The CFPB has issued a final rule to supervise large nonbank financial services providers that offer general-use digital consumer payment applications such as digital wallets and peer-to-peer payment apps.

Many of those apps are owned by large technology companies. While banks and credit unions are subject to CFPB supervisory examinations, many of the largest technology firms offering consumer payment services have not been subject to that scrutiny, according to the CFPB.

In its press release, CFPB stated, “Digital payment apps have become a cornerstone of daily commerce, rivaling traditional payment methods like credit cards and debit cards for both online and in-store purchases. These services have gained popularity among middle and lower-income consumers, who now use the apps for daily spending and fund transfers that now rival or exceed the use of cash.”

The CFPB said that while the agency always has had enforcement authority over these companies, the final rule gives the bureau the authority to conduct examinations to ensure that companies are complying with the law. “The rule will help the CFPB to ensure that these companies – specifically those handling more than 50 million transactions per year – follow federal law just like large banks, credit unions, and other financial institutions already supervised by the CFPB,” the CFPB said, in announcing the rule. The CFPB estimates that the most widely used apps covered by the rule collectively process more than 13 billion consumer payment transactions each year.

The final rule will allow the CFPB to supervise companies in several areas covered by federal law, including:

• Privacy and Surveillance. Large technology companies are collecting vast quantities of data about a person’s transactions. Federal law allows consumers to opt-out of certain data collection and sharing practices. In addition, misrepresentations about data protection practices are prohibited.

• Errors and Fraud. Under federal law, consumers may dispute transactions they believe are incorrect or fraudulent, and financial institutions must investigate those complaints. CFPB officials said they are particularly concerned about how payment apps may be used to defraud older adults and active duty servicemembers.
• Debanking. Consumers can face serious harm when they lose access to their app without notice or when they cannot make or receive payments. The CFPB said that consumers have reported concerns to the CFPB about disruptions to their lives due to closures or freezes.

The CFPB noted that the final rule includes key changes from the proposed rule, which was released in November 2023. The threshold for examination was set at five million transactions a year in the proposed rule. The final rule increases that to 50 million transactions a year. The CFPB also limited the scope of the rule to count only transactions conducted in U.S. dollars. The final rule is effective 30 days after publication in the Federal Register.