Dive Brief:

• The Consumer Financial Protection Bureau this month sought to reinforce the rights of consumers to dispute errors and avoid liability for unauthorized transfers when using digital payments, as part of a proposed interpretive rule under the Electronic Fund Transfer Act and the related Regulation E.
• The federal agency issued those views on digital payment regulation in the Jan. 10 rule proposal in the last days of the Biden administration, noting consumers’ increasing use of money transfer apps and other digital tools offered by technology companies rapidly innovating in the arena. 
• “The CFPB is concerned that if market participants do not apply EFTA and Regulation E in a consistent manner, consumers making electronic fund transfers using accounts established primarily for personal, family, or household purposes might face challenges in vindicating their rights in the event of unauthorized transfers and other errors,” the agency said in a Jan. 15 interpretive rule published in the Federal Register.

Dive Insight:

Under Director Rohit Chopra, the CFPB issued a flurry of reports and rule actions last week just before the inauguration of President Trump. Chopra has remained in his appointed post despite the likelihood he will be bumped by the new administration that took over from former President Biden on Monday.

Chopra has been particularly concerned with improving oversight of emerging electronic payments services developed by technology companies. In November, the CFPB finalized a rule to oversee big tech companies that offer digital wallet apps and other electronic money transfer services.

In its eleventh-hour barrage of regulatory actions under Biden, the agency also issued a report on buy now, pay later use and an interpretive rule related to how online gaming platforms are subject to the Electronic Fund Transfer Act. In addition, it withdrew a rule proposal barring bank fees on certain declined transactions, reserving its option to pursue a “more comprehensive approach.”

Regarding the latest interpretive rule for digital payments, the federal agency said it was worried about leaving some payments providers, such as financial institutions, at a disadvantage as competition among new paytech providers rises. “The CFPB is also concerned that inconsistent application of EFTA and Regulation E might put certain providers at an unfair, competitive disadvantage,” the agency said in the rule proposal.

With the new interpretive rule “the CFPB outlined a framework regarding when the Electronic Fund Transfer Act (EFTA) and its implementing Regulation E apply to emerging digital payments systems, such as those offered by large technology companies and video game platforms, including platforms that utilize virtual currencies,” a Jan. 16 post by lawyers at the law firm Cooley said.

The CFPB’s interpretive rule proposal makes clear what various payments terms mean under the law in the realm of digital payments tools. For instance, it provides context for interpretation of the words ‘funds’ and ‘accounts.’

Under the proposal, “accounts on video game platforms used to purchase virtual items, virtual currency wallets that can be used to buy goods and services or make P2P transfers, and credit card rewards points accounts that can be used for future purchases could all be considered ‘accounts’ subject to the EFTA and Regulation E,” the Cooley post said.

The CFPB asked for public comment on the rule proposal and could take that input into consideration before it finalizes the rule, but it’s not under any obligation to do so in moving ahead with the rule. The deadline for those comments is March 31.

In a separate action, the agency last week also asked for public comment on “how companies that offer or provide consumer financial products or services collect, use, share, and protect consumers’ personal financial data, such as data harvested from consumer payments.” With digital tools proliferating, companies have ever more data at their disposal for marketing and consumer research.