CFPB proposes new federal oversight of big tech companies and other providers of digital wallets and payment apps

WASHINGTON DC – The Consumer Financial Protection Bureau (CFPB) proposes to oversee larger non-bank companies that offer services such as digital wallets and payment apps. Driven largely by Big Tech and other large technology companies, digital payment apps and wallets continue to grow in popularity, but many companies are not subject to the CFPB’s supervisory examinations. The rule proposed today would ensure that these nonbank financial companies – particularly larger ones that handle more than 5 million transactions per year – adhere to the same rules as large banks, credit unions and other financial institutions already supervised by the CFPB.

“Payments systems are critical infrastructure for our economy. These activities were conducted almost exclusively by supervised banks,” said CFPB Director Rohit Chopra. the companies are subject to adequate supervision.”

Digital applications now help millions of people send money to friends and family, as well as help them make a variety of retail payment transactions. These digital applications represent a similar or larger share of e-commerce payment volume than traditional payment methods, such as credit and debit cards. Such applications have also gained a significant volume of in-person retail spending. Amid growing merchant acceptance of general-purpose consumer digital payment applications, low- and middle-income consumers are using consumer digital payment applications for a share of their overall retail spending that rivals or exceeds use of cash. However, complaints about these applications and the companies that operate them have increased in recent years.

Big Tech and other companies operating in consumer financial markets are blurring the traditional lines that separated banking and payments from commercial activities. The CFPB has found that this confusion can put consumers at risk, especially when traditional bank guarantees themselves, such as deposit insurance, may not apply. Despite their impact on consumer credit, Big Tech and other non-bank payments companies do not receive the same regulatory scrutiny and oversight as banks and credit unions. Although the CFPB has enforcement authority over these companies, the CFPB previously did not have, within many of these companies, examiners to carefully scrutinize their activities to ensure that they comply with the law and monitor their executives.

The proposed rule would subject the largest non-bank consumer digital payment companies to the CFPB’s authority to conduct examinations, helping to ensure consistent enforcement of federal consumer financial laws across the market. Specifically, the proposed rule would help ensure these large nonbank corporations:

• Comply with applicable funds transfer, privacy and other consumer protection laws: The CFPB would be able to supervise larger participants for compliance with applicable federal consumer financial protection laws, which include enforceable protections against unfair, deceptive and abusive acts and practices, rights of consumers who wire money, and privacy rights.
• Play by the same rules as banks and credit unions: The CFPB’s oversight of these large companies can help level the playing field with depository institutions. Increased oversight of nonbank companies in this market would ensure that federal Consumer Financial Protection Act is applied consistently across nondepository and depository institutions to promote fair competition.

Today’s proposed rule, if finalized, would be part of the CFPB’s efforts to closely monitor the entry of large technology companies, including Big Tech giants, into consumer financial markets. In 2022, the CFPB warned Big Tech companies that they must adhere to federal consumer financial protection laws when using sophisticated behavioral targeting techniques to market financial products and launched a public inquiry to gain more insights into the risks posed by Big Tech payment platforms along with potential policy solutions. In 2023, the CFPB followed up Request 2021 to Big Tech companies for information on their payment system plans with more detailed orders to ascertain more information about their use of sensitive personal data, and highlighted the role of some Big Tech companies in limiting competition and innovation in mobile payments.

In addition to these actions, the CFPB has opened the Office of Competition and Innovation to ensure that nascent businesses can compete with big tech companies in the consumer finance space, and established a supervisory technology program made up of technology experts and examiners focused on, among other things, the risks associated with Big Tech’s consumer financial products.

The Consumer Financial Protection Act gives the CFPB the authority to conduct supervisory examinations of all nonbank companies in the mortgage, payday lending, and private student loan industries, as well as those serving as service providers to banks and credit cooperatives. Additionally, the CFPB can supervise individual entities that pose a risk to consumers, as well as larger participants in other markets.

The proposed rule would be the sixth in a series of CFPB rules to define larger participants operating in markets for consumer financial products and services that play a substantial role in the daily lives of consumers. The first five rules were for older participants consumer reporting, consumer debt collection, student loan service, international money transfersAND automotive financing.

Read today’s notice of proposed rulemaking.

Comments must be received by January 8, 2024, or 30 days after publication of the proposed rule in Federal Registerwhatever is next.

Read Director Chopra’s October 2023 remarks on digital payments.

Consumers can file complaints about financial products or services by visiting the site The CFPB website or by calling (855) 411-CFPB (2372).

Employees who believe their company has violated federal consumer financial protection laws are encouraged to submit information about what they know of informant@cfpb.gov.

The Consumer Financial Protection Bureau is a 21st century agency that implements and enforces federal consumer financial law and ensures that markets for consumer financial products are fair, transparent and competitive. For more information visit www.consumerfinance.gov.

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