Washington has a habit of producing policies that sound consumer-friendly but ultimately are the opposite. The Biden administration‘s approach to personal financial data is a prime example — and one that the Trump administration has the opportunity to correct.
At issue is a sweeping regulation finalized by former Consumer Financial Protection Bureau Director Rohit Chopra in October 2024, just weeks before President Donald Trump’s reelection. The rule sought to implement Section 1033 of the Dodd-Frank Act, a provision intended to give consumers access to their financial information. In practice, however, the CFPB’s interpretation went far beyond that goal.
Under the rule, banks, credit unions, and financial technology companies would be forced to share sensitive consumer financial data with third parties whenever requested, regardless of security risks, cost burdens, or meaningful consumer consent.
Data sharing can be beneficial when done responsibly. But mandated sharing without adequate safeguards puts privacy and security at risk, possibly exposing millions of Americans to fraud and misuse of their most sensitive information.
The 1033 regulation would also impose costly technical requirements on financial institutions, including the creation of application programming interfaces, while barring them from charging fees to offset the substantial investment required to protect consumer data. Meanwhile, data aggregators would be free to profit from monetizing that information. The result is a system where costs and liability fall on banks and consumers, while third parties reap the rewards.
Unsurprisingly, the 1033 rule would threaten serious unintended consequences. Increased compliance costs would ultimately be passed on to customers, making everyday banking more expensive. Worse, insufficient security standards could leave consumer data vulnerable to breaches.
Fortunately, enforcement of the rule has been frozen by a court order, giving new leadership under the Trump administration time to reassess and chart a better course.
That course should not involve simply tweaking or rebranding the same flawed framework. The CFPB must return to a narrow reading of Section 1033, one that reflects what Congress actually intended. The bureau has repeatedly attempted to expand its authority beyond statutory limits, effectively setting prices and dictating how private actors operate in the marketplace. That approach undermines competition, innovation, and consumer choice.
Any new rulemaking must avoid fee bans, respect private contractual agreements, and refrain from government interference in market-negotiated data-sharing arrangements. Regulators should consult with relevant agencies, prohibit insecure practices such as screen scraping, and clearly define liability standards in the event of data breaches.
Financial innovation does not need redundant regulation to survive. Banks and credit unions already partner with financial technology firms through voluntary agreements that allow consumers to access and move their data safely, such as when linking a bank account to pay rent or manage expenses. Government mandates will only disrupt these functioning arrangements and increase costs for consumers.
The broader context also matters. Conservatives have long sought to rein in or dismantle the CFPB, and they are closer than ever. With the agency operating under funding constraints, now is not the time to grant it sweeping new authority through an unfunded mandate that could revive its power for future administrations.
Consumers are capable of making informed choices about their financial services. Smart regulation should protect both freedom and security, not sacrifice one for the illusion of the other.
The Trump administration has an opportunity to restore balance, safeguard privacy, and ensure that well-intended policies don’t end up hurting the very people they claim to protect. We hope Trump’s team will favor good governance and outcomes over flawed intentions, however good they may seem.
Carrie Sheffield is a senior policy analyst for the Center for Economic Opportunity at Independent Women.
