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The ways consumers make payments, including the data and technology associated with those payments, is becoming an increased focus of regulators. Financial institutions should carefully and thoroughly consider the recent actions of the Consumer Financial Protection Bureau as they refine their payments strategy and policies. In particular, the CFPB appears very interested in the “robustness” of financial institutions’ Electronic Fund Transfer Act (“EFTA”) and Gramm-Leach-Bliley Act (“GLBA”) compliance programs.

On October 21, 2021, the CFPB issued several orders calling for the collection of information from Big Tech companies related to their use of payment services. The orders, issued pursuant to Section 1022(c)(4) of the Dodd-Frank Wall Street Reform and Consumer Financial Protection Act, indicate the CFPB’s increasing interest in ensuring that markets for consumer financial products and services are fair, transparent, and competitive. Moreover, the collection and review of the information will assist the CFPB as it seeks to promulgate new consumer protection rules, specifically Section 1033 of the Dodd-Frank Act.

What information is the CFPB Seeking to Collect under the Order?

The CFPB ordered the following six tech platforms offering payment services to turn over information about their products, plans, and practices when it comes to payments:

  1. Google
  2. Apple
  3. Facebook
  4. Amazon
  5. Square
  6. PayPal

The Bureau will also study the practices of Chinese tech giants such as WeChatPay and Alipay. Congress has authorized the CFPB to require participants in the marketplace to provide information that helps the Bureau monitor risks to consumers and to publish aggregated findings that are in the public interest. Specifically, the CFPB seeks to gain insight on the following questions through the review of the information collected:

  1. Are Big Tech companies sharing consumer data collected through payment systems for behavioral targeting?
  2. Will the Big Tech companies operate payment platforms in a manner that interferes with fair, transparent and cooperative markets?
  3. How will these platforms ensure that key consumer protections are adhered to and, specifically, are they sufficiently staffed to ensure that those protections are addressed and that the companies can respond to customer service issues?

In his statement concerning the order, CFPB Director Rohit Chopra opines that reviewing the requested information and answering the above questions, among others, will help the CFPB to implement its statutory responsibilities, including rulemaking under Section 1033.

What is Section 1033?

Last fall, the CFPB announced its plan to issue a final rule regarding consumers’ rights to access their financial data under Section 1033. Section 1033 provides consumers with a right of access to their financial information. Through the new rule, the CFPB seeks to regulate access to consumer financial data and to identify and promote consumer interests while allowing the market to develop through innovation, without direct regulatory intervention.

Providers of consumer financial products, such as online payment systems, accumulate information concerning the consumers who utilize their products and services. In recent years, there has been a significant increase in the number of products and services that seek third-party access to consumer data with consumers’ authorization in order to utilize the financial product. The use of consumer-authorized data access has led to increased efficiency and innovation in the consumer financial product market.

Through this proposed rule, the CFPB looks to take a major step to regulate the transfer, storage, and control of such consumer data in this growing marketplace. The period for comments on the proposed rule closed in early February 2021. Although the rule has not yet been finalized, on July 9, 2021, President Biden signed an Executive Order encouraging the CFPB to commence the rulemaking process under Section 1033.

Our Financial Services team will continue to keep you posted on new developments.