicly accessible websites to new service flows to data access Agreements – will take some time and they have requested an extension.

PYMNTS reached out to TCH, which was unable to comment at this time.

According to the July letter, “the companies subject to the rule will likely have numerous questions about its requirements and parameters, which will likely result in ongoing dialogue with the CFPB as these companies prepare for implementation,” the trade groups said and TCH. “Based on our best estimates of the work that needs to be completed, we estimate there will be a period of at least two years the output of a final regulation would be appropriate.

“This will allow customers of these institutions (who have already developed APIs that enable data sharing with third parties for over 50 million customers) in order to continue to reliably benefit from the advantages of data exchange” the letter continued. “A shorter compliance period will require data providers to reallocate operational resources to meet the deadline as companies scramble to adapt existing data exchange systems to the new rules, which would likely impact services for tens of millions of consumers.”

The end of October is just weeks away — and all eyes are on the CFPB, where the “will they/won’t they” vigilance continues.