While other regulators have announced plans to stop issuing new rules or guidance during the transition period before President Trump goes back into office, the Consumer Financial Protection Bureau yesterday announced a final rule to supervise the largest nonbank companies offering digital funds transfer and payment wallet apps. These platforms include Apple, Google, Amazon, PayPal, Block, Venmo and Zelle, according to published reports.
Why it matters: The CFPB’s new rule aims to address growing concerns over consumer protections in the digital payments space, including privacy, fraud, and sudden account closures. This move expands CFPB’s supervisory authority to encompass large nonbank companies that handle more than 50 million consumer payment transactions annually, a market that collectively processes over 13 billion transactions each year. The regulator already had enforcement authority over these platforms, but said this new rule gives it the ability to “conduct proactive examinations to ensure companies are complying with the law.”
The big picture: Digital payment apps have quickly become a daily necessity, rivaling traditional payment methods like credit and debit cards. While banks and credit unions are already subject to CFPB supervisory examinations, many of these massive tech firms, which process trillions of dollars annually, have remained outside of the CFPB’s supervisory scope — until now.
Details: The rule gives the CFPB supervisory authority over key areas, including:
- Privacy and Surveillance: Ensuring that large technology companies comply with federal privacy regulations, allowing consumers to opt out of certain data collection practices.
- Errors and Fraud: Addressing consumer rights in cases of fraudulent or incorrect transactions, and focusing on risks such as elder fraud and service member scams.
- Debanking: Mitigating harms that arise when consumers lose access to their payment apps or face disruptions due to sudden account closures.
What they’re saying: “Digital payments have gone from novelty to necessity, and our oversight must reflect this reality,” said CFPB Director Rohit Chopra. He emphasized that the rule aims to protect consumers’ privacy, guard against fraud, and prevent arbitrary account closures.
Context: This rule is the latest step in a series of actions taken by the CFPB to regulate nonbank financial markets, following rules covering industries like debt collection, student loan servicing, and international money transfers. The CFPB has previously highlighted concerns about nonbank digital wallets lacking federal deposit insurance and their increasing role in consumers’ daily financial activities.
Between the lines: By expanding supervision, the CFPB aims to level the playing field between traditional financial institutions and big tech firms, ensuring all players are held to similar standards of consumer protection. This could impact how these companies use consumer data, a significant part of their business models.
What’s next: The rule becomes effective 30 days after publication in the Federal Register.
