NJ Leads Multistate Support for Wider Consumer Oversight of Digital Payment Services

Joining Forces with Other States, AG Platkin Advocates for Enhanced Consumer Protections and Regulatory Parity for Digital Wallets like Venmo and PayPal.

New Jersey (January 10, 2024) – New Jersey Attorney General Matthew J. Platkin is leading a coalition of Attorneys General in a concerted effort to extend greater legal and regulatory protections to users of digital payment services. This initiative supports a proposed federal rule aimed at placing nonbank companies offering digital consumer payment and wallet services under similar scrutiny as traditional financial institutions.

The multistate comment letter, spearheaded by New Jersey, backs the Consumer Financial Protection Bureau's (CFPB) Notice of Proposed Rulemaking for peer-to-peer digital payment services. Announced on November 7, 2023, the proposed rule has three primary objectives:

1. To include larger nonbank financial companies in CFPB supervisory examinations.
2. To hold these firms accountable at the same level as banks and credit unions, particularly concerning data privacy and funds transfer.
3. To ensure uniform enforcement of federal consumer financial protection laws and promote fair competition.

Attorney General Platkin emphasized the necessity of this rule, highlighting the current regulatory gaps that leave consumers vulnerable when using standalone digital payment apps. "This rule will close regulatory loopholes and ensure that all of New Jersey’s consumers will be protected," he stated. The Attorney General raised concerns about the lack of FDIC insurance and reduced oversight for funds held by these services, a risk particularly significant for those who can least afford it.

The rule would also address concerns regarding data privacy. Cari Fais, Acting Director of the Division of Consumer Affairs, pointed out the current lack of stringent scrutiny on digital payment apps compared to banks, especially in terms of federal data privacy laws compliance. The proposed rule would mandate these apps to be transparent about data sharing practices and offer consumers opt-out options.

The move to extend CFPB supervision over these nonbank payment services is also seen as a step towards reducing risks associated with consumer data misuse and enhancing consumer protection against scams.

This initiative would complement New Jersey's existing consumer protection regulations. The state's Department of Banking and Insurance, which currently licenses and oversees these platforms in a limited capacity, would gain additional tools and information to curb unfair practices in the market through CFPB examinations.

New Jersey has previously demonstrated its commitment to regulating digital payments. In 2021, the state joined a comment letter in response to a CFPB inquiry into the business practices of big tech payment platforms, focusing on consumer protection.

Other states supporting this initiative include California, Colorado, Connecticut, Delaware, Maryland, Massachusetts, Michigan, Minnesota, Nevada, New Mexico, North Carolina, New York, Oregon, Pennsylvania, Rhode Island, Vermont, Wisconsin, and the District of Columbia. This multi-state collaboration reflects a growing consensus on the need for stringent oversight of digital payment services, ensuring consumer safety and fair market practices.