Investing,com - The Consumer Financial Protection Bureau (CFPB) on Thursday finalized a rule extending federal oversight to major digital payment apps handling over 50 million annual transactions. The move places popular apps from Big Tech and other nonbank entities under the same scrutiny as traditional financial institutions, aiming to address issues of fraud, data privacy, and sudden account closures.
“We note that the largest nonbank players include PayPal (NASDAQ:PYPL), Cash-App, Apple (NASDAQ:AAPL), and Google (NASDAQ:GOOGL). We see little incentive for Team Trump to reverse this supervision designation,” TD Cowen analyst Jaret Seiberg wrote in a note.
These apps, increasingly relied upon by middle and lower-income consumers, process trillions in transactions annually. Yet, until now, they have largely operated without the proactive oversight banks and credit unions face. The CFPB’s expanded authority will allow it to conduct examinations to preempt risks and protect users from harm, such as unauthorized account freezes or data misuse.
"Digital payments have gone from novelty to necessity and our oversight must reflect this reality,” said CFPB Director Rohit Chopra. "The rule will help to protect consumer privacy, guard against fraud, and prevent illegal account closures."
The rule prioritizes three key concerns: safeguarding consumer privacy, preventing fraud—particularly targeting vulnerable groups like older adults and servicemembers—and curbing illegal "debanking" practices.
This marks the CFPB’s latest move to regulate Big Tech’s role in consumer finance. Past initiatives highlighted gaps, such as the lack of federal deposit insurance on funds held in payment apps. The new rule also adapts to market realities by raising the supervision threshold to 50 million transactions and limiting its scope to U.S. dollar payments.
Effective in 30 days, the rule underscores the CFPB’s commitment to ensuring a level playing field in financial services, protecting consumers in a tech-driven economy.