CFPB Director Rohit Chopra before the Senate Committee on Banking, Housing, and Urban Affairs entitled “Semi-Annual Report to Congress of the Consumer Financial Protection Bureau” on November 30, 2023 in the Dirksen Building ” testified at the hearing.
Tom Williams | Cq-roll Call Inc. | Getty Images
this Consumer Financial Protection Bureau The final version was released on Thursday rule It said it would soon regulate non-bank companies that provide financial services such as payments and wallet apps.
Tech giants and payments companies that process at least 50 million transactions a year will be scrutinized, the CFPB said in a report, a move aimed at ensuring new entrants comply with the same laws that banks and credit unions comply with. release. This will include popular services apple and Googleand payment companies, e.g. PayPal and clogged.
While the CFPB has some power over digital payments companies due to its regulation of electronic funds transfers, the new rules allow it to treat technology companies like banks. It subjects companies to “proactive inspections” to ensure legal compliance, allowing them to request records and interview employees.
“Digital payments have moved from novelty to necessity, and our regulations must reflect this reality,” said the CFPB Director. Rohit Chopra. “This rule will help protect consumer privacy, protect against fraud and prevent illegal account closures.”
A year ago, the CFPB explain It wants to extend regulation to technology and fintech companies that provide financial services but avoid more scrutiny by partnering with banks. Americans are increasingly using payment apps as de facto bank accounts to store cash and make everyday purchases on their phones.
The CFPB said Thursday that the most popular apps covered by the rule collectively process more than 13 billion consumer payments annually and have experienced “particularly strong adoption” among low- and moderate-income users.
“What started as a convenient alternative to cash has grown into an important financial tool, processing more than a trillion dollars in payments between consumers and their friends, family and businesses,” the regulator said.
The original proposal would have made companies that process at least 5 million transactions a year subject to some of the same inspections that the CFPB conducts on banks and credit unions. The agency said Thursday that threshold has been raised to 50 million transactions in the final rule.
Payment apps that only work with specific retailers, e.g. Starbucksare excluded from the rules.
The CFPB’s new rule is one of the rare instances of the U.S. banking industry publicly supporting regulators’ actions; banks have long argued that technology companies moving into financial services should be subject to greater scrutiny.
The CFPB said the rule will take effect 30 days after being published in the Federal Register.
