The Consumer Financial Protection Bureau (CFPB) is calling for new federal regulatory oversight of nonbank companies that offer digital wallets and payment apps to consumers.
The agency’s proposal aims to bring Big Tech companies and financial technology firms under the CFPB’s regulatory umbrella by subjecting companies handling more than 5 million transactions per year to the agency’s supervisory examinations.
"Payment systems are critical infrastructure for our economy," CFPB Director Rohit Chopra said. "These activities used to be conducted almost exclusively by supervised banks. Today’s rule would crack down on one avenue for regulatory arbitrage by ensuring large technology firms and other nonbank payments companies are subject to appropriate oversight."
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Millions of people use digital apps for financial services like sending money to family and friends as well as for consumer retail purchases, and the CFPB noted that such apps have a share of e-commerce payments volume "that is similar to or greater than traditional payment methods such as credit cards and debit cards."
The CFPB added that as the use of digital payment apps and wallets has increased, the number of "complaints about these applications and the companies that run them have been rising in recent years."
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The CFPB estimated that the regulation would cover about 17 providers of general-use digital consumer payment apps that meet the rule’s transaction threshold. Although it didn’t specify which entities would be covered within the proposed rule, it may eventually apply to payment platforms such as Google Pay, Apple Pay, PayPal and CashApp that offer such services.
Under the rule, large nonbank companies that offer digital payments and wall apps would be supervised by the CFPB for compliance with applicable federal consumer financial protection laws, including protections against unfair, deceptive and abusive acts and practices, rights of consumers transferring money and privacy rights.
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The CFPB’s goal with the rule is to ensure that consumer financial protection laws are enforced consistently between non-depository and depository institutions to protect fair competition.
The proposed regulation is now in a public notice and comment period that’s expected to end in early 2024. After that period concludes, the CFPB may submit a final rule.
Reuters contributed to this report.
