Senate Adopts CRA Resolution To Nullify Rule Subjecting Large Cash Apps To Bureau Supervision

Using the Congressional Review Act, the Senate has voted to nullify a CFPB final rule that would subject large cash apps to the bureau’s supervision.

The Senate voted 51-47 to adopt S.J. Res 28, a resolution that under the CRA, was not subject to a filibuster. The House has not yet considered a companion resolution. If the House adopts that resolution, it would go to President Trump for his signature.

The CFPB issued the rule in December. It places under CFPB supervision large nonbank financial services providers that offer general-use digital consumer payment applications such as digital wallets, payment apps, funds transfer apps, and peer-to-peer payment apps.

A nonbank covered person qualifies as a larger participant if it (1) facilitates an annual covered consumer payment transaction volume of at least 50 million transactions as defined in the rule; and (2) is not a small business concern.

Many of those apps are owned by large technology companies. While banks and credit unions are subject to CFPB supervisory examinations, many of the largest technology firms offering consumer payment services have not been subject to that scrutiny, according to the CFPB.

The CFPB said that while the agency always has had enforcement authority over these companies, the final rule gives the bureau the authority to conduct examinations to ensure that companies are complying with the law. The CFPB estimates that the most widely used apps covered by the rule collectively process more than 13 billion consumer payment transactions each year. In late January, Republican lawmakers asked the CFPB to reopen the comment period.

Sen. Pete Ricketts, R-Neb., the sponsor of the CRA resolution, said these companies already are regulated. “These payment systems are regulated at the State and Federal level,” he said. “There are other organizations out there that do regulation, like the FDIC, the FTC, the Office of Comptroller, and, of course, State banking regulators, which I used to manage as a former Governor.”

However, Senate Banking Committee ranking Democrat Sen. Elizabeth Warren, D-Mass., said the growth in cash apps has been accompanied by increased fraud. “Three-quarters of Americans use digital payment platforms like Venmo and Cash App, and reports of scams on those sites have skyrocketed,” she said, adding, “So CFPB investigated and then stepped in with a new rule to help prevent this fraud. The CFPB’s rule also helps protect consumer privacy, and it combats debanking on these platforms.”