Consumer-Watchdog

CFPB Proposes Regulations for Tech Giant Payment Services

The Consumer Financial Protection Bureau (CFPB) has approached tech giants’ like Alphabet, Apple, PayPal, and Block's CashApp with a proposal of regulating their digital payment and smartphone wallet services. According to them, though these payment services transformed the way of daily transactions, they still fall behind in terms of security measures.

The CFPB, through their proposal intends to supervise these digital payment services like the regulatory bodies oversee traditional banks. To prevent unfair and deceptive practices, they will facilitate inspections by CFPB examiners to assess privacy protections, the conduct of company executives, and compliance with laws.

The Consumer Financial Protection Bureau has expanded the proposals for around 17 companies that annually process more than 13 billion payments collectively. In these 17 companies, the CFPB has revealed only the names of a few companies i.e., GooglePay, ApplePay, PayPal, and CashApp. The names of the remaining companies are yet to be disclosed.

CFPB Director Rohit Chopra has been a vocal advocate of asserting the agency's authority over Big Tech, particularly due to concerns related to privacy and competition. He has steadily increased scrutiny of the tech sector since assuming his role in 2021, including inquiries into how these companies handle consumer data and their payment platforms.

As director Rohit Chopra has stated, tech giants have expanded into financial services traditionally provided by heavily regulated banks. He said that the proposed rule aims to address regulatory arbitrage. Not only that, they will also ensure that large technology firms and other non bank payment companies go through proper scrutiny.

Another concern that the CFPB has highlighted is regarding the collection of consumer payment data by tech giants. They have underscored their limited transparency and confusing corporate policies. This raises concerns about consumer privacy.

The Consumer Bankers Association has a positive reaction towards the proposal. According to them, the consumers deserve an equal level of protection across this field. Meanwhile, the Electronic Transactions Association, representing banks, fintechs, and big tech companies, seeks to ensure the proposal aligns with consumer protection and consistent public policy application.