The Consumer Financial Protection Bureau (CFPB) recently finalized a rule that will help the agency ensure that nonbank companies offering digital funds transfer and payment wallet apps follow the same federal laws as large banks, credit unions, and other financial institutions.
“Digital payments have gone from novelty to necessity and our oversight must reflect this reality,” CFPB Director Rohit Chopra said. “The rule will help to protect consumer privacy, guard against fraud, and prevent illegal account closures.”
The agency already had enforcement authority over payment apps, but the rule allows it to conduct proactive examinations to ensure companies are complying with laws. Supervision also helps the CFPB assess risks emerging in the market.
The rule applies specifically to apps handling more than 50 million transactions annually. Collectively, these apps process more than 13 billion consumer payment transactions annually.
The CFPB was concerned the apps could be used to defraud older adults and active duty service members. In lieu of managing disputes on their own, some apps refer disputes to banks, credit unions, and credit card companies. Federal law requires financial institutions must take steps to investigate fraud, and that consumers have the right to dispute transactions that are incorrect or fraudulent.