CFPB Director Rohit during a Senate Banking, Housing, and Urban Affairs Committee hearing titled “Consumer Financial Protection Bureau Semiannual Report to Congress” held at the Dirksen Building on November 30, 2023.・Mr. Chopra testifies.
Tom Williams | Cq-roll Call Inc. | Getty Images
The Consumer Financial Protection Bureau on Thursday announced the final version of a rule it says will soon supervise nonbank companies that provide financial services such as payments and wallet apps.
The CFPB said in a release that tech giants and payment companies that handle at least 50 million transactions a year will be subject to the review, which aims to ensure that new entrants comply with laws that banks and credit unions abide by. The purpose is to confirm.
The CFPB said seven nonbank banks will be subject to a new investigation. payment services from apple, google and Amazon, Not just fintech companies paypal and block This change affects peer-to-peer services Venmo and Zelle.
The CFPB already had some authority over digital payment companies because it oversees electronic funds transfers, but the new rules allow it to treat tech companies more like banks. This would subject companies to “active inspections” to ensure compliance, allowing them to request records and interview employees.
“Digital payments have gone from novelty to necessity, and our oversight must reflect this reality,” said CFPB Director Rohit Chopra. “This rule helps protect consumer privacy, prevent fraud, and prevent unlawful account closures.”
A year ago, the CFPB said it wanted to expand its oversight to tech and fintech companies that provide financial services but avoid further scrutiny by partnering with banks. Americans are increasingly using payment apps as their de facto bank accounts, storing cash and making everyday purchases through their mobile phones.
The CFPB said Thursday that the most popular apps subject to the rule, which collectively process more than 13 billion consumer payments annually, are “particularly widespread” among low- and moderate-income households. “I am doing so,” he announced.
“What began as a convenient alternative to cash has evolved into an important financial tool that processes more than $1 trillion in payments between consumers and their friends, family, and businesses,” the regulator said.
Under the original proposal, companies that process at least 5 million transactions a year would be subject to some of the same inspections the CFPB conducts for banks and credit unions. The final rule raises that threshold to 50 million transactions and limits the expanded authority from about 17 companies to just seven, the agency announced Thursday.
Payment apps that only work at certain retail stores. starbucksare not covered by the rules.
The CFPB’s new rules are one of the rare instances in which the U.S. banking industry has publicly supported a regulator’s actions. Banks have long felt that tech companies entering financial services deserve more scrutiny.
Lindsey Johnson, president of the Consumer Bankers Association, said in an email that the rule “represents an important step forward for the CFPB, which regularly verifies that non-bank market participants are in fact complying with their obligations to consumers. ” said in an email.
The CFPB announced that the rule will become effective 30 days after publication in the Federal Register.
It’s unclear whether the incoming Trump administration will decide to change or repeal the new rules, but expanding oversight of tech companies could be in line with future CFPB leadership.
