Apple,
PayPal
and other tech giants will be subjected to regular examinations by the federal government for the first time over their payment practices in areas like data privacy and consumer protections.
The Consumer Financial Protection Bureau on Tuesday proposed a rule that would subject large nonbank consumer payments companies to reviews by the CFPB’s examiners. That would give the CFPB extra insight into whether Apple (ticker: AAPL),
Alphabet
‘s (GOOGL) Google,
PayPal Holdings
(PYPL), and other large tech companies are running afoul of laws against unfair or deceptive practices, data privacy protections, and other regulations that have long been the subject of bank examinations.
While nonbank tech firms have to comply with those laws, until now they haven’t been subject to regular examinations, the CFPB said. Apple, Alphabet, and PayPal did not immediately respond to a request for comment.
The CFPB’s release describing the proposed rule doesn’t mention Apple, Google, or any other companies by name, but it’s clear that their growth is top-of-mind for CFPB Director Rohit Chopra. The proposed rule applies to companies that handle more than 5 million transactions per year, a threshold that easily captures the tech giants; the agency said the rule would apply to a total of more than a dozen companies.
“Today’s rule would crack down on one avenue for regulatory arbitrage by ensuring large technology firms and other nonbank payments companies are subjected to appropriate oversight,” Chopra said in a statement accompanying the proposal.
The proposed rule is the latest step taken by the CFPB around tech companies’ foray into payments. The bureau began to study the payments platforms in 2021, stating that the firms were starting to offer critical financial infrastructure that was previously the purview of heavily-regulated banks. In October of that year, the agency ordered Apple, Google,
Meta Platforms
(META),
Amazon.com
(AMZN), PayPal, and
Block
(SQ) to give it information about their business practices.
Since then, the bureau has issued rules or warnings around tech companies’ use of the data they gather through offering payments.
In a speech last month, Chopra drew a contrast between the nonbank tech firms and banks, which face restrictions on cross-ownership with commercial firms.
“Big Tech companies are now taking advantage of that blurring as they move into finance, threatening the fundamental separation between banking, money, and payments on one side, and our real economy on the other,” Chopra said.
The CFPB said it will take comments on the proposed rule until Jan. 8 or 30 days after the rule is published in the Federal Register, whichever is later.
Write to Joe Light at joe.light@barrons.com
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