A consumer watchdog in Washington is looking to regulate Big Tech much like it does major banks, which could result in increased scrutiny for popular mobile payment systems operated by Apple (AAPL) and Alphabet (GOOG, GOOGL).
The proposed rule by the Consumer Financial Protection Bureau (CFPB) would mandate that nonbank financial companies dealing with more than 5 million transactions per year adhere to the same regulations as the large lenders currently overseen by the CFPB.
This means that popular payment apps such as Apple Pay and Alphabet’s Google Pay, which millions of Americans use to transfer money through their mobile devices, would face more rigorous oversight.
Although the CFPB already has the power to take enforcement actions against financial divisions of tech companies that violate consumer finance laws, this rule would permit the agency to conduct regular examinations of these companies.
The objective of this rule, according to the CFPB, is to ensure that companies comply with regulations against unfair, deceptive, and abusive practices, as well as privacy protections.
The CFPB’s Director Rohit Chopra commented on the rule, stating that it “would crack down on one avenue for regulatory arbitrage by ensuring large technology firms and other nonbank payments companies are subjected to appropriate oversight.”
However, the proposed rule has faced opposition, with Republicans in Congress criticizing it as a step in the wrong direction. Despite this, banks have expressed support for the move, aligning themselves with the CFPB.
The new rule is part of a broader regulatory crackdown on Big Tech companies led by Washington. Federal agencies have filed antitrust lawsuits against major tech giants, further raising the stakes for the industry.
It is expected that the CFPB’s new rule will undergo further scrutiny and be finalized before the next presidential election, potentially reshaping the financial landscape for tech companies in the US.
This move signals a growing focus on nonbank financial firms, indicating a shift in the regulatory environment that could have implications for the financial system as a whole.
