This audacious move, referred to as a “larger participant” rulemaking, arises from mounting concerns voiced by CFPB and its Director, Rohit Chopra. Their apprehensions revolve around the exponential growth of digital payment services offered by ‘Big Tech’ entities and other companies operating outside the confines of the highly regulated traditional banking sector.
CFPB To Supervise Big Tech’s Payment Apps : A New Perspective
While the CFPB has long held the authority to sue nonbank payment providers for alleged legal violations, this bold leap into direct supervision provides the agency with a fresh, panoramic view into the inner workings of the industry giants. It enables them to proactively seek out violations and address them at an earlier stage, amplifying their impact on the regulatory landscape.
This move, in essence, levels the regulatory playing field, putting these tech giants on par with their traditional banking counterparts. Remarkably, platforms like Apple Pay and Google Pay, both used by tens of millions of U.S. consumers, have largely escaped the CFPB’s watchful eye, despite their colossal market reach.
Critical Infrastructure under Scrutiny
Chopra emphasized the significance of this regulatory expansion, stating, “Payment systems are critical infrastructure for our economy. 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.”
