Thanks to a new regulation introduced by the Consumer Financial Protection Bureau (CFPB) on Tuesday, consumers will gain increased control over their financial data and privacy.

The Personal Financial Data Rights regulation mandates that financial institutions, credit card companies, and other financial service providers must allow individuals to access their personal financial data and transfer it to a different provider at no cost if requested by the consumer. This change will be implemented gradually, with larger institutions required to comply by April 1, 2026, while smaller entities have until April 1, 2030. However, certain small banks and credit unions will not fall under this rule.

This regulation will streamline the process for consumers wanting to switch financial providers, fostering competition among companies striving to attract and retain clients. The CFPB anticipates that this competition will lead to reduced loan costs and enhancements in customer service across payment, credit, and banking sectors.

“Instead of continually improving products or services, we see various methods for making it difficult to cancel or switch,” stated Rohit Chopra, director of the CFPB, in remarks given at the Federal Reserve Bank of Philadelphia. “Rather than being upfront with prices, we frequently encounter obscure fees that appear later in the process. Instead of simplifying transactions between different brands, we often find ourselves needing exclusive accessories that only function with certain products. These problems can end up costing consumers billions.”

What does the Personal Financial Data Rights rule entail?

This regulation allows consumers to access and share their data associated with bank accounts, credit cards, mobile wallets, payment apps, and other financial products, according to the CFPB.

Only consumers will have the authority, not third parties, to decide how their data can be utilized. By empowering Americans with more control over their data, the CFPB expects to reduce the use of “screen scraping,” a practice where consumers provide their account passwords to third parties, who then access their data through online banking.

“Screen scraping poses risks such as excessive data collection, data inaccuracies, and the potential for compromised login credentials,” Chopra explained.

How will this rule benefit Americans?

• The rule compels financial institutions to facilitate easier and free data transfers, making it simpler for Americans to switch to different financial providers. This increased competition is expected to result in better product rates and credit offers for consumers, according to the CFPB.

Young adults and others with limited credit histories will see significant benefits, as lenders can utilize data from other institutions—such as income and expense information—to provide better credit options or loan terms.

• Consumers will also be able to securely share their payment information, promoting direct payment methods (paying directly from an account to a vendor) rather than using credit or debit cards.

“This could also benefit merchants, who currently incur high fees for accepting payments through traditional networks like Visa and Mastercard,” Chopra noted. “Merchants are considering ways to incentivize these payment alternatives through cashback, discounts, and rewards.”

• Companies will be restricted from using consumer data for their own purposes, which will help prevent what the CFPB terms “bait-and-switch data harvesting.” This occurs when a company uses consumer data for offers that lead to unwanted targeted advertising.
• If a consumer decides to withdraw access, the company’s data access will be terminated right away, and the information will be deleted. Companies can only access a consumer’s data for up to a year unless the consumer grants permission again.

This rule guarantees that “consumers have control over their own financial data,” stated National Economic Advisor Lael Brainard. “The new regulation will simplify the process for consumers to change banks and select financial services that are more aligned with their needs, while also providing opportunities for innovative new businesses to enter the market and lower consumer costs.”