The U.S. Consumer Financial Protection Bureau (CFPB) faces a lawsuit for imposing banking-like rules on digital wallets.
TechNet and NetChoice are opposing the CFPB’s efforts to regulate digital wallets and payment platforms such as Apple Pay, Google Wallet, PayPal, Venmo, and Cash App.
In a legal battle, the two tech trade groups are contesting the CFPB’s push to impose bank-like regulations on digital wallets and payment apps.
TechNet, a bipartisan tech executive network, and NetChoice, an internet freedom group, filed a complaint on January 16 against a rule issued by the CFPB in December.
The regulation increases the CFPB’s jurisdiction over “general-use digital consumer payment applications,” specifically targeting larger participants like digital wallets, payment apps, and other nonbank financial providers.
While the rule, outlined in 259 pages, aims at large non-bank firms, it excludes decentralized and crypto wallet providers.
“The CFPB’s unlawful power grab undermines the rule of law, further bloats the administrative state, and puts American consumers and innovation at risk,” NetChoice’s director of litigation, Chris Marchese, said in a statement.
“The CFPB’s actions create unnecessary roadblocks for businesses striving to meet consumer needs and set the stage for increased prices and reduced options,” he added.
“This blatant overreach is less about protecting consumers and more about overzealous bureaucrats consolidating government control over one of the most innovative sectors of the economy,” NetChoice said in a statement on X.
The CFPB focuses the rule on payment platforms with digital wallet functionality, such as Apple Pay, Google Wallet, PayPal, Venmo, and Cash App, and authorizes the bureau to conduct “proactive examinations” for compliance with privacy and fraud laws.
The CFPB designed the finalized rule to secure personal information, reduce fraud, and stop “illegal debunking.”
The plaintiffs maintain that state regulations already cover these companies extensively and accuse the CFPB of not identifying specific gaps that would necessitate its intervention.
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According to the plaintiffs, the CFPB’s failure to meet statutory standards makes the rule “arbitrary and capricious,” and they request the court to invalidate it, claiming it exceeds the bureau’s legal authority.
They filed the lawsuit simultaneously with the CFPB’s fine against Block Inc., the parent company of Cash App, for failing to provide adequate fraud protection.
The CFPB accused Jack Dorsey’s Block of telling Cash App users to contact their banks for transaction reversals after fraud-related losses, a claim the firm denied.
Reuters reported on January 17 that the bureau’s order includes a penalty of $55 million to pay into the victim relief fund, along with up to $120 million in compensation.
On January 10, the CFPB proposed a rule that would require crypto asset service providers to reimburse users for stolen funds, including losses from hacks and scams.
