The problems that consumers have had with digital payment and wallet apps like Zelle and Venmo have risen to the top of the Consumer Financial Protection Bureau’s (CFPB) to-do list. The agency is now proposing that it be allowed to supervise those companies and make them subject to CFPB supervisory examinations.
In the proposed rule, nonbank financial companies – specifically those that handle more than five million transactions per year – would be subject to the same rules as large banks, credit unions, and other financial institutions already regulated by the CFPB.
"Payment systems are critical infrastructure for our economy. These activities used to be conducted almost exclusively by supervised banks,” said CFPB Director Rohit Chopra.
"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."
Complaints have steadily grown
Complaints about these applications and the companies that run them have been rising in recent years to the point where there are currently tens of thousands of complaints about Zelle, Venmo, CashApp, and PayPal listed in the CFPB’s complaint database.
It’s the same in ConsumerAffairs' reviews, too. In the case of Venmo, reviewers have voiced their frustration with Venmo's customer service, account freezes, and difficulty accessing funds.
“[Venmo] held my money hostage for a little over a week. I got a notification stating fraudulent activity. I called in. They said it’s been escalated. That’s all they know,” Eric from Riverside Calif., wrote.
“They can’t give me a reason why seven days later I was asked to send a copy of a credit card statement and my ID. Still no reason why they suspended my account. Then they release it the following day. Then a few minutes ago, I attempted to purchase Bitcoin. They asked for my ID again. A few minutes later they approved it. I tried sending that Bitcoin. It wouldn’t allow me so I sold it and now they’re saying I’m not get my money for just about a week. Quick to take the money, quick to hang onto it. This is absolutely ridiculous.”
Continuing to fight the good fight
If the agency gets its proposed rule across the finish line, consumers should have a level playing field to work with when it comes to financial services – one that Big Tech won’t like very much.
In 2021, the CFPB raised concerns about these companies, suggesting that they may be crossing the line by harvesting consumer data and monetizing their relationship with consumers who use the apps.
Then, just a year ago, the CFPB told Big Tech firms that they needed to stick to federal consumer financial protection laws after they were caught red-handed using sophisticated behavioral targeting techniques to market financial products.
The proposed rule is the sixth in a series of CFPB proposals to define how “larger participants” that are operating in the consumer financial products and services market conduct business with consumers.
The first five rules covered larger non-bank entities and their dealings in regard to consumer reporting, consumer debt collection, student loan servicing, international money transfers, and automobile financing.