FDATA North America Sends Letter to CFPB Advocating for Distinction Between Digital Wallets and Passthrough Payment Platforms

by rebecca

Contact: Laine Williams, (202) 897-4757, [email protected] 

May 2, 2024, Washington, DC – The Financial Data and Technology Association of North America (FDATA), a trade association representing more than 30 financial technology companies and consumer-permissioned data access platforms in Canada and the United States, today sent a letter to the Consumer Financial Protection Bureau (CFPB or Bureau) addressing concerns in the Bureau’s approach to digital wallets and passthrough payment platforms in both its Notice of Proposed Rulemaking (NPRM) on Personal Financial Data Rights and its NPRM on Defining Larger Participants of a Market for General-Use Digital Consumer Payments.

The letter highlighted a critical oversight in the CFPB’s draft regulations, which grouped digital wallets—designed to hold consumer assets—with passthrough payment platforms that merely facilitate transactions via accounts at other financial institutions. FDATA emphasized that this conflation could compromise regulatory effectiveness, confuse consumers, and stifle innovation in the market, with key points from the letter including:

  • General Definitions: The proposed rules offered overly broad definitions for digital wallets that did not acknowledge the operational distinctions from passthrough payment services.
  • Regulatory and Consumer Impacts: The lack of distinction was criticized for potentially imposing undue regulatory burdens on passthrough platforms without offering additional consumer protections.
  • Call for Tailored Regulation: FDATA North America advocated for the CFPB to refine its regulations to accurately mirror the diverse functionalities within digital financial services, ensuring focused and effective consumer protections.
  • Concern Over Data Duplication: The current approach could lead to unnecessary and confusing duplications in regulatory data requirements.
  • Innovation at Risk: The letter emphasized the importance of a regulatory framework that understands the operational realities of digital finance to foster innovation and ensure consumer safety.
  • Plea for Precise Rulemaking: FDATA North America stressed the need for rulemakings that distinguish between the various digital financial services, benefiting consumers, providers, and the broader financial ecosystem.

FDATA called on the CFPB to exempt passthrough payment platforms from being considered data providers under its Personal Financial Data Rights rule and from the supervisory requirements set forth in its payments Larger Participant Rulemaking.

A full copy of the letter is available here.