US strengthens oversight of major digital payment firms with new CFPB rule
Setting a transaction threshold and limiting the rule to US dollar transactions is part of the CFPB’s broader effort to regulate large tech firms in consumer finance, building on their past regulatory actions.
The US Consumer Financial Protection Bureau (CFPB) has finalised a rule to supervise the largest nonbank companies offering digital funds transfer and payment wallet apps, specifically those processing over 50 million transactions annually. That rule aims to ensure that these companies comply with federal laws, similar to banks and credit unions.
The CFPB estimates that the apps affected by this rule collectively process over 13 billion consumer payment transactions yearly. In addressing key concerns such as consumer privacy, fraud prevention, transaction errors, and the issue of ‘debanking’, where consumers lose access to their accounts, the rule will grant the CFPB the authority to supervise these companies proactively.
That will help detect problems early and protect consumers from disruptions such as account closures and fraudulent transactions. Furthermore, the transaction threshold for supervision has been raised to 50 million transactions annually, and the rule’s scope is limited to US dollar transactions. Therefore, this action is part of the CFPB’s broader effort to regulate large technology firms in consumer financial markets.
Digital payment apps are crucial for daily commerce, particularly among middle and lower-income consumers. The CFPB’s oversight will ensure these companies protect privacy, address fraud, and prevent service disruptions, building on past efforts to regulate sectors like debt collection and student loan servicing. This helps ensure that digital payment companies comply with consumer protection laws.