The Consumer Financial Protection Bureau proposed a new rule Tuesday that would require Big Tech companies that offer payment services — think Apple Pay or PayPal — to submit to supervisory examinations typically reserved for large banks.
CFPB Director Rohit Chopra said in a statement that these payment services “are critical infrastructure to our economy” that “used to be conducted almost exclusively by supervised banks,” but are increasingly provided by Big Tech companies.
“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,” he added.
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The rule proposal follows a more than two-year study of Big Tech payment offerings, following a request for information that targeted Google parent Alphabet
GOOG,
Apple
AAPL,
Facebook parent Meta
META,
Amazon
AMZN,
Block
SQ,
and PayPal
PYPL,
The CFPB found that digital payment applications now have a share of e-commerce payments that rivals traditional payment methods like credit cards and debit cards and a growing share of in-person payment volume.
The proposed rule would subject large nonbank payment companies that handle more than 5 million transactions per year to in-house supervision by regulators who will carefully scrutinize business practices to make sure these companies follow federal consumer-protection and privacy laws.
The CFPB said the rule would affect 17 companies that hold 88% market share in the payment space and process $13 billion in payments each year.
Chopra has previously raised concerns about how the use of payment apps may erode privacy, saying in a speech last month that he was concerned about the amount of data collected by Big Tech purveyors of payment products and the common practice of selling that data to third parties.
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The banking industry has also been pushing for the CFPB to increase its oversight of Big Tech payment products, arguing that it would level the playing field for banks and credit unions.
The CFPB said that consumer complaints related to payment applications have been rising in recent years, and the agency has worked to educate consumers that money stored in payment applications is not necessarily protected by federal deposit insurance, as is the case with traditional checking and savings accounts.
Another concern for regulators is unauthorized or fraudulent transfer of funds through payment apps. Chopra said earlier this year that the CFPB was focused on encouraging banks and payment-services providers to implement policies that will make consumers whole if they are tricked into sending money to scammers.
The public will have until Jan. 8, 2024 to submit comments on the proposal, and the CFPB will incorporate this input before implementing a final rule.
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