Friday, November 10, 2023
"Driven largely by Big Tech and other large technology firms, digital payment apps and wallets continue to grow in popularity, but many of the companies are not subject to CFPB supervisory examinations," the CFPB wrote. "The rule proposed today would ensure that these nonbank financial companies – specifically those larger companies handling more than 5 million transactions per year – adhere to the same rules as large banks, credit unions, and other financial institutions already supervised by the CFPB."
While the CFPB’s request for comment period will remain open until Jan. 8, 2024, fintech, payments and financial service sectors are already weighing in on the measure; responses have been mostly supportive.
Scott Talbott, executive vice president of the Electronic Transactions Association, said, “ETA supports the stated goals of consumer protection and consistency of the proposed rule. We are evaluating the proposal through these lenses.”
Adam Rust, director of financial services at the Consumer Federation of America, concurred, calling the proposal a significant step forward. “Big Tech has used the information it can glean from its payment services to target consumers for financial products,” he said. “We applaud the Bureau for this proposal and the others it has taken to address the encroachment of Big Tech on consumer privacy.”
Rust further noted that under the proposal, the CFPB will supervise larger payment app and digital wallet providers for compliance with rules for the electronic transfer of funds, privacy provisions in the Gramm-Leach-Bliley Act, and against unfair, deceptive, or abusive acts and practices. All of these steps will advance the interests of consumers, he added, by holding Big Tech accountable to the same rules that apply to other payments providers.
Blurring lines between commerce and banking can potentially create conflicts of interest, Rust pointed out, stating that when large firms engage in both, they can undermine competition, destabilize the economy, and pose risks to consumers. It makes sense to separate the two, he noted, explaining that this has always been a fundamental principle of U.S. banking regulation. Big Tech payment apps and digital wallets, however, have been able to operate outside of these boundaries, which has given them an unfair advantage.
“The CFPB’s proposal will restore an imbalance in the marketplace between Big Tech and Main Street businesses,” he said. “Relatedly, the proposal fosters changes to support regulatory parity between Big Tech and insured depositories, ensuring that all entities facilitating payments comply with consumer financial protection laws.”
CFPB Director Rohit Chopra acknowledged that digital applications have helped millions of people send money to friends and family. In addition, he noted that these apps provide an array of benefits to consumers and merchants in the digital-first economy.
"Payment systems are critical infrastructure for our economy,” he said in a statement. “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 subjected to appropriate oversight."
The ultimate goal of the proposed rules is to protect all consumers, he added, including those with middle and lower incomes who use digital consumer payment applications. These rules will hopefully mitigate complaints about digital apps and service providers, which he noted have increased in recent years.
Additional information about the proposed ruling is available at www.consumerfinance.gov/about-us/newsroom/cfpb-proposes-new-federal-oversight-of-big-tech-companies-and-other-providers-of-digital-wallets-and-payment-apps/ 
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