SAN ANTONIO – The Consumer Financial Protection Bureau (CFPB) has finalized a new rule introducing federal oversight for major digital payment apps like Venmo, Cash App, and PayPal.
The rule, announced Thursday, is designed to protect personal data, reduce fraud, and prevent illegal practices like “debanking,” where accounts are closed or frozen without notice.
The regulation applies to nonbank companies that process more than 50 million transactions annually, targeting the largest platforms in this booming sector.
These apps handle more than 13 billion transactions in the U.S. annually, the CFPB said.
Oversight to address privacy, fraud, and access
CFPB director Rohit Chopra emphasized the importance of regulating platforms that have become critical to daily life.
“Digital payments have gone from novelty to necessity, and our oversight must reflect this reality,” Chopra stated.
The CFPB said the rule focuses on three primary areas:
- Privacy: It ensures compliance with federal privacy laws, giving consumers the right to opt out of certain data collection practices.
- Fraud protection: Companies must investigate disputes over incorrect or fraudulent transactions rather than deferring them to banks or credit card issuers.
- Debanking prevention: The rule aims to stop account closures or freezes without prior notice, addressing consumer complaints about disruptions to their financial activities.
Why it matters
Digital payment apps, often owned by major tech firms, are widely used for everything from splitting restaurant bills to paying rent. These platforms are popular among middle- and lower-income consumers and offer an accessible alternative to traditional banking methods.
The CFPB’s new rule allows the agency to detect risks early, including monitoring system outages and harmful practices. While the CFPB has always had enforcement authority over these types of companies, the rule allows the agency to conduct routine examinations to ensure compliance.
Key details of the rule
The CFPB made several changes to its original proposal before finalizing the rule:
- The threshold for supervision was raised to companies with 50 million or more annual transactions.
- Only transactions conducted in U.S. dollars are covered.
- The rule builds on previous CFPB actions, such as warnings to Big Tech about behavioral targeting in financial products and concerns over funds stored on payment apps lacking federal deposit insurance.
The rule takes effect 30 days after its publication in the Federal Register.
