Consumer Reports applauds rule that aims to protect users from fraud and privacy risks
WASHINGTON DC — Under a new rule finalized by the Consumer Financial Protection Bureau today, digital wallets and payment apps offered by Apple, Google and other big tech companies will now be subject to supervision by the Bureau just like large banks, credit unions and other financial institutions. Consumer Reports praised the final rule as an important step that will enable the CFPB to ensure that companies that offer the popular apps used to transfer money and make payments are following the law and consumers are protected from unfair practices.
The CFPB’s new rule applies to digital wallet and payment providers handling more than 50 million transactions per year. The most widely used apps subject to the rule process an estimated 13 billion consumer payment transactions annually, according to the CFPB.
“While digital payment apps have surged in popularity in recent years, they’ve also opened new avenues for fraud and privacy risks,” said Delicia Hand, senior director of the digital marketplace at Consumer Reports. “Users can end up losing money if they accidentally send a payment to the wrong person or fall victim to scams. Payment app providers collect a treasure trove of personal data from consumers and share that data widely with other companies, which can put users’ privacy at risk.”
Hand continued, “Consumers shouldn’t have to choose between the convenience of digital payment apps and the safety and security of their money and privacy. The CFPB’s new rule will enable the Bureau to protect consumers from unfair practices through regular examinations of digital payment app providers before issues become widespread. The rule also will ensure more consistent enforcement of the law and level the playing field between traditional banks and big tech companies that offer these services.”
Scams on peer-to-peer (P2P) payment apps have become increasingly common in recent years. In 2023 alone, consumers reported losing $210 million to scams on these platforms, a staggering 62 percent increase from 2021. In addition, users who accidentally send a payment to the wrong person find it nearly impossible to get their money back.
Consumer Reports evaluated P2P apps in 2022 and found that their policies for resolving fraud and errors left consumers at risk of losing their money. In most cases, consumers are left unprotected when they are tricked into sending money to scammers on P2P apps. In September, CR published a blog post summarizing an updated review of the policies of 11 P2P app providers and found little improvement since its previous evaluation.
CR’s 2022 evaluation also found that consumers using P2P apps face privacy risks because app providers share their personal information widely and make it difficult for users to delete their data. In addition, CR found that Apple Cash, Cash App, and Venmo require users to meet sometimes confusing conditions to ensure their funds held in the payments portion of the app are protected by Federal Deposit Insurance Corporation insurance. Users could lose money if they haven’t completed additional app or product registration requirements and the P2P companies suffer financial losses or declare bankruptcy. This is unlike banks which are required to maintain fund insurance.
Contact: Michael McCauley, michael.mccauley@consumer.org