The United States Consumer Financial Protection Bureau (CFPB) has laid out a proposal today to bring technology companies that provide digital wallets and payment applications under stricter regulation. Noting the surge in the adoption of services like Apple Pay, the CFPB expressed concern that these tech giants do not currently endure the rigorous supervisory examinations that are required for banks.
Under the proposed regulation, tech entities managing more than five million transactions annually would be compelled to comply with the stringent regulatory framework traditionally applied to large-scale banks, credit unions, and other financial institutions under the CFPB’s watch.
The CFPB’s proposition emerges amidst a growing tide of customer grievances against tech companies in the consumer finance arena. The Bureau contends that such examinations are vital for ensuring tech companies‘ adherence to federal laws.
Highlighting the increasingly blurred lines between banking, payments, and commercial activities due to Big Tech’s presence in consumer finance, the CFPB cautioned against potential risks to consumers, especially where conventional banking safeguards, such as deposit insurance, may not be present.
Despite the significant influence of Big Tech and other nonbank players in the payments market, their operations have not been subjected to the same level of regulatory scrutiny as traditional banking institutions. While the CFPB does have enforcement power over these firms, it lacks the authority to conduct internal examinations to monitor compliance with the law.
With the introduction of this rule, the CFPB aims to ensure these tech companies are not only abiding by funds transfer regulations, privacy statutes, and consumer protection laws, but are also being held to the same standards as banks.
Should this rule take effect, it would significantly increase the CFPB’s oversight of financial services offered by companies such as Apple and Google.