FX.co ★ Google Sues Consumer Finance Regulator Over Supervision Of Payment Arm

Google has initiated legal proceedings against the United States Consumer Financial Protection Bureau (CFPB) after the agency placed the tech giant's payment division under federal oversight, various reports have indicated.

On Friday, the CFPB declared its decision to subject Google Payment Corp. to regulatory supervision, similar to the inspections and monitoring procedures imposed on traditional financial institutions. This decision stemmed from consumer complaints that identified Google Payment services as a potential risk to users.

The U.S. Congress has empowered the CFPB to oversee certain nonbank financial entities, ensuring that consumer financial markets remain accessible, transparent, and competitive for all consumers. The agency, citing multiple indications, asserted that Google Payment aligns with the criteria for supervision stipulated by the Consumer Financial Protection Act (CFPA).

Central to this determination were consumer grievances concerning Google Pay Balance and Google’s peer-to-peer (P2P) payment platform, both integrated within the Google Pay app available on Android and iOS devices. Accusations pointed to Google's alleged negligence in addressing complaints about erroneous fund transfers and insufficient measures to monitor, prevent, and detect fraud, thereby failing to sufficiently alert consumers to fraudulent risks.

The CFPB underscored that federal supervision could proceed even if the services in question have been halted. Notably, Google's Pay and P2P platform services are no longer extended within the United States. In reaching its decision, the agency reviewed approximately 300 consumer complaints predominantly involving fraud, scams, and unauthorized transactions, ultimately concluding that Google's actions constituted misconduct.

Importantly, the CFPB clarified that supervisory measures aim not to penalize legal violations, and a supervision decision does not inherently indicate a determination of guilt.

In response to the CFPB's mandate, Google Payment has sought judicial intervention to obstruct the order, arguing that the regulator’s action was based on a limited and unfounded set of complaints regarding a now-defunct product. The company's legal filing contended that "a product that no longer exists is incapable of posing such risk."

In late November, the CFPB finalized a regulation to extend federal oversight to technology firms such as Google and Apple Inc. that offer digital financial transfer and payment wallet applications. This is aimed at treating these companies similarly to banks to enhance personal data protection, curb fraud, and prevent unlawful 'debanking.'

The finalized regulation follows a proposal from the previous year, targeting major technology firms and digital payment applications with annual transaction volumes exceeding 50 million in U.S. dollars. This initiative seeks to provide more stringent supervision of Big Tech and other frequently utilized digital payment services.