FX.co ★ Regulator CFPB To Consider Apple Pay, Other Digital Payment Apps As Banks

The US Consumer Financial Protection Bureau (CFPB) has officially enacted a regulation to oversee Apple Inc. and other prominent technology companies that provide digital funds transfer and payment wallet applications, aligning their regulatory treatment more closely with that of banks.

In a recent announcement, the American consumer protection body outlined that this new rule, which institutes federal supervision over widely used digital payment apps from major non-bank entities, is designed to safeguard personal information, minimize fraud, and curb unlawful 'debanking.'

This regulation, which builds upon a proposal introduced last year, will encompass Big Tech and other highly utilized digital payment applications that conduct over 50 million transactions annually. The CFPB highlighted that this marks a significant alteration from its initial proposal that set the oversight threshold at 5 million transactions per year.

Now, the CFPB has the capacity to ensure that these technology companies, specifically those facilitating more than 50 million transactions annually, adhere to federal regulations in a manner akin to large banks, credit unions, and other financial entities that are already under the agency's supervision.

The CFPB anticipates that the most frequently used apps within the scope of this rule collectively manage over 13 billion consumer payment transactions each year.

The agency noted that digital payment applications have evolved into an integral component of everyday commerce, competing with conventional payment methods such as credit and debit cards for both online and physical purchases. This trend is particularly pronounced among middle and lower-income consumers.

CFPB Director Rohit Chopra stated, "Digital payments have shifted from being a novelty to a necessity, and our regulatory oversight must reflect this transformation. This rule is intended to protect consumer privacy, defend against fraud, and prevent unlawful account closures."

While banks and credit unions that offer consumer payment services are subjected to CFPB's supervisory examinations, numerous large tech firms processing billions of transactions have not been under the same level of scrutiny.

The CFPB, having diligently monitored developments in this burgeoning market, has been attentive to consumer complaints and has initiated an inquiry into Big Tech and peer-to-peer platforms that offer popular payment applications.

According to the CFPB, the final rule will empower it to supervise companies in crucial domains including privacy and surveillance, errors and fraud, and debanking. With this rule, the CFPB gains the authority to conduct proactive examinations to ensure these companies comply with legal requirements in these and other areas.

The rule will take effect 30 days following its publication in the Federal Register.