The top U.S. consumer financial watchdog on Tuesday proposed regulating digital payments and smartphone wallet services from tech giants, saying they rival traditional payment methods in scale and reach but lack consumer safeguards.
The Consumer Financial Protection Bureau’s proposal would subject companies like Alphabet, Apple, PayPal and Block’s CashApp to bank-like oversight, with CFPB examiners inspecting their privacy protections, executive conduct and compliance with laws prohibiting 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 besides GooglePay, ApplePay, PayPal and CashApp.
Apple, PayPal and CashApp did not immediately respond to a request for comment. Google declined to comment
The proposal marks an ambitious and long-awaited move by CFPB Director Rohit Chopra to assert the agency’s full authority over Big Tech, a sector he has frequently criticized over privacy and competition issues.
Since taking over as director in 2021, Chopra has steadily increased CFPB scrutiny of the sector, seeking information in 2021 about how big tech companies use consumer data and last year launching an investigation into their payments platforms. .
In a statement on Tuesday, Chopra said the technology sector had expanded into financial services traditionally provided by the tightly regulated banking sector.
“Today’s rule would crack down on an avenue for regulatory arbitrage by ensuring that big technology companies and other non-bank payments companies are subject to adequate oversight,” he said.
“Today’s rule would crack down on an avenue for regulatory arbitrage by ensuring that big technology companies and other non-bank payments companies are subject to adequate oversight,” he said.
In a speech last month, Chopra said the CFPB’s investigation had found that tech giants were collecting vast amounts of consumer payments data with few limits, little transparency and confusing corporate policies, putting consumers at risk of surveillance. Chinese style by companies.
Speaking about Tuesday’s proposal, senior CFPB officials said it was imperative to look at privacy compliance at these larger companies with large amounts 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 that make more than 5 million transactions a year. The agency said the rule would also encourage competition by ensuring that both traditional financial players and the technology sector were equally subject to the same oversight.
The proposal is now subject to a notice and comment period that is expected to end in early 2024.
