Maryland Legal Alert for Financial Services
CFPB Supervision of Payment App and Digital Wallet Providers
CFPB Supervision of Payment App and Digital Wallet Providers
The Consumer Financial Protection Bureau (CFPB) issued a final rule on November 21, 2024, granting it authority over larger non-bank entities offering general-use digital consumer payment applications, including digital wallets and peer-to-peer payment applications. This rule defines the scope of covered entities as those processing 50 million or more consumer payment transactions annually, excluding small businesses under U.S. Small Business Administration (SBA) standards. The CFPB indicated that larger, non-bank entities will be provided notice of the CFPB’s intent to supervise its activities and will have the opportunity to dispute whether it qualifies as a large participant subject to the rule.
Notably, the rule excludes cryptocurrency transactions, transactions conducted in non-U.S. currencies, and merchants and marketplaces conducting payment transactions for sales through their own distinct platforms, focusing instead on applications facilitating personal, household, or family transactions.
The rule enables the CFPB to conduct proactive examinations and monitoring of covered entities for compliance with consumer financial protection laws. It highlights areas such as fraud prevention, privacy rights, unfair or deceptive practices, and consumer protections against service disruptions. Although the rule does not introduce new consumer protection requirements, it emphasizes stricter oversight of compliance systems and procedures. Additionally, the CFPB made adjustments based on industry feedback, such as measuring consumer payment transactions by residency rather than physical location. The rule is set to take effect 30 days after its publication in the Federal Register.
For more information, contact Christopher R. Rahl or Tamia J. Morris.