The Consumer Financial Protection Bureau (CFPB) on Tuesday proposed new oversight requirements for larger nonbank companies that offer services like Apple Pay. The CFPB says payment services like Apple Pay are growing in popularity, but the companies offering these services are not subject to the same “supervisory examinations” that banks undergo.
The newly proposed rule would require companies that handle more than five million transactions per year to adhere to the same rules as large banks, credit unions, and other financial institutions that are supervised by the CFPB.
The CFPB says it is seeing an increasing number of complaints about tech companies dabbling in the consumer finance market. The bureau argues that examiners should be allowed to determine if they are following the laws.
Big Tech and other companies operating in consumer finance markets blur the traditional lines that have separated banking and payments from commercial activities. The CFPB has found that this blurring can put consumers at risk, especially when the same traditional banking safeguards, like deposit insurance, may not apply.
Despite their impact on consumer finance, Big Tech and other nonbank companies operating in the payments sphere do not receive the same regulatory scrutiny and oversight as banks and credit unions. While the CFPB has enforcement authority over these companies, the CFPB has not previously had, inside many of these firms, examiners carefully scrutinizing their activities to ensure they are following the law and monitoring their executives.
The proposed rule would subject larger nonbank digital consumer payment companies to the CFPB’s authority to conduct examinations, helping to ensure consistent application of federal consumer financial laws across the marketplace. Specifically, the proposed rule would help ensure these large nonbank companies:
- Adhere to applicable funds transfer, privacy, and other consumer protection laws: The CFPB would be able to supervise larger participants for compliance with applicable federal consumer financial protection laws, which includes applicable protections against unfair, deceptive, and abusive acts and practices, rights of consumers transferring money, and privacy rights.
- Play by the same rules as banks and credit unions: The CFPB’s supervision of these large companies can foster a level playing field with depository institutions. Greater supervision of nonbanks in this market would ensure federal consumer financial protection law is enforced consistently between non-depository and depository institutions in order to promote fair competition.
