A U.S. consumer watchdog proposes rules for significant tech payments and digital wallets. Because digital prices and smartphone wallet services offered by internet firms match traditional payment methods in scope and size but lack consumer protections, the leading U.S. consumer finance watchdog urged regulators on Tuesday to regulate these services.
According to the proposal from the Consumer Financial Protection Bureau (CFPB), businesses like Alphabet (GOOGL.O), Apple (AAPL.O), PayPal (PYPL.O), and Block’s CashApp (SQ.N.) would be subject to oversight similar to that of banks.
Examiners from the CFPB would check the companies’ privacy policies, executive conduct, and compliance with laws prohibiting unfair and deceptive practices. According to a CFPB official, if approved, the plan would apply to around 17 businesses that collectively transmit more than $13 billion in payments annually. The government did not disclose whether more systems, besides GooglePay, ApplePay, PayPal, and CashApp, would be protected.
Google, Apple, PayPal, or CashApp did not immediately respond to a request for comment. The plan is CFPB Director Rohit Chopra’s long-awaited and bold attempt to establish the agency’s total control over Big Tech, a company he has regularly chastised for concerns about competition and privacy.
Since taking over as director in 2021, Chopra has gradually raised the CFPB’s level of industry monitoring. In 2021, the agency requested information about how Big Tech firms utilize consumer data, and the previous year, it initiated an investigation into their payment platforms.
In a statement on Tuesday, Chopra claimed that the internet industry had expanded into the highly regulated banking sector’s former market for financial services.
“Today’s rule would crack down on one avenue for regulatory arbitrage by ensuring large technology firms and other nonbank payment companies are subjected to appropriate oversight,” he stated.
In a lecture given last month, Chopra stated that the CFPB investigation had discovered that internet firms were gathering enormous quantities of payment information from customers with no restrictions, little transparency, and murky corporate practices, placing customers in danger of being surveilled by corporations like those in China.
Senior CFPB officials, speaking on Tuesday’s plan, stressed the need to investigate privacy compliance at these larger companies with vast amounts of consumer data, pointing out that selling that data is a critical component of many of their business models.
Prominent tech company representatives have already emphasized how hard they work to secure customer data. The plan on Tuesday would apply to businesses that process more than five million transactions annually. According to the agency, the regulation would also promote competition by guaranteeing that the Internet sector and conventional financial firms would be subject to the same level of scrutiny.
The Consumer Bankers Association referred to the plan as “a step in the right direction” in a statement.
“For a healthy, innovative, and competitive financial services ecosystem to function, consumers need to know that they are protected equally, regardless of who they do business with to meet their financial needs,” Lindsey Johnson, president and CEO of CBA, stated.
As a representative of banks, fintechs, and large tech firms, the Electronic Transactions Association stated that it aims “to ensure the proposal achieves the goals of consumer protection and consistent application of public policy for all players.” There is now a notice-and-comment process on the project, which is anticipated to finish in early 2024.