US Tightens Oversight of Big Tech’s Financial Services
US Tightens Oversight of Big Tech’s Financial Services
The U.S. Consumer Financial Protection Bureau (CFPB) is set to increase its supervision of Big Tech companies offering financial services. This move aims to bring these firms under similar regulatory scrutiny as traditional banks, ensuring better consumer protections and fair competition in the financial marketplace.
Fragmented Oversight and New CFPB Rule
Currently, Big Tech’s financial services face fragmented oversight in the U.S., with companies needing to apply for money transmitter licenses state by state. The new CFPB rule will require these firms to adhere to strict rules regarding privacy protections, conduct of executives, and practices to avoid unfair or deceptive activities.
Impact on Major Tech Companies
The rule will impact 17 companies, including giants like Apple, Google, PayPal, and Block’s CashApp. These firms facilitated approximately $1.7 trillion in payments in 2021. While PayPal and CashApp are already under CFPB’s supervision for international money transfers, Apple and Google will face CFPB oversight for the first time.
Increasing Competition and Protecting Privacy
The CFPB believes that subjecting large tech companies to bank-like oversight will enhance competition. Concerns about tech companies monetizing customer data and compromising privacy have also been raised. The regulation aims to prevent these firms from leveraging their dominance in consumer payments to expand into other services like lending and card issuing.
Banking Industry’s Concerns
The banking industry has been vocal about its concerns regarding Big Tech’s growing influence in financial services. They argue that consumer privacy is at risk and have been lobbying for regulatory action. They are advocating for the CFPB to use its Dodd-Frank law authority to designate these firms as “larger participants” in consumer financial products.
Response from Big Tech
Big Tech representatives have accused the CFPB of favoring traditional lenders. However, some legal experts believe that large technology companies might prefer supervision for clarity and compliance. The CFPB is open to public feedback on the proposal until early 2024, indicating a period of adjustment and potential debate in the industry.
