The Consumer Financial Protection Bureau (CFPB) has proposed a new rule to supervise larger nonbank companies offering services such as digital wallets and payment apps.
The proposal defines a market for general-use digital consumer payment applications and states large participants in the market fall under CFPB’s supervisory jurisdiction.
The definition would include providers of digital applications that offer funds transfer and wallet functionalities to consumers that facilitate payments to other people for personal, family or household purposes.
If finalized, the rule would ensure these nonbank companies adhere to the relevant funds transfer, privacy, and other consumer protection laws.
It would also require these companies to comply with the same rules as banks and credit unions to foster a level playing field with depository institutions.
Rohit Chopra, director of CFPB, said: "Payment systems are critical infrastructure for our economy. These activities used to be conducted almost exclusively by supervised banks.
"[This] 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 bureau says large tech firms operating in consumer finance markets “blur the traditional lines” between banking and payments from commercial activities.
It argues this blurring can place customers at risk, particularly where safeguards such as deposit insurance do not apply.
The proposed rule would be the sixth in a series of CFPB rulemakings to establish definitions for larger participants operating in consumer finance markets that play a substantial role in consumers’ everyday lives.