Attorney General Bonta Joins 18 Attorneys General in Support of Expanding Financial Protections to Vulnerable Consumers

OAKLAND — California Attorney General Rob Bonta today joined a multistate coalition of attorneys general in submitting a comment letter supporting a proposed rule that would expand the Consumer Financial Protection Bureau’s (CFPB) supervisory authority to cover non-traditional payment digital applications. The proposed rule would apply to nonbank payments companies that offer digital wallets or person-to-person payments through mobile and web applications and that process more than five million annual payment transactions, such as Venmo, CashApp, PayPal, and Zelle.

“Nonbank payment companies have a large and increasing significance to the everyday financial lives of consumers,” said Attorney General Bonta. “Consumers, especially those without access to traditional bank accounts, are using these platforms to deposit money and make payments. But just because companies offer a convenient alternative to bank payments, does not mean they can offer fewer protections to consumers. As technology evolves, it is our responsibility to ensure the market for banking services is safe and competitive. This proposed rule would advance consumer interests and would promote fair competition by ensuring that all payment platforms, whether offered by a bank or a non-bank company, are subject to the same oversight and are equally accountable if they break the law.” 

CFPB found that 76% percent of Americans have used at least one of the four largest app-based peer to peer payment apps (Venmo, CashApp, PayPal, and Zelle), and that this includes 61% of Americans with annual incomes of less than $30,000. However, these nonbank digital wallets are not subject to the same federal regulatory oversight as their traditional bank counterparts. This lack of federal oversight exposes millions of digital payment platform users to risks which can be higher for vulnerable consumers, including young or low-income individuals, who may not have ready access to traditional FDIC-insured bank-provided digital payment platforms. 

Specifically, the proposed rule would:

• Subject nonbank financial companies to CFPB supervisory examinations
• Ensure institutions follow applicable consumer protection laws
• Ensure the consistent enforcement of federal consumer financial protection laws between traditional and non-traditional financial institutions to promote fair competition 

In the letter, the attorneys general argue the proposed rule would ensure all consumers have sufficient protections, regardless of their financial resources and socio-economic background. Further, product offerings by nonbank digital payment companies blur the traditional lines of banking and commerce. The proposed rule would enable the CFPB to monitor for emerging risks that the collection and use of consumer data might pose to both consumers and the market.  

In issuing today’s comment letter, Attorney General Bonta joins the attorneys general of New Jersey, Colorado, Connecticut, Delaware, Massachusetts, Maryland, Michigan, Minnesota, North Carolina, Nevada, New Mexico, New York, Oregon, Pennsylvania, Rhode Island, Vermont, Wisconsin, and the District of Columbia. 

A copy of the letter can be found here.