CFPB Finalizes Rule on Oversight of Digital Payment Apps

The CFPB has finalized a rule enabling it to supervise the largest nonbank companies offering digital funds transfer and payment wallet apps. Targeting firms with over 50 million transactions annually, the rule extends the CFPB's oversight to ensure compliance with federal laws already applied to banks and credit unions. The CFPB estimates that these apps process over 13 billion consumer transactions annually.

The new rule focuses on these key areas:

Privacy and surveillance: Allows consumers to opt-out of certain data collection and sharing practices, and prohibits misrepresentations about data protection practices.

Errors and fraud: Extends to users of the services the right to dispute transactions that are incorrect or fraudulent - and the firms must take steps to look into them. The CFPB is particularly concerned about how digital payment apps can be used to defraud older adults and active duty service members, stating in its press release, "Some popular payment apps appear to design their systems to shift disputes to banks, credit unions, and credit card companies, rather than managing them on their own."

Debanking: Consumers can face serious harm when they lose access to their payment app without notice or when their ability to make or receive payments is disrupted.

The rule gives the CFPB the authority to conduct proactive examinations to ensure companies are complying with the law in these and other areas.

The rule will be effective 30 days after publication in the Federal Register.

Read the final rule.