The Bank Policy Institute, Forcht Bank, and the Kentucky Bankers Association have filed a motion with the U.S. District Court for the Eastern District of Kentucky to vacate the Consumer Financial Protection Bureau's (CFPB) Section 1033 rule. The plaintiffs argue that the rule is unlawful and oversteps statutory authority.
In their motion, they stated: "This case involves an agency that drastically overstepped its statutory authority, injected itself into a well-functioning ecosystem that was thriving under private industry initiatives, and installed a burdensome, irrational and risky regulatory framework in its place. That regime is unlawful many times over."
The plaintiffs emphasize that a robust data-sharing environment already exists in the U.S., which allows consumers to share their data securely due to banks' investments in technology. They express concerns that the new rule could disrupt this ecosystem and compromise consumer financial data: "Banks welcome the new opportunities to serve their customers that open banking has created. But there are obvious risks. Consumer financial data can be extremely damaging in the wrong hands... [T]he Rule’s framework places customers’ most sensitive financial data at risk..."
The CFPB proposed this rule on October 31, 2023, and despite receiving significant criticism during its comment period, finalized it on October 22, 2024. Recently, even the CFPB acknowledged that the rule violates the law. The Financial Technology Association has intervened to defend it.
A timeline for legal proceedings includes several deadlines for motions and replies between June 29 and August 29 of this year.
The Bank Policy Institute represents various banks in regulatory matters and information security issues.