CFPB Proposes New Federal Oversight of Big Tech Companies and Other Providers of Digital Wallets and Payment Apps

WASHINGTON DC – The Consumer Financial Protection Bureau (CFPB) proposes to supervise large non-bank companies that offer services such as digital wallets and payment applications. Driven largely by Big Tech and other large technology companies, digital payment applications and wallets continue to grow in popularity, but many of the companies are not subject to CFPB supervisory examinations. Today’s proposed rule would ensure that these non-bank financial companies – specifically large companies that manage 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.

“Payment systems are critical infrastructure for our economy. These activities used to be conducted almost exclusively by supervised banks,” said CFPB Director Rohit Chopra. “Today’s rule would stifle an avenue of regulatory arbitrage, ensuring that large technology companies and other nonbank payments companies are subject to appropriate oversight.”

Digital applications now help millions of people send money to friends and family, as well as help them carry out a variety of retail-to-consumer payment transactions. These digital applications have a share of e-commerce payment volume similar to or greater than traditional payment methods such as credit cards and debit cards. Such applications also gained a significant volume of in-person retail spending. Amid increasing merchant acceptance of general consumer digital payment applications, low- and middle-income consumers use consumer digital payment applications for a portion of their total retail spending that rivals or exceeds their use of cash. However, complaints about these applications and the companies that manage them have increased in recent years.

Big tech companies and other companies operating in consumer finance markets are blurring the traditional lines that separated banking and payments from commercial activities. The CFPB concluded that this uncertainty could put consumers at risk, especially when the same traditional banking safeguards, such as deposit insurance, may not apply. Despite their impact on consumer finance, Big Tech and other non-bank companies operating in the payments sphere do not receive the same scrutiny and regulatory oversight as banks and credit unions. Although the CFPB has enforcement authority over these companies, the CFPB previously did not have examiners at many of these companies who carefully examined their activities to ensure they were complying with the law and monitoring their executives.

The proposed rule would subject the largest non-bank consumer digital payments companies to the CFPB’s authority to conduct examinations, helping to ensure consistent application of federal consumer financial laws across the market. Specifically, the proposed rule would help ensure that these large non-bank companies:

• Comply with applicable funds transfer, privacy, and other consumer protection laws: The CFPB would be able to oversee larger participants for compliance with applicable federal consumer financial protection laws, which include applicable protections against unfair, deceptive, and abusive acts and practices, rights of consumers transferring money, and privacy rights.
• Follow the same rules as banks and credit unions: Supervision of these large companies by the CFPB can promote a level playing field with depository institutions. Greater oversight of non-banks in this market would ensure that federal consumer financial protection law is applied consistently across non-deposit institutions and depository institutions in order to promote fair competition.

Today’s proposed rule, if finalized, would be one part of the CFPB’s efforts to carefully monitor the entry of large technology companies, including Big Tech giants, into consumer financial markets. In 2021, the CFPB warned big technology companies that they must adhere to federal consumer financial protection laws when using sophisticated behavioral segmentation techniques commercialize financial products and launched a public inquiry for more information on the risks posed by Big Tech payments platforms, along with potential policy solutions. In 2023, the CFPB followed up with a 2021 Solicitation to big technology companies for information about their payment system plans with more detailed orders for more information about the use of sensitive personal data, and highlighted the role of certain big technology companies in limiting competition and innovation in mobile payments.

In addition to these actions, the CFPB opened the Competition and Innovation Office to ensure that start-ups can compete with big tech companies in consumer finance, and established a supervisory technology program features technology experts and examiners focused on, among other things, the risks associated with Big Tech consumer financial products.

The Consumer Financial Protection Act gives the CFPB the authority to conduct supervisory examinations on all nonbank companies in the mortgage, payday loan, and private student loan industries, as well as those that serve as service providers to banks and credit unions. . Additionally, the CFPB may oversee individual entities that pose a risk to consumers as well as larger players in other markets.

The proposed rule would be the sixth in a series of CFPB rules to define the largest participants operating in markets for consumer financial products and services that play a substantial role in consumers’ everyday lives. The first five rules covered larger participants in consumer reports, consumer debt collection, student loan service, international money transfersIt is car financing.

Read today’s Notice of Proposed Rulemaking.

Comments must be received by January 8, 2024, or 30 days after the proposed rule is published on Federal Registerwhatever happens next.

Read Director Chopra’s October 2023 remarks on digital payments.

Consumers can lodge complaints about financial products or services by visiting the CFPB website or by calling (855) 411-CFPB (2372).

Employees who believe their company has violated federal consumer financial protection laws are encouraged to submit information about what they know to whistleblower@cfpb.gov.

The Consumer Financial Protection Bureau is a 21st century agency that implements and enforces federal consumer financial laws and ensures that markets for consumer financial products are fair, transparent and competitive. For more information visit www.consumerfinance.gov.

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