CFPB Official Questions JPMorgan Fees for Customer Data Access

At least one political appointee at the Consumer Financial Protection Bureau is raising concerns about fees JPMorgan Chase & Co. plans to charge data aggregators and financial technology companies for accessing customer data.

The official, in conversations with fintechs, is probing whether the agency’s bid to kill a Biden-era open banking rule in court may have opened the door for the charges, according to multiple people with knowledge of the situation who asked to remain anonymous to discuss internal deliberations.

The CFPB’s rule barred banks from imposing the charges, in a bid to make it easier for people to use third-party payment companies such as PayPal Holdings Inc.’s Venmo service and online investment firm Betterment.

But the CFPB under acting Director Russell Vought asked a federal judge in Kentucky to vacate the rule, in part because the agency now says it doesn’t have the power to block banks from charging data access fees.

JPMorgan, the country’s largest bank, has since informed fintechs it plans to charge significant fees that could upend much of the fintech business model and potentially shutter smaller online startups.

The confusion at the CFPB, and now throughout the marketplace, over data access fees highlights one cost of the Trump administration’s sweeping attempt to shutter the agency and roll back previous rules, said Graham Steele, the former assistant Treasury secretary for financial institutions in the Biden administration.

“By repealing the rule without fully thinking it through, they have caused a lot of problems in the marketplace and for consumers,” Steele, now an academic fellow at Stanford Law School and a fellow at the Roosevelt Institute, said.

The CFPB didn’t immediately respond to a request for comment.

CFPB Flip

The CFPB’s open banking rule, finalized in October, required banks to let customers freely share their deposit and credit card account information with third-party fintechs. The goal was to increase competition in the financial services marketplace.

The Bank Policy Institute, a trade group for the largest banks, sued to block the final rule hours after it was released. One of the trade group’s complaints was that the CFPB barred banks from charging for data access.

Siding with the banks, the CFPB in May asked Judge Danny C. Reeves in the US District Court for the Eastern District of Kentucky to vacate the rule.

Section 1033 of the Dodd-Frank Act, which required the data access rule, “does not authorize the Bureau to prohibit banks from charging any fees for maintaining and providing access through the required developer interfaces,” the CFPB’s filing said.

JPMorgan CEO Jamie Dimon sits on BPI’s board and has been a vocal critic of the CFPB’s rule, including the ban on charging for data access.

“It just costs a lot of money to set up the APIs and stuff like that to run the system protection,” he said on the bank’s second-quarter earnings call on July 15.

Trish Wexler, a JPMorgan spokesperson, said in a Thursday statement that data aggregators such as Plaid Inc., MX, and Finicity serving as a go-between for banks and fintechs don’t always transfer customer data responsibly.

They also charge a fee, she said, adding that JPMorgan has received more than 2 billion requests for customer data from data aggregators, with over 90% of those unconnected to a direct customer request to access information.

“Having a charging structure will ensure that data is provided only when customers request it, and that data middlemen are contributing to the system we built and maintain—and that their entire industry was built upon,” Wexler said.

Unclear Path

It’s unclear what action, if any, the CFPB might take to address the fee issue, and how high up the concerns go.

Vought has put most of the CFPB’s staff on administrative leave, including enforcement attorneys who would have the power to investigate how the fees affect consumers and competition.

The CFPB in recent months also moved to dismiss around 20 enforcement actions and water down a handful of Biden-era settlements.

The comments from the CFPB political appointee come as cryptocurrency companies and investors are starting to raise alarms about the bank fees.

JPMorgan’s move amounts to “Operation Chokepoint 3.0,” Alex Rampell, a general partner at venture capital firm Andreessen Horowitz, said in a Thursday LinkedIn post. He was referring to alleged efforts in previous administrations to pressure banks to stop doing business with clients and industries seen as politically controversial, such as crypto.

“Make no mistake: this isn’t about a new revenue stream,” he wrote. “It’s about strangling competition. And if they get away with this, every bank will follow.”

Marc Andreessen is a vocal supporter of President Donald Trump who has advised the administration on several issues.

So far only JPMorgan has said it will charge fees. But PNC Financial Services Group Inc. CEO Bill Demchak on a Wednesday call with investors said his bank was considering a similar move.