The CFPB today finalized a rule that will allow it to regulate large nonbank firms that provide digital payments services, including peer-to-peer payments, mobile wallets and other payment apps. However, the agency limited the scope of the rule so it only applies to providers that conduct more than 50 million transactions annually, and it excludes services for cryptocurrency and other digital assets. The final rule will cover the seven nonbank firms responsible for 98% of the market transaction volume.
The new rule allows the CFPB to examine nonbank payment providers to ensure compliance with applicable federal consumer financial protection laws. In a statement, the bureau said the rule would ensure that these providers are held to the same standards as banks, credit unions and other financial institutions already subject to CFPB supervision.
The CFPB first proposed the rule last year to cover an industry whose major providers process more than 13 billion consumer payment transactions annually, according to bureau estimates. The final rule is more limited in scope than the original proposal, which would have applied to any provider that processes more than five million transactions annually. The final rule also only applies to transactions conducted in U.S. dollars “given the evolving market for digital currencies.”
The American Bankers Association in January submitted comments in favor of the proposed rule, citing the need for consistent regulation among banks and nonbanks. Still, the association had reservations about the proposal’s attempt to define “funds” to include digital assets and virtual currencies. “This is a substantive action by the CFPB that is made with little underlying justification for the proposed change,” ABA said. The CFPB removed both from coverage in the final rule.
“One of our few areas of agreement with Director [Rohit] Chopra is his recognition that Big Tech is taking advantage of legal loopholes to offer financial services without federal supervision,” ABA said in a statement after the final rule was announced. “In our view, if you offer bank-like services, you should have to comply with bank-like rules. This rule, albeit late in the game for this CFPB, aligns with that sensible approach. We hope the next CFPB director and the next Congress will continue to focus on the growth of Big Tech in financial services, and the risks that poses to consumers.”
