The Consumer Financial Protection Bureau has finalized a rule that will allow them to supervise nonbank firms offering financial services like payments and wallet apps. Tech giants and payments firms that handle at least 50 million transactions annually, including Apple, Google, Amazon, PayPal, and others, will fall under this new scrutiny. The rule aims to ensure that these newer entrants comply with the laws that banks and credit unions follow.
The CFPB will conduct proactive examinations of these companies to ensure legal compliance, including demanding records and interviewing employees. The rule is meant to protect consumer privacy, guard against fraud, and prevent illegal account closures in the rapidly growing digital payment industry. The most popular payment apps collectively process over 13 billion consumer payments a year and are increasingly used by low- and middle-income users.
The initial proposal would have subjected companies processing at least 5 million transactions annually to examinations but was raised to 50 million transactions in the final rule. The rule excludes payment apps that only work at specific retailers, like Starbucks. The U.S. banking industry has publicly supported the increased scrutiny on tech firms entering financial services.
The new rule is set to take effect 30 days after publication in the Federal Register. It is unclear if the incoming Trump administration will change or eliminate the rule, but expanded oversight of tech companies may align with future CFPB leadership.
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