The Consumer Financial Protection Bureau yesterday issued a Notice of Proposed Rulemaking that would give the Bureau the power to regulate tech companies like Apple and Google which are playing a larger role in the payments ecosystem in the United States.
The Background: Any company that processes more than 5 million transactions per year would be subject to the rule. Currently, 17 companies meet that threshold, according to the CFPB. Those companies would now be subject to supervisory examinations by the Bureau to ensure fair competition and consumer protection over products like digital wallets and payment apps.
- “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,” said Rohit Chopra, the director of the CFPB.
What it Means: More companies in the accounts receivable management industry are accepting digital forms of payment, like Venmo and PayPal. Apps like CashApp and others are likely on the horizon. By regulating how these apps are used and putting them on a level playing field with debit cards and credit cards — which are already regulated by the Bureau — this development might hasten the adoption of digital wallets and new payment apps by collection operations.
The Reaction: Rep. Patrick McHenry [R-N.C.], the chair of the House Financial Services committee, said the proposed rule was a “step in the wrong direction” because it will impede the “adoption and development of innovative products and services.”
- “For a healthy, innovative, and competitive financial services ecosystem to function, consumers need to know that they are protected equally, regardless of who they do business with to meet their financial needs,” said Lindsay Johnson, the CEO of the Consumer Bankers Association.
What Happens Next: Comments on the proposed rule will be accepted through the beginning of 2024. After that, the Bureau can issue a final rule and enactment date.
