On November 21, the CFPB issued its final rule defining larger participants in the digital consumer payment applications market. The rule does not impose new substantive consumer protection requirements, but it does subject larger participants to CFPB supervision, and it amends the CFPA by establishing how nonbanks qualify as larger participants. The final rule specifies that a nonbank and its affiliated companies must facilitate at least 50 million consumer payment transactions denominated in U.S. dollars and must not be a small business concern under the SBA size standard. The market examples include consumer financial products and services like digital wallets, payment apps, funds transfer apps, and peer-to-peer payment apps.

As previously covered by InfoBytes, this rule was proposed over a year ago to supervise large non-bank fintech firms that offer services like digital wallets and payment apps; however, the proposed version would have been applicable to firms handling greater than 5 million transactions per year (rather than the 50 million threshold set by the final rule).

The final rule affects Subpart A of the CFPB’s existing larger-participant regulation; 12 CFR part 1090. Subpart A prescribes the procedures, definitions, standards and protocols that apply to the CFPB’s supervision of larger participants. The final rule incorporates these existing provisions while setting forth a new test to determine larger participant status in the digital consumer payment applications market.

The criteria for determining larger participants are designed to capture prominent market actors without overburdening smaller ones. By setting the threshold at 50 million annual transactions and excluding small business concerns, the CFPB aims to supervise entities that have a significant impact on the market while allowing smaller participants to operate with fewer regulatory burdens. This targeted approach ensures that the CFPB can monitor and address risks effectively in the digital consumer payment applications market.

The final rule also highlights the CFPB’s consultation with other agencies during its development. The CFPB consulted with the FTC, the Fed, the FDIC, FinCEN, the NCUA, the OCC, and the SEC to ensure consistency among other agencies’ objectives. The final rule will go into effect 30 days after publication in the Federal Register.