On November 7, 2023, the Consumer Financial Protection Bureau (CFPB) proposed a significant rule alteration that could change the landscape of compliance for Big Tech Companies. Main players in the industry such as Apple, Meta and Alphabet, handling more than five million payment transactions per year, could be exposed to a new type of CFPB supervisory examinations should this new rule become law.
This rule proposal specifically targets certain large nonbank companies that provide consumer financial services. This notably includes businesses offering digital wallets and payment applications. The CFPB’s intention with this proposal is to bring this relatively unregulated sector of tech into closer scrutiny and to provide consumer protection in line with current banking structures.
The potential ramifications of this proposed rule are extensive. Large technology companies not previously under the supervision of the CFPB would now need to enact significant modifications to their compliance programs and be prepared for new regulatory responsibilities. Should discrepancies be identified in the supervisory examinations, these companies could face stiff penalties or regulatory actions.
The exact parameters of the proposed CFPB rule are still under development, with plenty of debate anticipated from major stakeholders. However, the clear intention is to bring more rigor to a rapidly expanding sector of consumer financial services and to ensure that large nonbank companies are subject to the same regulations as their banking counterparts.
The proposed rule forms part of a wider trend of international regulatory bodies scrutinizing the financial activities of Big Tech. For example, the European Union has been working on similar legislation for some time, known as the Digital Markets Act, which also aims at bringing large technology companies under greater regulatory supervision.
With the sector’s rapid growth showing no signs of slowing down, the implementation of new regulatory legislation seems likely if not inevitable. How these potential changes will impact the fintech landscape and consumer experience remains to be seen. Interested parties can stay informed by reviewing updates and details about the proposal directly from the CFPB.
Further information on the proposed rule can be found here.