The Consumer Financial Protection Bureau (CFPB) has recently proposed a new rule that would bring tech giants such as Apple, Google, and PayPal under regular examination by the federal government. These examinations would primarily focus on payment practices, including data privacy and consumer protections.
Up until now, nonbank tech companies have been required to comply with laws regarding unfair or deceptive practices, data privacy protections, and other regulations; however, they have not been subject to regular examinations like traditional banks.
The proposed rule, applicable to companies handling more than 5 million transactions per year, is expected to affect over a dozen prominent tech firms. Although the CFPB’s release does not explicitly mention specific companies, it is evident that the growth of Apple, Google, and others is a significant concern for CFPB Director Rohit Chopra.
By subjecting these tech giants to closer scrutiny, the CFPB aims to gain a deeper understanding of their business operations and ensure compliance with laws and regulations that have long been upheld in traditional banking institutions.
Regulation Proposed to Oversee Tech Companies in Payments
The Consumer Financial Protection Bureau (CFPB) is taking steps to ensure that large technology firms and nonbank payments companies are subject to proper oversight. In a statement accompanying the proposal, CFPB representative Chopra stated, “Today’s rule would crack down on one avenue for regulatory arbitrage” among these types of firms.
This is just the latest action taken by the CFPB regarding tech companies’ involvement in the payments industry. The bureau initiated a study of payments platforms in 2021 and noted that these companies now offer critical financial infrastructure that was traditionally regulated by banks. In response, the agency requested information about their business practices from major players including Apple, Google, Meta Platforms (META), Amazon.com (AMZN), PayPal, and Square (SQ).
The CFPB has already issued warnings and introduced regulations concerning tech companies’ use of customer data obtained through payment services. In a recent speech, Chopra pointed out the differences between nonbank tech companies and banks when it comes to restrictions on cross-ownership with commercial firms. According to Chopra, “Big Tech companies are now taking advantage of that blurring as they move into finance, threatening the fundamental separation between banking, money, and payments on one side, and our real economy on the other.”
The proposed rule is open for public comment until Jan. 8 or 30 days after its publication in the Federal Register, whichever comes later.