The Consumer Financial Protection Bureau (CFPB) announced on Friday that it is placing Google Payment Corp., Google’s payment subsidiary, under federal supervision due to perceived risks to consumers. Google immediately responded by filing a lawsuit challenging the decision.
The CFPB cited nearly 300 consumer complaints, primarily concerning fraud, scams, and unauthorized transactions, as the basis for its decision. The agency emphasized that this action doesn’t constitute a finding of wrongdoing by Google. However, the CFPB order indicated that consumer complaints suggest Google Payment failed to adequately investigate complaints regarding erroneous transfers, among other potential violations. The CFPB asserts that the law permits supervision even if the services in question are no longer offered by Google.
Google Payment Corp. countered with a lawsuit, arguing that the CFPB’s decision relied on a small number of unsubstantiated complaints related to a discontinued product. The company contends that a product that no longer exists cannot pose a risk to consumers. “As a matter of common sense, a product that no longer exists is incapable of posing such risk,” the company stated in its complaint.
This move signifies increased scrutiny of Silicon Valley’s expanding role in financial services under the Biden administration. The CFPB has been actively monitoring tech companies offering financial products, a sector traditionally dominated by banks. Last month, the CFPB finalized regulations extending the same supervisory oversight applied to banks to tech companies providing digital wallets and payment services.
This action and subsequent lawsuit represent a significant clash between the government and a major tech company in the waning weeks of the Biden administration. The CFPB declined to comment on the pending litigation. Financial regulators utilize confidential supervisory examinations to identify and rectify companies’ legal violations. The outcome of this case could have significant implications for the future regulation of tech companies in the financial services sector. The CFPB has continued its rulemaking efforts despite calls from Republican lawmakers to halt such activities in the final weeks of the Biden administration.
