Stein urges CFPB to regulate digital payment services

RALEIGH — Digital payment and wallet services such as Venmo, CashApp, PayPal and Zelle should be subject to the same federal consumer protections as banks, credit unions and other traditional financial institutions, state Attorney General Josh Stein said.

Customer funds in traditional banks and credit unions are secured by the Federal Deposit Insurance Corp., but money held by the standalone person-to-person digital payment services are not, exposing their millions of users to scams and other risks, a release from the N.C. Department of Justice says. When payment problems do occur, the third-party digital payment platforms make it difficult or impossible to contact a customer service representative for help.

The federal Consumer Financial Protection Bureau has proposed a rule that would:

• Include nonbank financial companies in CFPB supervisory examinations.
• Hold the firms to the same level of accountability as banks and credit unions regarding data privacy, funds transfer and other relevant consumer protection laws.
• Consistently enforce federal consumer financial protection laws to promote fair competition.

“More and more North Carolinians are conducting business on Venmo and other digital payment platforms, and they need to be able to trust that their money is going where they want to spend it,” Stein said in the release. “These digital payment platforms need to be playing by the same rules so that people’s hard-earned money is protected.”

Stein and the attorneys general of 17 other states and the District of Columbia recently addressed the issue in a letter sent to Rohit Chopra, the CFPB’s director.

Expanding the CFPB’s supervisory authority over these nonbank payment services also would reduce the risk of potential misuse of consumer data, the release says. Digital payment apps would be required to tell consumers about how they share and use their data and provide them with ways to opt out of information sharing.