Digital payment wallet apps handling more than 50 million transactions annually are subject to a final rule requiring them to follow federal law applied to banks, credit unions and other financial institutions already supervised by the federal consumer financial protection agency, it said Thursday.
According to the Consumer Financial Protection Bureau (CFPB), the final rule – which takes effect 30 days after publication in the Federal Register — The final rule will enable to the CFPB to supervise companies in key areas including privacy and surveillance, errors and fraud and “debanking” (closures or freezes by the companies of their service to consumers).
“While the CFPB has always had enforcement authority over these companies, today’s rule gives the CFPB the authority to conduct proactive examinations to ensure companies are complying with the law in these and other areas,” the bureau said in a release. “Supervision can prevent harm by detecting problems early. Supervision also is an important tool for the CFPB to assess risks that can emerge rapidly in this market, including from outages and other issues that could lead to millions of consumers losing access to their funds.”
Under privacy and surveillance, the bureau said the new rule allows consumers to opt-out of certain data collection and sharing practices, and also prohibits misrepresentations about data protection practices.
As for errors and fraud, the new rule 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 agency said it is particularly concerned about how digital payment apps can be used to defraud older adults and active duty servicemembers. “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,” the agency said.
On debanking, the agency contended that consumers can face serious harms when they lose access to their app without notice or when their ability to make or receive payments is disrupted. “Consumers have reported concerns to the CFPB about disruptions to their lives due to closures or freezes,” CFPB said.
The agency said a key change in the final rule from the proposal was the transaction threshold determining which companies require supervision is now substantially higher, at 50 million annual transactions. “Given the evolving market for digital currencies, the CFPB also limited the rule’s scope to count only transactions conducted in U.S. dollars,” the agency said.
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