Government Relations Newsletter: Vol 9, Issue 3 - "CFPB Orders Tech Giants to Turn Over Info..."

CFPB Orders Tech Giants to Turn Over Information on their Payment System Plans

By: The MAC Government Relations Committee

Within twenty-three days after the Senate confirmation of Rohit Chopra to head the CFPB, the Bureau issued a series of initial orders aimed at the information collection and business practices of large technology companies operating “payments systems” in the United States.  

The information is being gathered to help the CFPB better understand how these firms use personal payments data and manage data access to users so the Bureau can ensure adequate consumer protection.

Who Received the Initial Orders?

Initial orders were sent to Amazon, Apple, Facebook, Google, PayPal, and Square. The Bureau will also be studying the payment system practices of Chinese tech giants, including Alipay and WeChat Pay.

What is the CFPB Focused On?

• Data harvesting and monetization – Payment companies may be actively sharing payment data across product lines and with data brokers and other third parties. In some cases, Big Tech companies may be using this data for behavioral targeting. According to the CFPB, these practices may not align with consumers’ expectations. The orders seek information on how companies collect, use, and monetize data, including exploration of these questions (among others):
  • Will the operators engage in invasive financial surveillance and combine the data they collect on consumers with their geolocation and browsing data?
  • Will they in turn use this data to deepen behavioral advertising, engage in price discrimination, or sell to third parties?

• Access restrictions and user choice – As explained by the CFPB, when payment systems gain scale and network effects, merchants and other partners feel obligated to participate, and the risk increases that payment systems operators will limit consumer choice and stifle innovation by anticompetitively excluding certain businesses. The orders seek to understand any such restrictive access policies and how they affect the choices available to families and businesses, including:
  • Will these companies operate their payment platforms in a manner that interferes with the fair, transparent, and competitive markets?
  • Will the payment platforms be truly neutral, or will they use their scale to extract rents from market participants?
  • Will small businesses feel coerced into participating in the payment platform out of fear of being suppressed or hidden in search or product listings?
  • If these tech companies enter a market that competes with other providers on the platform, will these providers be removed or otherwise disadvantaged?
  • What factors will these tech companies use when disqualifying or delisting an individual or business from participating on the platform?

• Other consumer protections – In the CFPB’s view, consumers expect certain assurances when dealing with companies that move their money. They expect to be protected from fraud and payments made in error, for their data and privacy to be protected and not shared without their consent, to have responsive customer service, and to be treated equally under relevant law. The orders seek to understand the robustness with which payment platforms prioritize consumer protection under laws such as the Electronic Fund Transfer Act and the Gramm-Leach-Bliley Act. For example:
  • How will these payment platforms ensure that key consumer protections are adhered to? How effectively do they manage complaints, disputes and errors?
  • Are they sufficiently staffed to ensure adequate steps are taken to address consumer protection and provide responsive customer service when things go wrong?

Why are the Orders Significant to the Payments Industry?

Clearly, the orders squarely focus on payment services and activities in the payments industry, and the CFPB positions the initiative as part of its mission to ensure that markets for consumer financial products and services are fair, transparent, and competitive.  Information that the CFPB gathers through this inquiry will be available to other regulators, including the Federal Trade Commission and others with more direct authority over the “tech giants,” to shape future regulatory policies and law enforcement initiatives regarding payments services provided to consumers and small businesses.  These resulting policies and initiatives will undoubtedly have ripple effects across the entire payments industry.