CFPB Intends to Supervise and Examine Consumer Payments Companies
The Consumer Financial Protection Bureau (CFPB) recently released its Spring 2023 rulemaking agenda. The agenda includes a new rulemaking that did not appear on the Fall 2022 agenda—a rule to supervise, pursuant to Section 1024 of the Dodd-Frank Wall Street Reform and Consumer Protection Act (DFA), nonbank larger participants in the consumer payments market. The agenda gives a July 2023 estimate for issuance of a notice of proposed rulemaking.
The CFPB has long expressed concern about big tech’s entry into financial services, particularly in connection with payments, and these companies’ ability to collect and monetize consumer data. For example, the CFPB used its market monitoring power to issue orders seeking information about payments products and services and the use of consumer payments data to six large technology platforms. The CFPB has not issued a report on its findings from these monitoring orders.
The notice of proposed rulemaking will provide details on the new regulation. Typically, such rulemakings define the larger participant market using revenue or similar metrics. If the “larger participant rule” is adopted for consumer payments, covered participants will be subject to CFPB supervision and other requirements, including examinations and enforcement actions. CFPB examinations, while similar to state examinations, would stress consumer protection and the overall strength of the compliance management system to a greater degree.
Many nonbank payment companies are subject to state regulation and/or act as program managers to state and federal banks, thus they already are subject to regulatory oversight. Additionally, defining a large market for supervision would not change the laws, regulations, and rules that applied to that market. However, this new rule, if finalized, would bring the largest players in the consumer payments industry under the Bureau’s supervisory purview, affording the CFPB the ability to impact the industry’s consumer compliance approaches.