(Bloomberg) — Meta Platform Inc., Apple Inc., Alphabet Inc. and other companies that offer digital wallets and payments apps will come under the supervision of the U.S. Consumer Financial Protection Bureau under a new proposed rule aimed at giving non-banks more control over traditional counterparties. To behave like.Thank you for reading this post, don't forget to subscribe!
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Companies that handle more than 5 million transactions per year will be regulated like banks, credit unions and other financial institutions already overseen by the CFPB, the agency said in a statement Tuesday. When the rule is finalized, CFPB examiners will be able to monitor payment apps for compliance with federal money-transfer laws, as well as for unfair, deceptive or abusive conduct. The agency can take preemptive action if non-banks act illegally, but it cannot routinely monitor their operations under existing rules.
“Today’s rule will put an end to regulatory arbitrage by ensuring large technology firms and other non-bank payments companies are subject to appropriate oversight,” CFPB Director Rohit Chopra said in the statement.
The use of digital payments to store and send money — services like PayPal Holdings Inc.’s Venmo and Block Inc.’s Cash App — has grown rapidly in recent years as consumers use their phones and other electronic devices for transactions. While banks have largely facilitated these services in the past, technology companies have now stepped in, according to the CFPB, and many of the safeguards consumers take for granted, including deposit insurance, may not be in place.
The CFPB doesn’t have authority over deposit insurance, so it won’t be able to enforce those types of protections even if additional oversight is approved, but the agency will be able to learn if companies are making false claims.
“This CFPB proposal will mean that as more Americans use payment apps for their everyday transactions, they will be able to expect the same consumer and privacy protections from technology companies that they get from their banks – President Biden “Consistent with the broader agenda of fighting for consumers,” National Economic Council Director Lael Brainard said in an emailed statement.
This offer is strictly targeted at Apple Pay and Google Pay. The CFPB already oversees PayPal and Block, so the agency likely has at least some visibility over the activity of Venmo and Cash App.
An Alphabet spokesman declined to comment. Representatives for Meta, Apple, PayPal and Block did not respond to requests for comment. Scott Talbot, executive vice president of the Electronic Transactions Association, which represents the affected companies, said the group “supports the goals of stability and strong consumer protection” and will examine the proposed rule.
“By bringing supervisory attention on large non-bank payments firms in line with expectations for banks offering similar products, the CFPB is taking a step in the right direction,” said Lindsey Johnson, chief executive of the Consumer Bankers Association, which represents retail banks. ” In an emailed statement. “For a healthy, innovative and competitive financial-services ecosystem to function, consumers need to know that they are equally protected no matter who they do business with to meet their financial needs.”
The CFPB estimates that 17 companies representing 88% of total digital payments annually would be covered under the proposed rule. The agency estimates that those companies processed about 13 billion transactions representing $1.7 trillion in payments in 2021.
The CFPB is already investigating Venmo’s error-resolution processes, PayPal said in a Nov. 2 regulatory filing. The company said it is cooperating in the investigation.
Under Chopra, the CFPB is monitoring the entry of big tech companies into consumer payments and other financial services. Chopra’s first assignment as a director, in October 2021, is Apple, Google, Amazon Inc. And sought information from other big tech companies about their payments operations.
In September, the CFPB warned Apple over its policy of requiring iPhone users to make all payments through Apple Pay, rather than allowing direct integration with apps like Venmo. Google’s Android operating system, for its part, allows competitors to offer alternatives to Google Pay.
Comments on the regulator’s proposal are due by January 8 or 30 days after the publication of the proposed regulation.
(Updated with comments from the National Economic Council in sixth paragraph.)
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