Two industry associations for technology have initiated a legal action against the U.S. Consumer Financial Protection Bureau (CFPB), disputing their attempts to classify payment applications and digital wallets similarly to banks.
On January 16th, TechNet (a group of tech CEOs and senior executives from various parties) and internet advocacy group NetChoice voiced their opposition to a recently enacted rule by the Consumer Financial Protection Bureau, which was announced in December.
The regulation broadens the Consumer Financial Protection Bureau’s power to monitor and scrutinize digital consumer payment platforms like payment apps, digital wallets, and other similar financial services provided by non-bank entities, focusing particularly on larger industry players.
As a crypto investor, I’ve noticed that the recent 259-page judgment doesn’t seem to be directly focusing on cryptocurrency wallet providers or those using decentralized systems. Instead, it appears that the intention is to tackle larger non-banking entities within the industry.
According to Chris Marchese, the head of litigation at NetChoice, the unjustified expansion of power by the Consumer Financial Protection Bureau poses a threat to the legal system, expands the bureaucracy excessively, and jeopardizes both American consumers and technological advancement.
He stated that the actions taken by the CFPB unnecessarily obstruct businesses trying to fulfill consumer requirements, which may lead to price hikes and decreased choices.
In a statement regarding X, NetChoice pointed out that what appears as excessive interference is not primarily aimed at safeguarding consumers, but rather reflects overly aggressive bureaucrats trying to expand government oversight into an area of the economy known for its groundbreaking innovation.
As a researcher delving into this domain, I’m focusing on a regulation that encompasses digital payment applications equipped with wallet functionalities, like Apple Pay, Google Wallet, PayPal, Venmo, and Cash App. This rule empowers the Bureau to proactively conduct reviews, ensuring these platforms adhere to federal privacy and anti-fraud laws.
When this rule was established, the Consumer Financial Protection Bureau (CFPB) asserted that its purpose was to safeguard personal information, minimize fraudulent activities, and prevent unlawful debanking.
The plaintiffs argue that several of these businesses are currently subject to extensive regulation at a state level, and they question whether the Consumer Financial Protection Bureau adequately recognized any existing regulatory loopholes necessitating their involvement.
The plaintiffs claim that since the Consumer Financial Protection Bureau (CFPB) didn’t follow the necessary legal guidelines, the ruling they consider as “unreasonable” should be deemed void by the court. They also ask the court to rule this rule as illegal and beyond the powers of the CFPB.
The legal action was initiated on the very same day that Block Inc., the parent company of Cash App, was penalized by the Consumer Financial Protection Bureau for inadequate anti-fraud measures.
According to the regulatory body, Jack Dorsey’s company, Block, allegedly instructed Cash App users dealing with fraud-related losses to reach out to their banks for potential transaction reversals. However, the company firmly denies this claim.
According to Reuters’ report on January 17th, the decree issued by the Bureau encompasses a potential payout of $120 million in compensation and a fine of $55 million that must be deposited into the regulator’s fund for victim relief.
On January 10th, the Consumer Financial Protection Bureau (CFPB) suggested a regulation under which cryptocurrency service providers might be obligated to refund users who have lost funds due to illegal actions like hacking or fraudulent schemes.
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2025-01-17 06:46