GAFAs also fly under the CFPB's radar

The U.S. Consumer Financial Protection Bureau (CFPB) is continuing its work to regulate an ever-changing market, marked by the integration of new players and new offerings. So, after laying new foundations for the regulation of BNPL, it's now the turn of the GAFAs to be subjected to the CFPB's clear stance on the regulation of their financial activities.

FACTS

• Apple Pay, Google Pay and Paypal are all innovative players parallel to the traditional financial sector who, over the years, have multiplied their initiatives in offering banking or payment services.

• But their status as alternative players does not exempt them from liability, as the US Consumer Financial Protection Bureau (CFPB) is now emphasizing.

• The CFPB has just announced that it has finalized regulations for the federal oversight of the most popular digital payment applications, in particular those supported by leading players such as Google, Apple, Venmo, Zelle, Amazon and Paypal. A total of 7 players are expected to be affected.

• This decision has been taken to protect users' personal data, reduce fraud and put an end to inappropriate practices. Consumers must, for example, retain the right to dispute incorrect or fraudulent transactions with financial institutions, whether traditional or BigTech.

• In terms of data processing and confidentiality, the CFPB would also like to guarantee the best possible protection for consumers by enabling them to refuse certain data collection and sharing practices.

• The transaction threshold for companies requiring supervision is now set at 50 million annual transactions.

CHALLENGES

• Indispensable regulation: Big Tech and the financial services and payment applications offered by a variety of players have gone from being alternative players to becoming part of the daily lives of users and consumers, particularly in the US. The CFPB highlights the fact that BigTechs and other digital payment applications are sometimes capable of processing over 50 million transactions a year. Collectively, this figure represents over 13 billion payment transactions processed for consumers per year by alternative players.

• Ensuring oversight: The new rules put in place today should empower the CFPB to conduct proactive reviews to ensure that companies are complying with the law, and that they are able to prevent potential harm to users of their services.

• Similar service, similar responsibility: The CFPB emphasizes that large non-banking companies offering digital money transfer applications or payment wallets must adhere to the same standards, and comply with the same rules, as large banks, credit unions and other financial institutions already supervised for these types of activities.

MARKET PERSPECTIVE

• This announcement comes just one month after the CFPB imposed a colossal fine on Goldman Sachs and Apple concerning the Apple Card. The two American giants have been fined $89 million for deceptive practices related to the management of the Apple Card in the United States.

• The American CFPB has also been calling for BNPL to be regulated since September 2022. After studying the market, the CFPB then proposed recommendations for the strict regulation of these activities. And it was only last May that the CFPB officially announced its intention to tighten legislation on BNPL.

• Today's announcement of new regulation for the GAFAs, coupled with the recent fines imposed on Apple and Goldman Sachs, demonstrates the acceleration of the CFPB's decision-making and concrete actions to ensure its mission as the federal agency protecting the financial interests of consumers in the United States.