US Consumer Financial Protection Bureau orders tech giants to hand over payment system details to determine how they use personal information and manage consumers’ data

October 25, 2021 |

As with the Federal Trade Commission, the US Consumer Financial Protection Bureau (CFPB) is concerned about tech giants untrammelled use of vast amounts of consumers’ personal information.  To that end the CFPB issued orders on Tech Giants to require each to provide information about data harvesting and monetization and access restriction.  

The Director of the CFPB set out the rationale for this significant fact finding exercise in a formal statement.  It provides:

Faster, friction-less, and cheaper payment systems offer significant potential benefits to  consumers, workers, their families, and small businesses in the United States. For example, families can send money to friends without delay, or to relatives overseas at lower costs. Fast payment systems can also help small businesses succeed with quicker transactions, lower cost, and more revenue conversion. And faster settlement can reduce the need for families and businesses to borrow.
But payments businesses are network businesses and can gain tremendous scale and market
power, potentially posing new risks and undermining fair competition. Furthermore, knowing what we spend our money on is a valuable source of data on consumer behavior. This data can be monetized by companies that seek to profit from behavioral targeting, particularly around advertising and e-commerce. That many Big Tech companies aspire to grow in this space only heightens these concerns.
In China, we can already see the long-term implications of these forces. Alipay and WeChat Pay are deeply imbedded into the lives of the Chinese public, combining messaging, e-commerce and payment functionality into super-apps. In such a market, consumers have little choice but to use these apps and little market power to shape how their data is used.

Today the Consumer Financial Protection Bureau (CFPB) has ordered six technology platforms offering payment services to turn over information about their products, plans and practices when it comes to payments. The orders were issued to Google, Apple, Facebook, Amazon, Square, and PayPal. The CFPB will also study the practices of the Chinese tech giants that offer payments services, such as WeChatPay and Alipay.

Congress has tasked the CFPB with ensuring that markets for consumer financial products and services are fair, transparent, and competitive. To that end, it has authorized the CFPB to require participants in the marketplace to provide information that help the Bureau monitor risks to
consumers and to publish aggregated findings that are in the public interest.
Little is known publicly about how Big Tech companies will exploit their payments platforms. For example, will the operators engage in invasive financial surveillance and combine the data they collect on consumers with their geolocation and browsing data?
1 Will they in turn use this data to deepen behavioral advertising, engage in price discrimination, or sell to third parties?
Will these companies operate their payment platforms in a manner that interferes with fair, transparent, and competitive markets? Will the payment platforms be truly neutral, or will they
use their scale to extract rents from market participants? Will small businesses feel coerced into participating in the payment platform out of fear of being suppressed or hidden in search or product listings? If these tech companies enter a market that competes with other providers on the platform, will these providers be removed or otherwise disadvantaged? What factors will these tech companies use when disqualifying or delisting an individual or business from participating on the platform?
Finally, how will these payment platforms ensure that key consumer protections are adhered to?
How effectively do they manage complaints, disputes and errors? Are they sufficiently staffed to  ensure adequate steps are taken to address consumer protection and provide responsive customer service when things go wrong?

The CFPB’s inquiry will help to inform regulators and policymakers about the future of our payments system. Importantly, it will also yield insights that may help the CFPB to implement other statutory responsibilities, including any potential rulemaking under Section 1033 of the Dodd-Frank Wall Street Reform and Consumer Protection Act. The CFPB’s orders build on the efforts of the Federal Trade Commission’s work to shed light on the business practices of the
largest technology companies in the world.
The CFPB’s inquiry is one of many efforts within the Federal Reserve System to plan for the future of real-time payments and to ensure a fair and competitive payments system in our
country. The Bureau intends to open a Federal Register docket to invite public comment. I invite d
any interested parties to submit comments to inform the agency’s inquiry.

The media release CFPB Orders Tech Giants to Turn Over Information on their Payment System Plans provides:

WASHINGTON, D.C. – Today, the Consumer Financial Protection Bureau (CFPB) issued a series of orders to collect information on the business practices of large technology companies operating payments systems in the United States. The information will help the CFPB better understand how these firms use personal payments data and manage data access to users so the Bureau can ensure adequate consumer protection.

“Big Tech companies are eagerly expanding their empires to gain greater control and insight into our spending habits,” said CFPB Director Rohit Chopra. “We have ordered them to produce information about their business plans and practices.”

The orders are issued pursuant to Section 1022(c)(4) of the Consumer Financial Protection Act. The CFPB has the statutory authority to order participants in the payments market to turn over information to help the Bureau monitor for risks to consumers and to publish aggregated findings that are in the public interest. The CFPB’s work is one of many efforts within the Federal Reserve System to make payments safer, faster, and more competitive. The initial orders were sent to Amazon, Apple, Facebook, Google, PayPal, and Square. The Bureau will also be studying the payment system practices of Chinese tech giants, including Alipay and WeChat Pay.

Families and businesses benefit from faster, cheaper, and more secure payment systems. As online commerce and electronic payments have become consumers’ normal expectation — especially during the pandemic — companies have developed new products and business models to meet this demand.

At the same time, these changes present new risks to consumers and to a fair, transparent, and competitive marketplace. For example, large technology firms such as Apple and Google have sought to integrate payments services into their operating systems. Person-to-person (P2P) payments platforms such as Venmo and CashApp have grown quickly, and speedy growth can present risks to families and businesses. Chinese giants Alipay and WeChat Pay are part of broader super apps that touch multiple parts of a consumer’s life and until recently were actively seeking to expand their presence in the US market.

The CFPB’s orders build on the efforts of the Federal Trade Commission’s work to shed light on the business practices of the largest technology companies in the world. The orders also seek to illuminate the range of these consumer payment products and their underlying business practices. Specifically, the orders will compel information on:

Data harvesting and monetization. Payment companies may be actively sharing payment data across product lines and with data brokers and other third parties. In some cases, Big Tech companies may be using this data for behavioral targeting. These practices may not align with consumers’ expectations. The orders seek information on how companies collect and use data.

Access restrictions and user choice. When payment systems gain scale and network effects, merchants and other partners feel obligated to participate, and the risk increases that payment systems operators will limit consumer choice and stifle innovation by anticompetitively excluding certain businesses. The orders seek to understand any such restrictive access policies and how they affect the choices available to families and businesses.

Other consumer protections. Consumers expect certain assurances when dealing with companies that move their money. They expect to be protected from fraud and payments made in error, for their data and privacy to be protected and not shared without their consent, to have responsive customer service, and to be treated equally under relevant law. The orders seek to understand the robustness with which payment platforms prioritize consumer protection under laws such as the Electronic Fund Transfer Act and the Gramm-Leach-Bliley Act.

A copy of the sample order can be found here

The CFPB actions are reported by Reuters and Wall Street Journal.    


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