CFPB orders tech giants to turn over payment system information

The Consumer Financial Protection Bureau has ordered six prominent technology companies to turn over information on their payments systems as it seeks to regulate how much control consumers have over their own data.

The CFPB is demanding that Amazon, Apple, Alphabet’s Google, Facebook, PayPal and Square provide detailed information on the use of personal payments data and how they manage data access.

The CFPB said it plans to send similar orders to Chinese tech giants, including Alipay and WeChat. It said it will make its findings public.

“Big Tech companies are eagerly expanding their empires to gain greater control and insight into our spending habits,” CFPB Director Rohit Chopra said in a press release Thursday. “We have ordered them to produce information about their business plans and practices.”

The CFPB has the statutory authority not only to make payments firms turn over information to monitor for risks to consumers but also can publish its findings if it determines they are in the public interest.

Consumers expect certain protections from fraud and errors when dealing with companies that move their money, according to the CFPB. Consumers also demand a level of privacy and security, no sharing of their data without consent, responsive customer service and to be treated “equally under relevant law,” according to the CFPB.

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.

The move is one of the first by Chopra, a Democrat who was sworn in as director on Oct. 12.confirmed as director on Sept. 30. Previously, he was a member of the Federal Trade Commission, where he lambasted tech companies for using their size and market power to undermine fair competition.

The Consumer Bankers Association applauded the move.

"A growing share of banking activity has occurred outside of the purview of leading regulators, putting consumers and the resiliency of the financial system at risk," Richard Hunt, the CBA's president and CEO, said in a press release.

The CFPB said the orders will help it carry out Congress’s mandate to monitor for risks to consumers. The companies have until Dec. 15 to respond to a list of more than 55 questions and provide details on different products and services.

“Knowing what we spend our money on is a valuable source of data on consumer behavior,” Chopra said in a statement on the CFPB’s inquiry. ”This data can be monetized by companies that seek to profit from behavioral targeting, particularly around advertising and e-commerce. That many Big Tech companies aspire to grow in this space only heightens these concerns.”

Chopra said consumers know little about how large technology companies are using consumer data in their payments platforms. He cited the experience of consumers In China as an example that action needed to be taken.

“Alipay and WeChat Pay are deeply imbedded into the lives of the Chinese public, combining messaging, e-commerce and payment functionality into super-apps,” he wrote. “In such a market, consumers have little choice but to use these apps and little market power to shape how their data is used.”

The CFPB said its inquiry will help inform regulators and policymakers about the future of the U.S. payments system including a rulemaking to clarify standards for how fintechs access bank account data. That rulemaking, expected to be issued by the CFPB this year, is mandated by Section 1033 of the Dodd-Frank Act.

The CFPB has asked the companies to respond to a series of questions to determine if their business practices present risks to consumers and to a fair, transparent and competitive marketplace.

Specifically, the orders compel the companies to turn over information on data harvesting and monetization, and whether the companies are actively sharing payment data across their product lines and with data brokers and other third parties. In addition, the CFPB is looking at whether the payment systems restrict consumer access and user choice.

The CFPB said that in some cases, companies may be using their data for behavioral targeting and other practices that “may not align with consumers’ expectations." The orders seek information on how companies collect and use data.

The companies also were asked to provide recent contracts signed with third-party companies and to provide details about any compensation the technology giants have received from sharing or selling consumer data.

Moreover, the CFPB has asked the companies to describe specific products and if they are using consumer data to develop, sell or market other products or services from that data. In addition, the CFPB wants information on whether any third party has obtained data that permits a company to identify any individual consumer or commercial user of a specific product.