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The Consumer Financial Protection Bureau wants to expand its watchdog powers to digital wallets and payment apps operated by non-bank companies such as Apple, Google, PayPal and Block.
The agency on Tuesday proposed a new rule that would subject large companies — those that process more than five million financial transactions a year — to the same regulatory investigations the agency conducts on banks and credit unions. About 17 companies would be subject to the rule, according to an agency official.
“Payment systems are a critical infrastructure for our economy,” said Rohit Chopra, director of the CFPB. “The current rule would eliminate one opportunity for regulatory arbitrage by ensuring that large technology companies and other non-bank payments companies are subject to appropriate supervision.”
Mr. Chopra has been open about his desire for greater scrutiny of big tech companies. Last month, he warned of the “surveillance and censorship” such companies can impose on consumers’ financial transactions, citing the wealth of personal data that can be gleaned from the payment trail recorded by apps like PayPal’s Venmo and Block’s Cash App.
A September report from the agency highlighted the ways Apple and Google are using their dominance as mobile phone makers to drive customers to their own tap-to-pay digital wallet products.
According to an estimate cited by the consumer agency, consumers moved $893 billion last year through payment services — including digital wallets, payment apps and Zelle, a system owned by a consortium of banks — and keep billions of dollars stored in those apps. Americans have been slower than consumers in other countries to adopt digital payments, but the pandemic has greatly accelerated their use.
According to the consumer agency, nearly 56 million consumers made an in-store purchase last April using Apple Pay, the most popular mobile payment service in the United States. Starbucks’ digital app and Google Pay, the next most used retail payment apps, follow Apple.
The consumer bureau already has enforcement powers over digital payment companies because it regulates electronic fund transfers, but adding oversight would significantly increase its visibility into the operations of the market’s biggest players.
The public has until at least January to comment on the proposal. The agency can then get to work finalizing the regulations.
