CU Trades Support Proposed CFPB Digital Wallet, Payment Rule
Rule would enforce consumer protection laws at nonbank firms.
Financial services trade groups are applauding the CFPB for proposing a new rule that would subject large nonbank companies that offer such products as digital wallets and payment apps to the same consumer protection rules that large credit unions and banks must follow.
“NAFCU has long supported a level playing field between credit unions and fintechs,” NAFCU Senior Vice President of Government Affairs Greg Mesack said. “Today’s proposed rule will help ensure that large fintechs and nonbanks offering digital consumer payment applications are held to similar standards as credit unions and other institutions examined by the CFPB.”
A CUNA official agreed.
“CUNA strongly believes that all financial products and services should be subjected to materially equivalent regulatory oversight, regardless of the nature of the entity providing the product or service,” Madison Rose, CUNA senior director of advocacy and counsel for payments and technology, said.
What the Rule Says
On Tuesday, the CFPB issued the proposed rule, which would cover nonbanks that handle more than $5 million transactions a year. In the past, the CFPB has not had examiners scrutinizing the activities of those institutions.
"Payment systems are critical infrastructure for our economy,” CFPB Director Rohit Chopra said. “These activities used to be conducted almost exclusively by supervised banks. "Today's 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 agency said the rule would allow the agency to examine large firms to ensure that they are complying with requirements of consumer protection laws, such as the prohibition against unfair, deceptive, and abusive acts or practices, the privacy provisions of the Gramm-Leach Bliley Act and the Electronic Fund Transfer Act.
In addition, the agency said, it would enable the CFPB to monitor the companies for new risks to consumers.
“Greater supervision of nonbanks in this market therefore would further the CFPB’s statutory objective of ensuring that Federal consumer financial law is enforced consistently between nonbanks and depository institutions in order to promote fair competition,” the CFPB said.
Bankers Agree with CUs
Banking trade groups joined credit union groups, in expressing support for the CFPB proposal.
“For a healthy, innovative, and competitive financial services ecosystem to function, consumers need to know that they are protected equally, regardless of who they do business with to meet their financial needs,” said Lindsey Johnson, president/CEO of the Consumer Bankers Association said.
And Paige Pidano Paridon, senior vice president and senior associate general counsel, at the Bank Policy Institute said, “We strongly support the CFPB’s commitment to consistent regulatory principles for regulating nonbanks — if it walks like a bank and talks like a bank, regulate it like a bank.”
However, a frequent critic of the CFPB, House Financial Services Committee Chairman Rep. Patrick McHenry, R-N.C., said the rule would stifle innovation.
“The action announced by Director Chopra today is a step in the wrong direction,” he said. “Consistent with the bureau’s track record, this proposed rule will only entrench the status quo by impeding the adoption and development of innovative products and services. The CFPB is once again stretching its supervisory authority to the detriment of the consumers the agency was created to protect.”
The CFPB is accepting comments on the proposed rule until Jan. 8, 2024, or for 30 days after it is published in the Federal Register, whichever is later.”