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The Consumer Financial Protection Bureau (CFPB), the top consumer financial watchdog in the United States, has put forth a proposal to regulate digital payments and smartphone wallet services offered by tech giants. The CFPB argues that these services, such as Alphabet, Apple, PayPal, and Block’s CashApp, have grown to a scale and scope comparable to traditional payment methods but lack the necessary consumer safeguards.
The CFPB’s proposal aims to subject these tech companies to bank-like supervision. CFPB examiners would scrutinize their privacy protections, executive conduct, and compliance with laws against unfair and deceptive practices.
The proposal, if finalized, would cover approximately 17 companies responsible for over 13 billion payments annually. While GooglePay, ApplePay, PayPal, and CashApp are confirmed, the CFPB has not disclosed the names of other platforms that would be subject to these regulations.
Tech companies like Apple, PayPal, and CashApp have yet to respond to the proposal, while Google declined to comment.
This proposal represents a significant move by CFPB Director Rohit Chopra to assert the agency’s authority over Big Tech. Since taking office in 2021, Chopra has steadily increased scrutiny of the sector, investigating how these companies handle consumer data and launching inquiries into their payments platforms.
In a recent statement, Chopra noted that large technology firms have expanded into financial services traditionally provided by heavily regulated banks. The CFPB’s rule is aimed at preventing regulatory arbitrage by ensuring that tech companies and nonbank payments firms receive appropriate oversight.
Chopra has voiced concerns about the collection of consumer payments data by tech giants, citing limited boundaries, lack of transparency, and confusing corporate policies that could put consumers at risk of surveillance.
This proposal focuses on privacy compliance at tech companies with significant consumer data holdings, as many of their business models revolve around monetizing this data.
The rule would apply to companies handling more than five million transactions annually and seeks to promote fair competition by subjecting both traditional financial players and the tech sector to the same oversight.
Industry representatives, such as the Consumer Bankers Association and the Electronic Transactions Association, have offered cautious support for the proposal.
The proposal is now open for a notice-and-comment period, expected to conclude in early 2024.
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