In these digital pages, Alan Sears, the founder of the Alliance Defending Freedom, recently defended the Consumer Financial Protection Bureau’s so-called open banking rule. The rule is the regulatory offspring of Section 1033 of the Dodd-Frank Act. Sears’s essay proceeds from a sound and worthy premise: a love of religious freedom and robust competition. But it loses itself in a thicket of misapplied principles and misconceptions about its subject.

The open banking rule, finalized in 2024, required banks to transfer customers’ financial data to third parties, including financial technology firms and data aggregators. Besides its heavy-handedness and the nearly impracticability of certain of its provisions, the construction of the data sharing regulations badly endangers Americans’ privacy (dangers of which Sears says nothing). It should be no wonder, considering that the rule was molded, proposed, and imposed by former President Joe Biden appointee Rohit Chopra, an arch progressive incapable of regulatory restraint. The Trump administration, after preparing to abandon the rule in the first months of 2025, now seems eager to preserve it.

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Sears’s heroes are the providers of financial services products and data aggregators (many of them with ties to churches) to which, per the open banking rule, consumers’ financial data must be made available. His villains are the banks, by which those data are stored. He endeavors to make two stories into one. The banks, he argues, seek to “[control] who has access to banking institutions and resources,” summoning as evidence both the fees they have begun to charge the financial services that utilize their digital architecture and, attempting to establish an analogue, cases of banks severing relations with conservative customers. 

However, cases of debanking — of ideologically driven depravations of financial services — have little to do with the question of the open banking rule. And debanking, scandal though it was, ought not to be deployed as a catch-all excuse for all manner of ill-conceived regulatory proposals for the financial-services industry. 

If banks wish to deny a third party’s request for data outright, the wish stems from concern for the customer’s privacy, not some monomaniacal urge to suppress conservatism. Under the rule, a bank, upon detecting unsavory or lax data practices, could not protect its customer by withholding his or her data from the offending third party. As the complaint in a 2024 legal challenge to the rule puts it, “Fintech companies … may offer services to customers in exchange for targeted advertising or referral fees for other services. Data aggregators, for their part, are literally in the business of collecting and selling as much customer data as possible.” Bank customers depend upon financial institutions and other warehouses of data to ferret out bad practices because they lack the technical capacity to do so themselves.

Sears invokes the data aggregator Plaid as a likely victim of banks’ purportedly anticompetitive machinations. He does not note that, in 2021, Plaid succumbed to a $58 million settlement following allegations that it had “obtained and used bank account credentials and financial information without consent,” as summarized by Reuters. Plaid seems to have reformed its practices since. Yet shoddy privacy policies are endemic in the digital age, due either to malice or human error. In policy terms, prudent regulation will not raze the bulwarks of defense — erected by banks or other actors in the market — that safeguard Americans’ privacy.

Complaints about the fees now levied on third parties seeking access to customer data, which Sears deems anticompetitive, withstand scrutiny no better. However, his narrative denies banks the same charity given to third parties. The expensive digital architecture banks have constructed to facilitate data sharing has become greatly imposed upon, states a July internal memo at JPMorgan Chase. The count of data requests reached 1.89 billion in the month of June. “JPMorgan says it bears the rising costs from maintaining the infrastructure needed for the surge in volumes, as well as elevated fraud claims linked to payments made in the fintech ecosystem,” CNBC relates. 

In Milton Friedman’s phrase, “There’s no such thing as a free lunch.” It is a truism, but the third-party financial products and data aggregators hope to convince the Trump CFPB to require the banks to pay for theirs.

Sears advocates “requiring banks to abide by both the letter and spirit of the open banking rule.” Conservatives know that the authority of the administrative state’s pronouncements is derivative, defined and bound by discrete delegations laid down in congressional statute. The “letter and spirit” after which conservatives ought to inquire is that of Section 1033 of the Dodd-Frank Act, not the brainchild of Chopra. Sure enough, as the plaintiffs in the 2024 suit contended, the CFPB very likely trespassed beyond the mandate created in the mere 330-odd words found in that provision. Before meeting with the violent objections of the third parties’ lobbyists, the Trump administration agreed, writing in a court filing, “Bureau leadership has determined that the Rule is unlawful and should be set aside.” 

RESTORING AMERICA: TRUMP’S OPEN BANKING RULE IS NEEDED TO PROTECT RELIGIOUS LIBERTY

In the American republic — ruled by the law, and not by men, ruled by the representatives of the people, and not the bureaucrats of the administrative state — the inquiry ought to terminate here. 

Sears’s ends are laudable and broadly shared, but the open banking rule is an inapt and dangerous tool. The unforeseen consequences of the regulation’s shortcomings will endanger Americans, including godly Americans and religious institutions.

David B. McGarry is the research director at the Taxpayers Protection Alliance.