On November 7, 2023, the CFPB issued a notice of proposed rulemaking to supervise larger nonbank companies that offer services like digital wallets and payment apps. According to the CFPB, the rule proposed would ensure that these nonbank financial companies adhere to the same rules as large banks, credit unions, and other financial institutions already supervised by the CFPB.
From CFPB Director Rohit Chopra’s statement:
"Payment systems are critical infrastructure for our economy. These activities used to be conducted almost exclusively by supervised banks. Today's rule would crack down on one avenue for regulatory arbitrage by ensuring large technology firms and other nonbank payments companies are subjected to appropriate oversight."
The CFPB’ action is in response to the increasing popularity of digital payment apps and wallets, which are driven largely by Big Tech and other large technology firms. The CFPB noted that complaints about these applications and the companies that run them have also been rising in recent years. Big Tech and other nonbank payment companies do not receive the same level of regulatory scrutiny as banks and credit unions despite their impact on consumer finance. Thus, the CFPB’s proposed rule aims to ensure consistent application of federal consumer financial laws across the marketplace.
Specifically, the proposed rule would help ensure these large nonbank companies:
Adhere to applicable funds transfer, privacy, and other consumer protection laws. Big Tech and other companies operating in consumer finance markets will be subjected to applicable federal consumer financial protection laws, including UDAAP, rights of consumers transferring money, and privacy rights.
Play by the same rules as banks and credit unions. The CFPB’s supervision of these large companies can foster a level playing field with depository institutions and promote fair competition.
Interested parties are invited to submit their comments regarding the proposed rule on or before January 8, 2024, or 30 days after publication of the proposed rule in the Federal Register, whichever is later.
Read the CFPB’s announcement here.
The proposed rule can be found here.
