US consumer finance watchdog levels the playing field for banks and big tech
The banking industry has been lobbying financial regulators to crack down on tech giants, arguing that they are putting consumers’ privacy at risk.
The Consumer Financial Protection Bureau (CFPB), the US consumer finance watchdog, has provided the banking community with a rare success by pushing down on big tech corporations that are progressively invading the banking sector. Although not usually aligned with Wall Street lenders’ interests, the move by the CFPB is seen as a positive development for banks, which have been under pressure from various fronts. The decision by the US regulator to treat big tech companies similarly to traditional banks by regulating ‘digital payments and smartphone wallet services’ is seen as levelling the playing field for competition from tech companies.
Why does it matter?
The US oversight of financial services provided by tech companies is fragmented, with companies needing to apply to each state for money transmitter licenses and being subject to oversight by various regulators. The CFPB authority would increase supervision, requiring companies like Apple, Google, and PayPal to comply with its rules on privacy protections, executives’ conduct, and unfair and deceptive practices. The banking industry has been lobbying financial regulators to crack down on tech giants, arguing that they are putting consumers’ privacy at risk. They have called for the CFPB to invoke its authority under the 2010 Dodd-Frank law to designate ‘larger participants‘ in the nonbank market for consumer financial products. The Bank Policy Institute, a Washington trade group, is among those leading this campaign. Big Tech firms, despite having plenty of resources to handle the new scrutiny, could be impacted by restrictions on their data-based business model. Representatives for large tech companies have accused the CFPB of trying to protect traditional lenders.