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Tech Groups Sue CFPB Over New Rule on Digital Wallet Oversight

By  |  January 16, 2025

Two prominent technology trade associations, NetChoice and TechNet, filed a lawsuit on Thursday seeking to block a recently introduced rule by the U.S. Consumer Financial Protection Bureau (CFPB). The rule extends the CFPB’s supervisory authority over large non-bank entities offering digital wallets and payment apps such as Apple Wallet, Google Pay and Venmo.

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    According to Reuters, the rule, which was finalized in November, applies to companies handling at least 50 million transactions annually, totaling more than 13 billion transactions overall. The CFPB argued that this measure would provide users of major digital payment platforms with the same protections against fraud, privacy violations and account closures that bank customers currently enjoy.

    CFPB Director Rohit Chopra justified the initiative by highlighting the increasing reliance on digital payments, stating that such transactions have evolved “from novelty to necessity,” requiring updated regulatory oversight.

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    Related: In Regulatory First, CFPB Pushes to Supervise Google’s Financial Offerings

    However, the trade groups argue that the CFPB has overstepped its authority. Per Reuters, the lawsuit filed in a Washington, D.C. federal court claims that Congress did not grant the CFPB “free rein” to regulate large non-bank entities arbitrarily.

    The groups further allege that the bureau failed to demonstrate any significant consumer risks or gaps in regulatory oversight to warrant the rule. The complaint describes the CFPB’s approach as “a problem in search of a solution.”

    NetChoice and TechNet expressed concerns about the potential implications of the rule. Chris Marchese, NetChoice’s director of litigation, characterized the regulation as an “unlawful power grab” that could hinder innovation, increase consumer costs, and stifle competition. In a separate statement, Carl Holshouser, executive vice president of TechNet, warned that the rule might subject digital payment providers to oversight extending beyond the CFPB’s purview, such as tax payments and other unrelated services.

    Source: Reuters