Digital wallets and payment providers like PayPal, Apple Pay, Google Pay, Cash App, and more will soon be regulated more like banks.
Today, the United States Consumer Financial Protection Bureau (CFPB) announced a final rule regulating digital wallets and payment providers. The agency will supervise these services to reflect the new reality where “digital payments have gone from novelty to necessity.” CFPB Director Rohit Chopra said in the announcement that “the rule will help to protect consumer privacy, guard against fraud, and prevent illegal account closures.”
The new oversight will apply to all digital payment apps and services handling more than 50 million transactions per year. The consumer watchdog will have the authority to conduct “proactive examinations” to ensure companies are complying with the law in these and other areas. “Supervision can prevent harm by detecting problems early,” reads the announcement.
“Supervision also is an important tool for the CFPB to assess risks that can emerge rapidly in this market, including from outages and other issues that could lead to millions of consumers losing access to their funds.”
If you’ve ever had your PayPal account closed and your funds withheld because the system erroneously flagged your account for some mundane reason, the new rule should put an end to that. Digital payment services are notorious for closing accounts without giving you a path forward or a chance to explain yourself. That’s a far cry from how regular brick-and-mortar banks and financial institutions operate, so this change should benefit everyone who uses PayPal, Apple Pay, Google Pay, Revolut, and similar digital wallets and payment solutions.
The CFPB said these digital payment apps are responsible for over 50 million transactions yearly. The new rule will go into effect 30 days after it’s published in the Federal Register. It remains to be seen whether the incoming Trump administration will kill the rule. After all, the previous Trump administration did accuse the CFPB of overreach.
The CFPB has slapped Apple and its former Apple Card partner, Goldman Sachs, with a $90 million fine for improperly handling disputed card payments.
Source: CFPB
