The U.S. Consumer Financial Protection Bureau (CFPB) is proposing a new regulation that could bring digital wallet and payment app providers, such as Meta and Apple under stricter federal supervision.
This move aims to regulate non-bank financial institutions similarly to their traditional counterparts.
According to a statement released on Tuesday by the CFPB, companies processing over 5 million transactions annually could be regulated like banks, credit unions, and other financial institutions that are already under the bureau’s supervision.
Under the proposed rule, auditors from the CFPB would have the authority to ensure payment applications comply with federal laws regarding money transfers and protect against unfair, deceptive, or abusive practices. While the CFPB can currently intervene if non-banking institutions operate unlawfully, it cannot regularly supervise their operations under existing rules.
CFPB Director Rohit Chopra stated, “The proposed rule will take a significant step towards eliminating regulatory arbitrage by ensuring that large tech companies and other non-banks face appropriate oversight.”
The proliferation of digital payments for storing and transferring money has led to the rise of services like PayPal’s Venmo and Block’s Cash App in recent years. Consumers are increasingly using their phones and other electronic devices to conduct transactions.
While banks have traditionally facilitated these services, technology companies are now entering this space. According to the U.S. consumer watchdog, the protections consumers have come to expect, including deposit insurance, may not apply in these new settings.
The CFPB does not have the authority to enforce deposit insurance, and thus will not be able to impose such protections with the additional oversight approval. However, it will be able to determine if companies are making false claims.
The proposal is expected to directly target payment services like Apple Pay and Google Pay. The CFPB already oversees PayPal and Block, so the agency is likely to extend at least some supervision over Venmo and Cash App activities. A spokesperson for Alphabet declined to comment. Representatives for Meta, Apple, PayPal, and Block did not immediately respond to requests for comment.
Scott Talbott, Senior Vice President of Government Affairs for the Electronic Transactions Association, which represents affected companies, said the group “supports the goals of uniformity and strong consumer protection” and will review the proposed rule carefully.
