CFPB’s Google Fight Threatens Power To Designate Risky Companies

A US financial regulator’s bid to keep closer tabs on Google could jeopardize the agency’s longstanding but little-used power to designate companies as a potential risk to consumers, if the incoming Trump administration chooses to retain the tech giant’s designation.

Google Payment Corp., a unit of Alphabet Inc., immediately sued the CFPB on Dec. 6 after the agency issued an order putting the company under its supervisory umbrella. The lawsuit—the first of its kind—challenges not only the order, but also the underlying process by which the CFPB deploys its designation authority.

The CFPB’s order doesn’t apply to all of Google or even Google Wallet, its primary payment tool available in the US. Instead, it targets Google Pay, a product the company retired domestically earlier this year.

The order came less than a month after the CFPB issued a rule that would subject the largest digital payment operators, including Google, to agency supervision. That rule is expected to be published in the Federal Register as soon as Tuesday, and will take effect 30 days after.

As a results of those factors, the specific designation of Google Payment—and any similar actions against other unsupervised consumer finance entities that pose a risk to customers—may be on the legal chopping block, said Mercedes Tunstall, a partner at Cadwalader, Wickersham & Taft LLP focused on consumer financial services and fintechs.

“That could be at risk by doing things like this,” she said.

Designation Powers

The 2010 Dodd-Frank Act gave the CFPB the power to supervise banks with over $10 billion in assets and other consumer finance firms.

The law, which created the CFPB, also gave the agency the power to expand its regulatory authority by designating for supervision the largest players in any market it oversees. The CFPB did so for debt collectors, student loan servicers, and several other markets.

Dodd-Frank also empowered the CFPB to designate certain companies that pose a serious threat of consumer harm. That authority lay dormant until CFPB Director Rohit Chopra announced plans to revive it in 2022, with a particular eye on financial technology companies.

“Congress specifically tasked the CFPB with keeping pace with new entrants in financial markets, including as they rapidly evolve with new technologies and platforms,” a CFPB spokesman said in a Monday statement.

Allowing such designations makes sense when “judiciously used,” given the speed with which fintechs have evolved, Tunstall said.

The CFPB has specifically designated buy now, pay later giant Affirm Holdings Inc. and installment lender World Acceptance Corp. for supervision. Because the orders are confidential unless the subject of supervision challenges or discloses them, it’s unclear what other companies may have been designated.

Affirm agreed to supervision and revealed its status in a securities filing. World Acceptance disagreed with the CFPB’s determination, and the agency subsequently released the order publicly.

Google Pushback

Google Payment is the first company to sue over a CFPB designation.

Agency watchers said it made sense for Google to take that route given the facts of the case, in particular since Google Payment no longer offers the peer-to-peer payments service the CFPB was concerned about in the US.

A fight limited to supervision of a single entity that is winding down US operations would pose only a limited threat to the CFPB’s broader designation power, said Jesse Silverman, counsel with Troutman Pepper Hamilton Sanders LLP.

“That’s embarrassing to the CFPB but it’s not particularly damaging,” Silverman, a former CFPB enforcement attorney, said.

But in the case at hand, Google is challenging the process for those designations alongside the dispute over supervising a defunct product. The company is disputing the specifics of Google Payment’s designation as well as the CFPB’s policy of making the designations public only when a company challenges them.

That approach, if successful, could jeopardize a wider universe of designations, Silverman said.

The incoming Trump administration could choose to rescind the supervision order against Google Payment, potentially alleviating the litigation risk, he added.

Fintech Fights

The fight between Google and the CFPB comes amid a broader battle between digital payment companies and the agency.

The CFPB issued a final rule in November subjecting seven digital payment companies that process more than 50 million transactions annually to CFPB supervision. Google Payment said in its lawsuit that it anticipated being one of the seven companies covered by the rule.

The tech industry lobbied hard against the rule and hopes either Congress will repeal it using the Congressional Review Act or that the Trump administration will move to rescind it.

Many observers believe repealing the larger participant rule won’t be high on the next Congress’s agenda, and the industry is considering a lawsuit challenging it if lawmaker action doesn’t come quickly.

“Big Tech’s attempts to avoid oversight are telling, particularly given the industry’s track record on consumer privacy,” the CFPB spokesman said.

Google’s lawsuit is part of a campaign by the company, and fintechs broadly, to keep the CFPB at bay, said Adam Rust, the director of financial services at the Consumer Federation of America.

“If in the end, net-net, it’s all the same, it makes me wonder if they’re trying to play a game of attacking everything,” he said.

Given Google’s track record of handling customer disputes, highlighted in the CFPB’s order, specific supervision of the company makes sense even if the CFPB separately plans to supervise the largest players across the digital payments market, he said.

“Asserting supervision on Google now and simultaneously initiating supervision of all large participants in this space reinforce each other,” Rust said. “The bottom line is that consumers are using these apps, and the businesses that provide them should be held responsible for conducting business appropriately.”

The case is Google Payment Corp. v. Consumer Financial Protection Bureau, D.D.C., No. 1:24-cv-03419, complaint filed 12/6/24.