Companies like PayPal, Cash App to be Examined for Fraud, Errors, Illegal Account Closures, Data Collection
WASHINGTON – Consumer advocates applauded today’s announcement that the Consumer Financial Protection Bureau (CFPB) has finalized a rule allowing it to supervise larger nonbank companies that offer services like digital wallets and payment apps to ensure that they comply with the law and do not facilitate fraud.
Digital payment apps and wallets, such as PayPal, Venmo, CashApp, and Apple Wallet, have become increasingly popular, used by millions of consumers to send money to friends and family, to send or receive payment for goods and services like rent, and for retail purchases. However, as consumer use of these products has increased, so have consumer complaints of fraud, unauthorized charges, and other issues.
“Millions of people use PayPal, CashApp, and other big tech payment apps, yet these services currently do not receive the same federal oversight banks have to ensure they comply with federal laws protecting payments from errors and unauthorized charges,” said Carla Sanchez-Adams, senior attorney at the National Consumer Law Center. “The CFPB rule will change that, giving big tech payment apps supervision to ensure they are not allowing their services to promote fraud.”
The new rule would enable the CFPB to ensure that nonbank financial companies – specifically those larger companies handling more than 50 million transactions per year – adhere to the same rules as large banks and credit unions, including the Electronic Fund Transfer Act, laws against unfair, deceptive, and abusive practices, and privacy laws, among others. The final rule only applies to companies that have more than 50 million transactions denominated in U.S. dollars. Transactions such as those using crypto-assets and not denominated in dollars are not counted.
“The crypto industry is rife with fraud, and crypto firms should also be held to comply with the law,” Sanchez-Adams said. “But this new rule is a significant step in protecting consumers and ensuring that big technology companies comply with consumer protection laws.”
Related Resources
- Testimony of Carla Sanchez-Adams on “Examining Scams and Fraud in the Banking System and Their Impact on Consumers,” February 1, 2024
- Comments on the CFPB’s Proposed Rule to Define a Market for General-Use Digital Consumer Payment Applications, January 8, 2024
- Written Testimony for House Financial Services on Digital Wallets, April 28, 2022
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