CFPB to Supervise Big Tech Payment Services
Hey FinTech Fanatic!
A significant regulatory shift is reshaping the digital payments landscape as the Consumer Financial Protection Bureau (CFPB) extends its supervisory reach to major tech companies and FinTechs.
The finalized rule will bring companies processing over 50 million transactions annually under the same regulatory scrutiny as traditional banks - a notable increase from the initially proposed 5 million transaction threshold, which would have affected 17 companies instead of the current seven.
The scope is substantial, covering seven nonbank giants including Apple Pay, Google, Amazon, PayPal, Block, and Venmo. These platforms collectively process more than 13 billion consumer payments annually and have gained "particularly strong adoption" among low- and middle-income users.
"Digital payments have gone from novelty to necessity and our oversight must reflect this reality," states Rohit Chopra, CFPB Director, adding that "the rule will help to protect consumer privacy, guard against fraud, and prevent illegal account closures."
While the CFPB already had some authority over digital payment companies through its oversight of electronic fund transfers, this new rule enables them to conduct proactive examinations, demand records, and interview employees - essentially treating these tech companies more like traditional banks.
Payment apps that only work at a particular retailer, like Starbucks, are excluded from the rule. Interestingly, this is one of those rare instances where the U.S. banking industry has publicly supported the CFPB's actions.
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