The CFPB said the rule will protect privacy and prevent fraud
of ConsumerAffairs
The Consumer Financial Protection Bureau (CFPB) has finalized a significant rule aimed at supervising the largest nonbank companies so-called fintech companies that offer digital funds transfer and payment wallet applications.
The new regulation targets companies that process more than 50 million transactions a year, ensuring they adhere to federal laws similar to those governing large banks, credit unions, and other financial institutions under CFPB supervision. The CFPB estimates that these widely used apps collectively handle more than 13 billion consumer payment transactions every year.
"Digital payments have gone from novelty to necessity, and our oversight must reflect this reality," said CFPB Director Rohit Chopra. The rule is designed to protect consumer privacy, prevent fraud, and stop illegal account closures.
The CFPB has steadily moved toward regulating digital payment apps because so many consumers have adopted them, making them more integral to daily commerce, rivaling traditional payment methods like credit and debit cards for both online and in-store transactions.
These services, often owned by major technology companies, have seen particularly strong adoption among middle and lower-income consumers. What started as a convenient cash alternative has evolved into a critical financial tool, facilitating over a trillion dollars in payments among consumers, friends, families, and businesses.
Big tech under a microscope
Previously, while banks and credit unions offering consumer payment services were subject to CFPB examinations, many large technology firms handling billions of transactions were not. The CFPB said it has been monitoring this emerging market, including consumer complaints and inquiries into Big Tech and peer-to-peer platforms. The new rule empowers the CFPB to supervise companies in several key areas:
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Privacy and Surveillance
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Errors and Fraud
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Debanking
The CFPB said its new rule grants it authority to conduct proactive examinations, ensuring compliance and preventing harm by detecting problems early. This supervision, it maintains, is crucial for assessing rapidly emerging risks, including outages that could affect millions of consumers.
The final rule includes significant changes from its initial proposal, notably raising the transaction threshold for supervision to 50 million annual transactions and limiting the rule's scope to U.S. dollar transactions. This move aligns with the CFPB's broader efforts to strengthen oversight of large tech firms in consumer financial markets.
Photo Credit: Consumer Affairs News Department Images
Posted: 2024-11-22 13:36:46
