In an effort to rein in the expanding influence of ‘Big Tech’ and similar large technology companies within consumer financial markets, the Consumer Financial Protection Bureau (CFPB) has announced a proposed rule slated to broaden its regulatory authority. This proposed rule, if passed, would enable the Bureau to supervise larger nonbank providers of specific digital consumer payment aspects (the Proposed Rule).
Presently, the American consumer finance markets have been disrupted by an influx of large technology companies. These firms, regardless of their lack of traditional banking licenses, provide a wide range of financial services to consumers, from online payment processing to more advanced retail investment platforms. If the proposed rule by the CFPB comes into force, it could signal significant shifts in the regulatory landscape these digital payment providers operate in.
This information was reported by Allen & Overy LLP, a multinational law firm. Based on aspects of the proposed rule highlighted by Allen & Overy, it is clear that the CFPB seeks not only to provide oversight but to also introduce guidelines that address potential vulnerabilities in the consumer financial market that could arise from the large-scale operations of these nonbanks.
- The proposed rule seeks to provide immediate jurisdiction to the CFPB over nonbank entities that engage in at least three million transactions with consumers annually.
- Notably, the CFPB would also have the authority to supervise fintech companies that facilitate money transfers, consumer payment services and cryptocurrencies.
It is imperative for all active participants in the consumer financial market to closely monitor developments around this proposed rule. The passage of the Proposed Rule could lead to an era in which the operations of large technology companies in the consumer financial market are closely supervised. Equally, it may herald a new age of opportunity and compliance challenges for corporations and legal professionals alike within the financial services sector.