Jimin Kim/SOPA Images/Sipa USA via AP
With two weeks until the general election, I’m struck by how key agencies within the Biden administration continue to make progress. Last week, the Federal Trade Commission finalized its “click to cancel” rule, ensuring that it will be as easy to cancel a subscription as it is to sign up for one. On Monday, the FTC’s ban on fake online reviews took effect, designed to stop sleazy celebrity testimonials, reviews written by company insiders, and other distortions of the now-ubiquitous peer-to-peer recommendation systems we see virtually everywhere.
These aren’t revolutionary steps, just solid progress to make people’s lives better. And the Consumer Financial Protection Bureau completed another one today. The final personal financial data rights rule was released, which will allow bank and credit card customers to move their money to competitors seamlessly.
One of the terms you hear a lot in antitrust is “switching costs.” It can take time and effort to move your business from one competitor to another in some markets. This is especially true in banking. If you have direct deposit or automatic bill pay, you have to track down every transaction and make sure that you don’t miss anything. Often there’s a mistake in the changeover, which could have major financial consequences. It’s a huge hassle.
This rule from the CFPB intends to change that. Data like active transactions, account balances, payment triggers, account verification, payment information, and more will be made instantly available under the rule, without the financial institution charging fees for the privilege. Your banking history will be available at your new bank. There are privacy protections built into the rule as well.
Sometimes this is called the “open banking” rule, and the goal is to get competitors to actually compete rather than lock in customers. Section 1033 of the Dodd-Frank Act made this a priority 14 years ago. At the time, Occupy Wall Street and other advocates were promoting “Move Your Money” campaigns, to try to exact a cost on big banks for crashing the global economy, or just to make people feel good that they aren’t doing business with such scoundrels. But the high barriers to switching made it difficult to start a movement. The rule, which the Obama and Trump administrations never activated, finally will go live.
In these cost-conscious times, the rule could also force competition on price. If one bank is offering 3 percent interest on deposits and the other 1 percent, people could move their money without the hassle. Better terms for customers should result, and those with thin credit histories will be able to give lenders their banking data so they can prove their creditworthiness. Shopping around for the best deal in banking; imagine that!
Interestingly, the Biden White House released a statement on the CFPB rule. “The new rule will make it easier for consumers to switch banks and use financial services that better fit their needs, provide greater opportunity for innovative new businesses to compete, and lower costs for consumers,” said National Economic Council chair Lael Brainard.
I continue to believe that the best way to get an open-banking system is through a public option, issued from the U.S. Postal Service or some other government operator. The pilot program initiated in 2021 was designed to fail, unfortunately. But there will be opportunities to build on it in the future.
For the moment, we have the open-banking rule. At least some Biden administration officials have figured out that the goal of politics is to improve people’s lives.
