US consumer finance regulator wants to extend oversight to Big Tech

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The top US consumer finance regulator is seeking new powers to oversee technology companies that offer digital wallets and payment applications, in a move that would intensify scrutiny over companies such as Google and Apple.

The proposal issued by the Consumer Financial Protection Bureau on Tuesday would subject non-bank companies that offer digital payments to a regulatory scheme similar to that for banks or credit unions.

It aims to ensure that US consumer protection laws are applied to a ballooning sector used by millions of consumers to transfer funds and make retail payment transactions.

The new rule would subject the industry’s largest players — those that facilitate more than 5mn consumer transactions a year — to regular supervision by the agency’s examiners, according to a CFPB official. The regulator estimated this would capture about 17 companies accounting for 88 per cent of market share.

It would apply to peer-to-peer platforms such as Venmo and Cash App, the official said, as well as cryptocurrency wallets.

The proposal underlines a major shift in how banking services are provided in the US, with more and more consumers linking their bank accounts to digital wallets from companies such as Apple and Google.

“Payment systems are critical infrastructure for our economy. These activities used to be conducted almost exclusively by supervised banks,” Rohit Chopra, CFPB director, said in a statement. “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.”

The CFPB can already bring enforcement actions against Big Tech and other non-bank companies over consumer financial issues. But the agency is now proposing to allow its examiners to scrutinise those businesses more closely. The proposal will be subject to public comments before final implementation.

The CFPB said that having large non-bank companies “play by the same rules as banks and credit unions” would help “promote fair competition” between depository and non-depository institutions — an important theme for Chopra, who advocated for tougher antitrust policies in his former role at the US Federal Trade Commission.

According to the agency, digital apps’ share of ecommerce payments has grown to match, and in some cases surpass, that of traditional payment tools such as credit and debit cards.

Chopra has repeatedly warned against the rise of Big Tech in payments. In a speech last month, he said he feared the US was “lurching toward a consolidated market structure, like the one that has emerged in China, that blurs the lines between payments and commerce and creates the incentives for excessive surveillance and even financial censorship”.

His tough regulatory stance has ruffled feathers in corporate America, which has claimed he is stepping beyond the CFPB’s authority. The agency has said it is merely enforcing the law.

The CFPB in 2021 requested big tech groups to turn over information on their payment systems including data harvesting, user choice and other consumer protections.

The consumer watchdog is seeking to expand its authority even as federal agencies contend with the fallout from a US Supreme Court ruling that raised questions around their rulemaking powers.

Additional reporting by Josh Franklin in New York

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