Update – Recent developments in Open Banking – the Consumer Data Right
Please find our update on Open Banking below, along with details of recent developments and upcoming changes.
“Open Banking” is the application of the Consumer Data Right (CDR) in the banking sector and involves the collection, sharing and use of consumer banking data. The CDR is one way of facilitating Open Banking (by compelling financial institutions to provide access to consumer’s financial data).
In summary, the purpose of Open Banking is to allow consumers to compare various products and services, and to encourage greater competition in the banking sector. The Open Banking regime is also expected to promote product and service innovation, through the sharing of consumer data.
CDR will also apply to the energy and telecommunications sectors in future, and will eventually apply across other sectors of the economy.
The Consumer Data Right – Open Banking
The consumer data right regime was established through amendments to the Competition and Consumer Act 2010 (Cth). Under the consumer data right regime, individuals and businesses can directly access or direct that their data be shared with certain participants – Accredited Data Recipients.
The Competition and Consumer (Consumer Data Right) Rules 2020 have applied to Open
Banking since 1 July 2020 and customers of the big four banks have been able to share:
- data in relation to various bank accounts, including term deposits, cheque accounts, debit accounts, credit and charge cards, and other accounts since 1 July 2020 (Phase 1); and
- data in respect of home loans and personal loans since November 2020 (Phase 2);
- data in relation to various other accounts including business finance, investment loans, cash management accounts and consumer leases since 1 February 2021 (Phase 3).
Non-major ADIs will be required to comply with Phase 1 from 1 July 2021, Phase 2 from 1 November 2021, and Phase 3 from 1 February 2022.
The CDR also requires businesses to provide public access to information on specified products they offer.
Open Banking provides individuals and businesses with a right to access information held by businesses about the transactions they enter into as consumers and to authorise secure access to this data by accredited third party data recipients.
Accredited data recipients
Consumers are able to opt in to take part in Open Banking, so that their data may be shared with accredited data recipients, which may receive the consumer’s data.
To date, only a limited number of providers have been appointed as accredited third party data recipients and are listed on the CDR register. However, this number is expected to grow over time.Apart from the small number of technology companies, which have successfully applied for accreditation, two banks (data holders under the regime) have also successfully applied to become accredited data recipients – CBA and Regional Australia Bank, with Regional Australia Bank being the first party to become an accredited data recipient.
Recent developments in Open Banking
On 3 May 2021, the ACCC published CDR – Compliance Guidance for data holders in the banking sector – April 2021. The purpose of the guide is to assist data holders to understand and comply with the Open Banking CDR obligations.
Changes to Open Banking
The ACCC recently made the Competition and Consumer (Consumer Data Right) Amendment Rules (No. 3) 2020.
The new changes include the following:
- from 1 July 2021, introducing additional functionality to the rules in relation to consents. Consumers will be able to amend their existing consents and add or remove uses, data types, accounts or data holders, or to amend the duration of their consent;
- from 1 November 2021, the big 4 banks (and from 1 November 2022 for non-major ADIs), enabling CDR data to be shared by non-individuals and business partnerships.
Proposed further changes
Treasury confirmed in late April 2021 that it was drafting further CDR rule changes, which will be released for public consultation. The proposed changes include:
- allowing consumers to provide lawyers, accountants, tax professionals (including BAS agents), financial advisers and residential mortgage brokers with access to the consumer’s CDR data; and
- allowing accredited data recipients to share data with agents, or by ‘sponsoring’ them into the relevant system.
Author: Michael Mavromatis (Special Counsel)
This article was first published as a T-REX Bites article in the May 2021 edition of T-REX. T-REX is a Tailored Regulatory Exchange Service that monitors and legal and regulatory developments in the financial services and credit industries.