US Consumer Watchdog Explores Stronger Protections for Digital Payments
The Consumer Financial Protection Bureau (CFPB), the leading U.S. consumer financial regulator, is exploring ways to enhance safeguards for consumers using digital payment methods. The agency announced two proposals on Friday, seeking public input on how to prevent excessive data collection and extend existing fraud protections to the rapidly evolving world of digital currencies and online payments.
Data Privacy in the Spotlight
One proposal focuses on the potential for intrusive data harvesting by companies offering digital payment services, particularly large technology platforms. The CFPB highlighted its own research, which found that some new payment mechanisms collect more data than necessary for the transaction itself. This data, the agency warns, could be used for "personalized pricing," where prices are adjusted based on individual consumer profiles. The deadline for public comment on this proposal is April 11.
CFPB Director Rohit Chopra emphasized the importance of consumer confidence in digital payments. "When people pay for their family expenses using new forms of digital payments, they must be confident that their transactions are not tainted by harmful surveillance or errors,"1 Chopra stated. He has previously expressed concerns about big tech companies using their payment platforms for market surveillance.
A Potential Ripple Effect on State Laws
The information gathered by the CFPB could potentially influence state privacy laws. Currently, many state laws exempt financial institutions or data already regulated by the federal Gramm-Leach-Bliley Act (GLBA). "To the extent that this drives a conversation in state legislatures... that would be a major change in the compliance stance for all financial institutions in the fintech industry," said Greg Szewczyk, a privacy and data security expert at law firm Ballard Spahr.
Extending Protections to New Payment Methods
The second proposal seeks to clarify whether the Electronic Fund Transfer Act, which protects consumers' rights to dispute payments, applies to newer payment methods, including those involving stablecoins and other digital currencies. While stablecoins are currently used primarily for trading and settlement, many industry players anticipate their wider adoption for consumer payments. Companies like Stripe, Visa, and PayPal all have stablecoin initiatives underway. The deadline for public comment on this proposal is March 31.
The CFPB clarified that its request for information aims to establish clear, market-wide expectations for how existing payment laws apply to new technologies, rather than relying on individual court decisions to set precedents.
What's Next?
The CFPB's initiatives signal a growing focus on consumer protection in the rapidly evolving digital payments landscape. While the future of these proposals remains uncertain under a new administration, the agency's efforts highlight the increasing importance of addressing privacy and fraud concerns as digital currencies and online payments gain wider adoption. The public comment period provides an opportunity for stakeholders to shape the future of these regulations.