Do you use payment apps like Venmo and PayPal?
On Thursday, the Consumer Financial Protection Bureau finalized a rule to supervise the largest nonbank companies offering digital funds transfer and payment wallet apps.
The rule applies to companies – those handling more than 50 million transactions per year – so they’ll be required follow federal law just like large banks, credit unions, and other financial institutions already supervised by the CFPB.
The CFPB estimates that the most widely used apps covered by the rule process more than 13 billion consumer payment transactions annually.
“Digital payments have gone from novelty to necessity and our oversight must reflect this reality,” CFPB Director Rohit Chopra said in a statement. “The rule will help to protect consumer privacy, guard against fraud, and prevent illegal account closures.”
Digital payment have become popular, rivaling traditional payment methods such as credit cards and debit cards for online and in-store purchases. Some of these apps are owned by the world’s largest technology conglomerates.
While banks and credit unions offering consumer payment services are examined by the CFPB, many of these large technology firms handling billions of transactions aren’t, Chopra said.
The CFPB has monitored consumer complaints and launched an inquiry into Big Tech and peer-to-peer platforms offering popular payment apps.
The final rule will enable to the CFPB to supervise companies in key areas including:
- Privacy and surveillance.
- Errors and fraud.
- Debanking when access to app lost.
While the CFPB has always had enforcement authority over these companies, the new rule gives the agency the authority to conduct examinations to make sure companies are complying with the law in these and other areas.
The rule will be effective 30 days after publication in the Federal Register.
