Tech Giants Sue CFPB Over Payment App Rule

In a move that could reshape the digital payment landscape, two prominent tech trade groups have filed a lawsuit against the Consumer Financial Protection Bureau (CFPB) to block a new rule that would subject large nonbank companies offering payment apps and digital wallets to agency supervision. The lawsuit, filed by NetChoice and TechNet, argues that the CFPB overstepped its authority and failed to demonstrate that digital payment companies pose a risk to consumers.

The CFPB's final rule, announced on Nov. 21, 2024, aims to give consumers who use big technology companies for processing payments the same protections against fraud, privacy violations, and account closures they enjoy at banks. CFPB Director Rohit Chopra stated that digital payments have gone from novelty to necessity, and the agency's oversight must reflect this reality.

However, the tech trade groups contend that the CFPB's rule is an unlawful power grab that risks creating confusion for consumers. They argue that the agency failed to show what consumer risks the rule was even meant to alleviate in its haste to dream up a problem in search of a solution. The complaint filed in Washington, D.C., federal court alleges that the CFPB failed to show that digital payment companies subject to the agency's "larger participant" rule posed a risk to consumers, as required by the 2010 Dodd-Frank Act.

The lawsuit also claims that the CFPB identified no consumer risks or gaps in regulatory oversight that justified the rule, which covers companies that process at least 50 million transactions annually, and more than 13 billion overall. The complaint further argues that the CFPB's actions created unnecessary roadblocks for businesses striving to meet consumer needs and set the stage for increased prices and reduced options.



The outcome of this lawsuit could have significant implications for the future of digital payment regulation in the US, particularly for peer-to-peer payment networks like Zelle. If the CFPB prevails, it would send a strong message to other digital payment providers that they must prioritize consumer protection and fraud prevention. This could lead to more stringent regulations and oversight of digital payment networks to ensure they have adequate safeguards in place to protect consumers from fraud.

On the other hand, if the CFPB's rule is struck down, it could leave consumers vulnerable to potential risks and gaps in regulatory oversight. Without the CFPB's supervision, consumers may be exposed to increased risks of fraud, privacy violations, and account closures. Additionally, a lack of consistent regulation could lead to an uneven playing field, with some companies enjoying regulatory advantages over others.

In conclusion, the lawsuit filed by NetChoice and TechNet highlights the ongoing debate surrounding the regulation of digital payment providers and the appropriate role of the CFPB in overseeing these companies. The outcome of this litigation will have far-reaching implications for consumers, businesses, and the broader digital payment industry. As the case progresses, it will be essential to monitor the developments and assess the potential impact on the future of digital payment regulation in the US.