CFPB Proposes Rule to Protect Consumers in Emerging Payment Systems

The CFPB's proposed rule aims to expand consumer protections under the EFTA and Regulation E to cover emerging payment systems like gaming and stablecoins.

On January 2, 2025, the Consumer Financial Protection Bureau (CFPB) unveiled a proposed interpretive rule related to the Electronic Fund Transfer Act (EFTA) and Regulation E. This initiative aims to clarify the regulatory landscape for evolving payment platforms, particularly those linked to video gaming, esports betting, and transactions involving stablecoins.

The CFPB notes that this step is part of a broader effort to ensure businesses providing such financial products implement robust consumer protections.

This is crucial in defending against risks like hacking, fraud, and unauthorized transactions.

The Bureau warns that without these protections, consumers may face significant challenges in asserting their rights when it comes to unauthorized transfers or mistakes.

CORE ELEMENTS OF THE PROPOSED RULE

The proposed rule seeks to broaden the scope of EFTA and Regulation E by including in-game transactions related to video games, esports betting, and stablecoin trading.

Built on extensive research and input from stakeholders, the proposal highlights several critical areas:

  • Redefining “Funds”: A key aspect of the rule is expanding the definition of “funds” to include monetary substitutes, such as stablecoins and other interchangeable assets that can act as a medium of exchange or payment method.

    The intention is for this new definition to embrace acknowledged cryptocurrencies, stablecoins, and in-game currencies that can readily be converted into U.S. dollars.

    The CFPB emphasizes that what qualifies as “funds” will rely on specific circumstances and will not cover assets unusable for transactions or difficult to convert into fiat currency.

  • Expanding the Definition of “Accounts”: Currently, “accounts” as per EFTA refers to demand deposit accounts and prepaid accounts that serve personal or household purposes.

    The proposed rule aims to broaden this classification to also encompass (i) digital wallets utilized for purchases and peer-to-peer money transfers, (ii) gaming accounts where users acquire virtual items from game developers or other players, and (iii) accounts for credit card reward points that allow consumers to redeem their points for merchandise from various merchants.

Businesses under EFTA must follow particular protocols regarding error resolution and liability protections set forth by Regulation E. Companies that fall under this new classification are expected to provide clear disclosures about their electronic fund transfer services, detailing applicable fees, transfer limits, and error resolution processes.

EXPLORING CONSUMER DATA PRIVACY

In conjunction with the proposed interpretive rule, the CFPB has released a Request for Information (RFI) focusing on how consumer payment and financial data is collected, utilized, and monetized.

This RFI aims to gain insight into the practices of gaming companies concerning their financial products and management of consumer data.

The ultimate goal is to assess whether Regulation P, which outlines privacy protections under the Gramm-Leach-Bliley Act, requires updates.

Both the CFPB and the FTC are closely observing the methods through which major tech firms monetize consumer data.

Alongside this RFI, the Bureau has encouraged gamers and their parents to share personal insights about their experiences regarding gaming assets and transactions.

CONSIDERATIONS FOR IMPLEMENTATION

The current EFTA and Regulation E feature exemptions for specific transactions related to securities or commodities.

These exceptions apply primarily to fund transfers intended for trading in securities or commodities, particularly when governed by the SEC or CFTC.

The classification of digital currencies remains a gray area—whether they fall under securities regulation by the SEC or commodities regulation by the CFTC is still unclear.

Should certain virtual currencies be deemed securities or commodities, relevant transactions could potentially escape EFTA requirements.

In summary, the CFPB’s proposed rule signals an important step toward ensuring that the fast-evolving landscape of digital payments, particularly in gaming and financial technology, includes necessary consumer protections.

Through clearer definitions and expanded regulations, this initiative aims to safeguard consumers and fit contemporary financial realities within a robust legal framework.

Source: Natlawreview