US consumer watchdog proposes rules for Big Tech payments, digital
wallets
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[November 08, 2023]
By Douglas Gillison and Hannah Lang
WASHINGTON (Reuters) -The top U.S. consumer financial watchdog on
Tuesday proposed to regulate tech giants' digital payments and
smartphone wallet services, saying they rival traditional payment
methods in scale and scope but lack consumer safeguards.
The Consumer Financial Protection Bureau's (CFPB) proposal would subject
companies like Alphabet, Apple, PayPal and Block's CashApp to bank-like
supervision, with CFPB examiners inspecting their privacy protections,
executives' conduct and compliance with laws barring unfair and
deceptive practices.
If finalized, the proposal would cover about 17 companies that together
send more than 13 billion payments annually, according to a CFPB
official. The agency declined to name the other platforms that would be
covered beyond GooglePay, ApplePay, PayPal and CashApp.
Apple, PayPal and CashApp did not immediately respond to a request for
comment. Google declined to comment.
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The proposal marks a long-anticipated and ambitious move by CFPB
Director Rohit Chopra to assert the agency's full authority over Big
Tech, a sector he has frequently criticized for privacy and competition
issues.
Since becoming director in 2021, Chopra has steadily increased CFPB
scrutiny of the sector, seeking information in 2021 on how Big Tech
companies use consumer data and last year launching an inquiry into
their payments platforms.
In a statement on Tuesday, Chopra said the tech sector had expanded into
financial services traditionally provided by the closely regulated
banking sector.
"Today's rule would crack down on one avenue for regulatory arbitrage by
ensuring large technology firms and other nonbank payments companies are
subjected to appropriate oversight," he said.
In a speech last month, Chopra said CFPB research had found tech giants
collected vast amounts of consumer payments data with few limits, scant
transparency and confusing corporate policies, putting consumers at risk
of Chinese-style surveillance by the companies.
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Speaking about Tuesday's proposal, senior CFPB officials said it was
imperative to look into privacy compliance at these larger firms
with a wealth of consumer data, noting that many of their business
models focus on monetizing that data.
Representatives of Big Tech companies have previously highlighted
their efforts to protect consumer data.
Tuesday's proposal would apply to companies handling more than five
million transactions a year. The agency said the rule would also
foster competition by ensuring that both traditional financial
players and the tech sector were equally subject to the same
oversight.
In a statement, the Consumer Bankers Association called the proposal
"a step in the right direction."
"For a healthy, innovative, and competitive financial services
ecosystem to function, consumers need to know that they are
protected equally, regardless of who they do business with to meet
their financial needs," said CBA President and CEO Lindsey Johnson.
The Electronic Transactions Association, representing banks,
fintechs and big tech companies, said in a statement it wants "to
ensure the proposal achieves the goals of consumer protection and
consistent application of public policy for all players."
The proposal is now subject to a notice-and-comment period expected
to end in early 2024.
(Reporting by Douglas Gillison and Hannah Lang in Washington;
Additional reporting by Chris Prentice in New York; Editing by
Matthew Lewis, Mark Potter and David Gregorio)
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