Digital Transactions Authoritative, insightful and timely information for payments professionals
The Consumer Financial Protection Bureau order handed down Thursday that asks Google, a unit of Alphabet Inc., Apple Inc., Facebook Inc., Amazon.com Inc., Square Inc., and PayPal Holdings Inc. to turn over information about their payments products, plans, and practices has industry observers lining up on both sides of the fence.
Some experts are of the opinion that the CFPB’s order, the first major action under its new executive director Rohit Chopra, is an indication the agency intends to take a harder regulatory stance under Chopra.
“The six companies CFPB is seeking information from are huge, highly successful, high-profile companies, most of which are increasingly politically unpopular, particularly with this administration,” Eric Grover, principal at Minden, Nev.-based payments consultancy Intrepid Ventures says by email. “Under Chopra, the CFPB is going to take an expansive view of its authority, as it did under Richard Cordray, perhaps even more so.” Cordray was the agency’s first executive director, stepping down in 2017.
The CFPB’s latest order stems from concerns about how the six big tech firms are collecting consumers data, how that data is being used, and whether consumer data is being gathered in compliance with existing data-privacy and -protection laws. The data model the CFPB may have in mind is similar to the financial-data laws applied to banks, such as the Gramm-Leach-Bliley Act, according to industry sources who spoke on condition of anonymity.
Other considerations reportedly factoring into the CFPB’s order include how transparent the six companies are with consumers about how they use payments data and whether the data is collected through unsafe practices, such as Web scraping, and whether the six companies can protect that information in the wake of a data breach.
The CFPB declined to comment about its order and what prompted its decision to issue it.
The Bank Policy Institute, a Washington D.C.-based lobbying group, issued a statement late Thursday in support of the CFPB’s order.
“BPI strongly supports the CFPB’s efforts to increase accountability from Big Tech companies operating payments systems in the United States by calling on these companies to be transparent about how they collect, use, and sell consumer data to ensure compliance with existing consumer-protection laws,” Paige Pidano Paridon, BPI senior vice president and associate general counsel, said in a prepared statement.
“Technology companies touch every aspect of American life, and while they provide some convenience, their entry into the payments system introduces tremendous risk to consumers and to the U.S. economy and financial system. Unlike banks that are subject to a robust consumer protection, regulatory, and supervisory framework, much less is known about how Big Tech firms operating in the payments ecosystem ensure that consumers are protected. The CFPB’s action today is an important step towards ensuring that the payments system is transparent, fair, and competitive and that consumers are safe from the threat of fraud and abuse.”
Grover argues the CFPB is taking action without first making a strong case for its intervention. “The CFPB is fishing. It hasn’t identified consumers or merchants being harmed,” Grover says “The principal case where regulators have made an antitrust argument that businesses were harmed by some of these firms’ payments practices has [consisted of] Apple and Google historically reaping a 30% fee for payments on their apps platform. But that wasn’t a CFPB (consumer) issuer.”
