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The Consumer Financial Protection Bureau late Tuesday said it is expanding its efforts to increase oversight of large, non-bank technology firms with a proposed rule that would subject companies that issue digital wallets to the same regulations as those that cover wallets from financial institutions.
The proposed rule, which would apply to wallet providers that generate more than 5 million transactions annually, would give the CFPB supervisory authority to audit non-bank wallet providers. Currently, the CFPB has regulatory and enforcement authority over these entities. Adding supervisory authority would give the CFPB the same level of oversight in this arena as state regulators, says Scott Talbott, executive president for the Electronic Transactions Association.
The CFPB says its proposed rule is intended to ensure non-bank wallet providers are subject to the same regulatory authority as the financial institutions it regulates.
The move also builds on a CFPB report earlier this year that raises questions about whether large tech firms like Apple Inc. and Alphabet Inc’s Google subsidiary are hampering innovation, consumer choice, and the growth of open and decentralized banking and payments in the United States.
“Payment systems are critical infrastructure for our economy. These activities used to be conducted almost exclusively by supervised banks,” CFPB director Rohit Chopra says in a statement issued Tuesday. “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.”
While the CFPB intends the proposed rule to put non-bank wallet providers under the same regulatory structure as financial institutions, payments experts say they want to see a final version that doesn’t stifle innovation.
“We would like to see a framework that continues the creativity and innovation fintechs have brought to payments the past couple of years, rather than stifles it,” Talbott says. “A final rule that encourages innovation and creativity is a positive step.”
Talbott adds the ETA would also like to see a longer comment period for the proposed rule, especially with the holiday season approaching. For feedback on the rule, the CFBA has set a deadline of Jan. 8, or 30 days after its publication in the Federal Register, whichever is later. “A longer comment period would be good,” Talbott adds.
If finalized, the proposed rule would be the sixth in a series of CFPB rules defining large providers of consumer financial products and services. The first five rules covered consumer reporting, consumer debt collection, student loan servicing, international money transfers, and automobile financing, according to the agency.
