The Consumer Financial Protection Bureau (CFPB) announced that it is proposing tighter regulation of big tech companies offering services such as digital wallets and payment apps, Reuters reports.
The agency said that despite the popularity of these payment services, many of the large technology firms that offer them are not subject to CFPB supervisory examinations.
The CFPB’s proposal would require that nonbank financial companies, specifically those handling over 5 million transactions per year, adhere to the same rules as banks, credit unions and other financial institutions currently supervised by the consumer watchdog.
The CFPB said that while it has enforcement authority over big tech and other nonbank companies, it has not had examiners inside the firms carefully scrutinizing their activities to ensure they are following the law and monitoring their executives.
“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 crack down on one avenue for regulatory arbitrage by ensuring large technology firms and other nonbank payments companies are subjected to appropriate oversight.”
The bureau noted that many consumers use digital consumer payment applications for a share of their overall retail spending that rivals or exceeds their use of cash. But officials said there have been a rising number of complaints about these apps and the companies that run them.
The CFPB said the proposed rule would help ensure that large nonbank companies adhere to applicable funds transfer, privacy, and other consumer protection laws. The CFPB would be able to supervise larger participants to make certain they are complying with applicable federal consumer financial protection laws, which includes applicable protections against unfair, deceptive, and abusive acts and practices, rights of consumers transferring money, and privacy rights.
The bureau said its supervision of these large companies “can foster a level playing field with depository institutions. Greater supervision of nonbanks in this market would ensure federal consumer financial protection law is enforced consistently between non-depository and depository institutions in order to promote fair competition.”
Comments on the proposed rule must be received on or before January 8, 2024, or 30 days after its publication in the Federal Register, whichever is later.
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