Dive Brief:

• At the heart of the Consumer Financial Protection Bureau's supervisory action against Google’s payment app, which included a peer-to-peer payment option and a means of storing funds, lies a rule requiring financial institutions to let customers dispute unauthorized transactions.
• The federal agency's order begins the process of putting Google’s payment services, including a digital wallet, under federal supervision, the agency announced late Friday. In issuing the order, the CFPB relied on Regulation E, a federal rule implementing the 1978 Electronic Funds Transfer Act, and it alleges Google failed to reimburse consumers whose accounts were taken over, and then refused to explain its decisions.
• Mountainview, California-based Google, in turn, sued the CFPB on Friday evening, accusing the bureau of overstepping its bounds.

Dive Insight:

The Electronic Funds Transfer Act obligates financial institutions to give customers the means to dispute unauthorized transfers of their money.

The online search behemoth announced in February that it would shut down the peer-to-peer payment platform in the United States by June. The Google spokesperson confirmed that that platform is no longer available in the United States.

"This is a clear case of government overreach involving Google peer-to-peer payments, which never raised risks and is no longer provided in the U.S., and we are challenging it in court," a Google spokesperson, Jose Castaneda, said in an email.

Friday’s order said the CFPB maintains supervisory authority even after a product or service has been discontinued. A CFPB spokesperson did not immediately respond to a request for comment, but Friday’s order said the agency will assess Google’s compliance with financial laws and require periodic reports from the search engine company on how it is assessing risk to consumers.

The bureau in November finalized a rule giving the agency oversight over large companies that offer digital wallets.

CFPB director Rohit Chopra is most likely trying to secure his legacy with last-minute supervisory actions before President-Elect Donald Trump takes office on Jan. 20, said Tony DeSanctis, a senior director of payments for the consulting firm Cornerstone Advisors.

"In the last couple weeks, the CFPB announcements have been coming out fast and furious," he said in an interview. "It's very much the CV builder. I don't know what Chopra's long-term plans are, but you could see a political career underneath something like this."

The bureau may also be squeezing in as many actions as it can before a more accommodating administration takes over, said Michele Alt, a partner at the financial advisory firm the Klaros Group.

"Given the significant influence of big tech in Trump’s re-election and the expected changes to the CFPB in Trump 2.0, I expect CFPB’s jurisdiction over Google is a far from settled issue," she said in an email.

The CFPB collected consumer complaints which "provide reasonable cause to determine that Google has failed to conduct a reasonable investigation of alleged errors," the agency said in its order.

Regulation E requires financial institutions to explain any denial of a refund, which Google failed to do, the order says. 

The document contains several screenshots of messages from Google Pay notifying customers that it had denied their refunds. The messages simply say the refunds were denied. None offered an explanation.

The order doesn't say how many complaints the CFPB received about Google, but cites complaints dating back to 2020.

Consumer advocates applauded the agency’s order.

"Consumers are using these apps, and the businesses that provide them should be held responsible for conducting business appropriately," said Adam Rust, director of financial services for the Consumer Federation of America. "'Just trust us' is not a valid answer."