The Federal Government has laid out its plans to reform the Consumer Data Right (CDR) scheme, including simplification of consent rules and a proposal to reduce onerous compliance and onboarding costs.

Treasury has opened consultation on these proposed changes, which it hopes will “reduce friction within the CDR” as well as improve the “cost-effectiveness, take-up, and [ability to] deliver better financial outcomes for consumers”.

Among the proposed changes include:

• a streamlining of consumer consent rules, with a proposal to enable multiple consents to be issued in a single action;
• a review of regulatory costs for implementing the CDR (which, the government acknowledges, remain “substantial” at present). The cost reform will be based on recommendations made in Heidi Richards’ Consumer Data Right Compliance Costs Review;
• a priority to align and interoperate the CDR with digital ID;
• an expansion of the CDR to the non-bank lending sector in early 2025, to be operational by mid-2026.

Under Treasury’s multiple consents – or ‘bundling’ – proposal, consumers will be able to give multiple consents with a single action for the collection, use and disclosure of their data. The hope is to reduce consumer fatigue in the existing consents process, which requires data recipients to request consumer approval for each instance of a CDR data transaction.

As well, Treasury is proposing to create a more “user-friendly” means for business consumers on the CDR to appoint a nominated representative to share consumer data on their behalf, noting the increasing prominence of cumbersome paper-based processes that have, it says, created “unnecessary barriers to participation in the CDR”.

The banking sector has been particularly critical of the progress of CDR uptake, which a recent report argued was used by only 0.3 per cent of customers.

Banks were also aggrieved by excessive adoption and compliance costs of the data sharing scheme, with the report finding that Australian banks had committed around $1.5 billion to develop and grow the CDR since 2018.

Financial services minister Stephen Jones said the Government was focused on “getting the existing CDR framework on a more sustainable footing”.

He added that, once the action initiation bill passes, the Government will not rush to declare new action types until the CDR is back on track.

The CDR has been beset by a number of challenges since its launch in 2020, with participants raising concerns over poor quality data, high accreditation costs, and low consumer awareness.

A number of participating fintechs have argued that competition objectives of the CDR have been largely unmet.

Tiimely (formerly Tic:Toc) chief executive Anthony Baum, who has urged the Government to push through action initiation legislation, argued that “unworkable data use and disclosure regulations, which impose a bespoke privacy regime on data received by the CDR, have created a significant barrier to its adoption and uptake”.

“This has stifled competition and innovation, undermining the very goals the CDR aims to achieve.”

The promise of action initiation – which would ACCC-accredited third parties to take action on behalf of a customer – may improve prospects for the CDR.

Effectively, this would enable fintechs to instruct a bank to, for instance, facilitate payments or even open or close an account.

Submissions in response to the consent and operational rule changes are due by 9 September 2024.