Big Tech vs. CFPB: The Battle Over Digital Wallet Regulation

Tech giants Apple and Google, through industry groups TechNet and NetChoice, have launched a legal battle against the Consumer Financial Protection Bureau (CFPB) to block new regulations on digital wallets, reports PaymentsDive. The lawsuit, filed on January 16, argues that services like Apple Pay and Google Pay function differently from payment processors and should not fall under the same regulatory framework. The CFPB’s rule, effective January 9, requires digital wallet providers handling over 50 million transactions annually to comply with consumer protection laws. This includes oversight of fraud handling, data privacy, and account shutdown practices.

The lawsuit contends that digital wallets merely transmit payment credentials—such as stored credit card details—rather than processing payments themselves. Chris Marchese, director of the NetChoice litigation center, claims the CFPB lacks the legal authority to impose these regulations. “Grouping digital wallets with payment processors stretches the law beyond its intent,” he said.

Consumer advocates, however, see the lawsuit as an attempt to avoid accountability. Adam Rust, director of financial services at the Consumer Federation of America, dismissed the argument as semantics. “Tech firms want the benefits of financial services without the responsibility,” he said. Professor Ramnath Chellappa of Emory University acknowledged the industry’s concerns but argued that digital wallets differ from traditional wallets because companies like Apple and Google can restrict user access. “Even if this rule isn’t perfect, some regulation is needed,” he said.

The CFPB maintains that digital wallet providers should be held to the same consumer protection standards as other financial services. “Consumers can suffer real harm when their accounts are disrupted,” the agency stated in a November 21 release. Tech industry advocates claim the rule is part of CFPB Director Rohit Chopra’s long-standing effort to rein in big tech firms. “This is an attempt to regulate digital services in the absence of a dedicated federal agency,” said Marchese.

Consumer protection groups disagree, arguing that digital wallets play a critical role in financial transactions and must be accountable. “Consumers rely on these apps to manage their money safely,” Rust said. “CFPB oversight is necessary to ensure that trust isn’t abused.” Apple and Google have not commented on the lawsuit.