On November 7, the Consumer Financial Protection Bureau released a proposed rule that would expand the CFPB’s supervisory and examination authority to cover, for the first time, “larger” providers of general-use digital consumer payment applications. Under the proposal, the market for these types of applications would include, at a minimum, “digital wallets,” “payment apps,” “funds transfer apps,” “person-to-person payment apps” and “P2P apps.” A “larger” provider under the proposal would be a nonbank entity that facilitates at least five million consumer payment transactions a year by providing general-use digital consumer payment applications.
Although the CFPB already has enforcement authority over all providers of consumer financial products and services in respect of Federal consumer financial laws, not every provider of a consumer financial product or services is subject to ongoing supervision and examination by the CFPB. The proposal would subject covered providers to ongoing supervision and examination by the CFPB for the first time, which would involve ongoing and regular access by the CFPB to internal materials and other information of the provider. The CFPB states that exercising this supervisory authority would help to ensure these larger participants (which the CFPB states represent a “substantial portion” of the market’s overall activity) are “complying with applicable requirements of Federal consumer financial law,” enable the CFPB to monitor for emerging risks to consumers and the market, and level the playing field between nonbanks and depository institutions that provide general-use digital consumer payment applications.
Comments on the proposed rule are due by January 8, 2024.
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