Greater Scrutiny for Big Tech in Finance
The Consumer Financial Protection Bureau (CFPB) is pushing for increased scrutiny of major technology companies handling significant payment transactions. A new rule, if enacted, will subject nonbank financial entities managing over 5 million transactions annually, including popular platforms like Apple Pay and Google Pay, to the same regulations as major banks.
Equalizing Oversight for Nonbank Financial Firms
This proposed rule, as explained by CFPB Director Rohit Chopra, is designed to eliminate regulatory arbitrage and ensure that large technology firms adhere to regulations preventing unfair, deceptive, and abusive practices, along with privacy protections. While the CFPB already has enforcement capabilities, the new rule would enable regular examinations of these companies.
Concerns and Criticisms
Traditional banks support the move, welcoming the extension of supervisory attention to large non-bank payment firms. However, it has faced opposition from Republicans in Congress, including House Financial Services Chair Patrick McHenry, who criticizes the CFPB’s perceived overreach, suggesting potential negative impacts on innovation.
Tech Giants’ Growing Influence
The CFPB has expressed concerns about the increasing influence of major tech companies, particularly Apple and Google, in the payments industry. A September report from the bureau highlighted their role as “choke points” in the U.S. payment system, potentially stifling innovation by controlling access.
A Long Regulatory Process Ahead
The proposed rule is open for public comment until January 8, with the CFPB anticipating finalization in late spring. Analysts suggest this move indicates a broader regulatory trend targeting nonbank financial firms, emphasizing the need to address the evolving role of technology companies in the financial landscape.