The U.S. Consumer Financial Protection Bureau (CFPB) is pursuing increased regulatory authority over technology giants, including Google and Apple, in their provision of digital wallet and payment applications, according to the Financial Times report.
The CFPB has put forth a proposal aimed at subjecting non-bank tech companies offering digital payment services to regulatory frameworks akin to those governing traditional banks and credit unions. This move seeks to guarantee that the same consumer protection laws that apply to established financial institutions are also extended to the rapidly growing digital payment sector, which now caters to millions of users for fund transfers and retail payments.
Under the proposed rule, industry leaders, those handling over 5 million consumer transactions annually, would be subject to routine supervision by the CFPB’s examiners, accounting for approximately 17 companies that collectively hold an 88% market share. This sweeping regulation would cover peer-to-peer platforms like Venmo and Cash App and even cryptocurrency wallets.
This initiative highlights a transformative shift in the U.S. banking landscape, with an increasing number of consumers linking their bank accounts to digital wallets offered by tech giants like Apple and Google.
Rohit Chopra, the Director of the CFPB, emphasized the critical role payment systems play in the U.S. economy, stating, “Payment systems are critical infrastructure for our economy. 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.”
While the CFPB already possesses the authority to take enforcement actions against Big Tech and non-bank entities concerning consumer financial matters, the new proposal aims to empower its examiners to conduct more rigorous examinations of these businesses. The proposal is currently open for public comments before final implementation.
The CFPB argues that aligning the regulations for large non-bank companies with those governing banks and credit unions will foster fair competition between depository and non-depository institutions, a cause championed by Chopra, who has advocated for stricter antitrust policies based on his prior role at the U.S. Federal Trade Commission.
Digital payment apps have witnessed a substantial surge in usage, with their share of e-commerce payments now on par with, and in some cases surpassing, that of conventional payment methods like credit and debit cards.
Chopra has been vocal about his concerns regarding the ascendancy of Big Tech in the payment sector, warning that the U.S. could be moving toward a consolidated market structure, akin to that seen in China, blurring the lines between payments and commerce, potentially leading to excessive surveillance and even financial censorship.
Chopra’s firm stance on regulation has faced resistance from corporate America, which has argued that he is overstepping the CFPB’s authority. The agency, however, contends that it is merely enforcing existing law.
In 2021, the CFPB had requested comprehensive information from major tech companies regarding their payment systems, including data handling practices, user choice, and other consumer protection measures.
The consumer watchdog is determined to expand its authority, even as federal agencies grapple with the aftermath of a U.S. Supreme Court ruling that has raised questions about their rulemaking powers.
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