The top U.S. consumer financial watchdog on Tuesday proposed regulating tech giants’ digital payments and smartphone wallet services, saying they rival traditional payment methods in scale and reach but lack guarantees for consumers.
The Consumer Financial Protection Bureau’s (CFPB) proposal would subject companies like Alphabet, Apple and PayPal to bank-like oversight, with CFPB examiners inspecting their privacy protections, executive conduct and compliance with laws prohibiting unfair and deceptive practices. .
This proposal constitutes an ambitious and long-awaited measure by CFPB Director Rohit Chopra, who wants to assert the agency’s full authority over large technology companies, a sector that he has frequently criticized for privacy and competition issues.
Since being named director in 2021, Mr. Chopra has continued to strengthen the CFPB’s oversight of this sector, requesting information in 2021 on how big tech companies use consumer data and launching an investigation into their payment platforms last year .
In a statement released on Tuesday, Chopra said the technology sector has expanded into financial services traditionally provided by the banking sector, which is tightly regulated.
“The rule adopted today ends an opportunity for regulatory arbitrage by ensuring that big technology companies and other non-bank payments companies are subject to adequate oversight,” he said.
In a speech last month, Chopra said CFPB research found that tech giants were collecting vast amounts of consumer payments data with few limits, little transparency and confusing company policies, which exposed consumers to the risk of surveillance. Chinese style. of these companies.
Representatives from large technology companies have already highlighted their efforts to protect consumer data.
Tuesday’s proposal would apply to companies that process more than 5 million transactions a year. The agency said the rule would also promote competition by ensuring that traditional financial players and the technology sector are subject to the same oversight.
The proposal is now subject to a notice and comment period that is expected to end in early 2024. (Reporting by Douglas Gillison in Washington; supplemented by Chris Prentice in New York; editing by Michelle Price and Matthew Lewis)