Federal Register / Vol. 88, No. 221 / Friday, November 17, 2023 / Proposed Rules 80197 

1Consumer Financial Protection Act of 2010, 

Title X of the Dodd-Frank Wall Street Reform and 

Consumer Protection Act, Public Law 111–203, 124 

Stat. 1376, 1955 (2010) (hereinafter, ‘‘CFPA’’). 

2The provisions of 12 U.S.C. 5514 apply to 

certain categories of covered persons, described in 

section (a)(1), and expressly excludes from coverage 

persons described in 12 U.S.C. 5515(a) or 5516(a). 

The term ‘‘covered person’’ means ‘‘(A) any person 

that engages in offering or providing a consumer 

financial product or service; and (B) any affiliate of 

a person described [in (A)] if such affiliate acts as 

a service provider to such person.’’ 12 U.S.C. 

5481(6). 

3 12 U.S.C. 5514(a)(1)(A), (D), (E). 

4 12 U.S.C. 5514(a)(1)(B), (a)(2); see also 12 U.S.C. 

5481(5) (defining ‘‘consumer financial product or 

service’’). 

The DG, entitled ‘‘Evaluating 

Deviations and Reporting Defects and 

Noncompliance under 10 CFR part 21,’’ 

is temporarily identified by its task 

number, DG–1416. 

This proposed revision of the guide 

(Revision 1) updates the guidance to 

provide additional clarification on 

NRC’s Counterfeit, Fraudulent, Suspect 

Items definition. In addition, several 

editorial changes were made to conform 

to the current format and content of 

RGs. 

The staff is also issuing for public 

comment a draft regulatory analysis 

(ADAMS Accession No. ML23187A550). 

The staff developed a regulatory 

analysis to assess the value of issuing or 

revising a regulatory guide as well as 

alternative courses of action. 

As noted in the Federal Register on 

December 9, 2022 (87 FR 75671), this 

document is being published in the 

‘‘Proposed Rules’’ section of the Federal 

Register to comply with publication 

requirements under 1 CFR chapter I. 

III. Backfitting, Forward Fitting, and 

Issue Finality 

Issuance of DG–1416 as a final RG 

would not constitute backfitting as that 

term is defined in section 50.109 of title 

10 of the Code of Federal Regulations 

(10 CFR), ‘‘Backfitting,’’ and as 

described in NRC Management Directive 

(MD) 8.4, ‘‘Management of Backfitting, 

Forward Fitting, Issue Finality, and 

Information Requests;’’ affect the issue 

finality of an approval issued under 10 

CFR part 52, ‘‘Licenses, Certifications, 

and Approvals for Nuclear Power 

Plants;’’ or constitutes forward fitting as 

that term is defined and described in 

MD 8.4 because, as explained in DG– 

1416, licensees would not be required to 

comply with the positions set forth in 

the DG. 

IV. Submitting Suggestions for 

Improvement of Regulatory Guides 

A member of the public may, at any 

time, submit suggestions to the NRC for 

improvement of existing RGs or for the 

development of new RGs. Suggestions 

can be submitted on the NRC’s public 

website at https://www.nrc.gov/readingrm/doc-collections/reg-guides/ 

contactus.html. Suggestions will be 

considered in future updates and 

enhancements to the ‘‘Regulatory 

Guide’’ series. 

Dated: November 13, 2023. 

For the Nuclear Regulatory Commission. 

Stephen M. Wyman, 

Acting Chief, Regulatory Guide and Programs 

Management Branch, Division of Engineering, 

Office of Nuclear Regulatory Research. 

[FR Doc. 2023–25421 Filed 11–16–23; 8:45 am] 

BILLING CODE 7590–01–P 

CONSUMER FINANCIAL PROTECTION 

BUREAU 

12 CFR Part 1090 

[Docket No. CFPB–2023–0053] 

RIN 3170–AB17 

Defining Larger Participants of a 

Market for General-Use Digital 

Consumer Payment Applications 

AGENCY: Consumer Financial Protection 

Bureau. 

ACTION: Proposed rule; request for 

public comment. 

SUMMARY: The Consumer Financial 

Protection Bureau (CFPB) proposes a 

rule to define a market for general-use 

digital consumer payment applications. 

The proposed market would cover 

providers of funds transfer and wallet 

functionalities through digital 

applications for consumers’ general use 

in making payments to other persons for 

personal, family, or household 

purposes. Larger participants of this 

market would be subject to the CFPB’s 

supervisory authority under the 

Consumer Financial Protection Act 

(CFPA). 

DATES: Comments should be received on 

or before January 8, 2024. 

ADDRESSES: You may submit comments, 

identified by Docket No. CFPB–2023– 

0053 or RIN 3170–AB17, by any of the 

following methods: 

• Federal eRulemaking Portal: 

https://www.regulations.gov. Follow the 

instructions for submitting comments. A 

brief summary of this document will be 

available at https://

www.regulations.gov/docket/CFPB2023-0053. 

• Email: 2023-NPRM-PaymentApps@

cfpb.gov. Include Docket No. CFPB– 

2023–0053 or RIN 3170–AB17 in the 

subject line of the message. 

• Mail/Hand Delivery/Courier: 

Comment Intake—LP Payment Apps 

Rulemaking, Consumer Financial 

Protection Bureau, c/o Legal Division 

Docket Manager, 1700 G Street NW, 

Washington, DC 20552. Because paper 

mail in the Washington, DC area and at 

the CFPB is subject to delay, 

commenters are encouraged to submit 

comments electronically. 

Instructions: The CFPB encourages 

the early submission of comments. All 

submissions should include the agency 

name and docket number or Regulatory 

Information Number (RIN) for this 

rulemaking. In general, all comments 

received will be posted without change 

to https://www.regulations.gov. 

All comments, including attachments 

and other supporting materials, will 

become part of the public record and are 

subject to public disclosure. Proprietary 

information or sensitive personal 

information, such as account numbers 

or Social Security numbers, or names of 

other individuals, should not be 

included. Comments will not be edited 

to remove any identifying or contact 

information. 

FOR FURTHER INFORMATION CONTACT: 

Christopher Young, Deputy Assistant 

Director, and Owen Bonheimer, Senior 

Counsel, Office of Supervision Policy, at 

202–435–7700. If you require this 

document in an alternative electronic 

format, please contact CFPB_

Accessibility@cfpb.gov. 

SUPPLEMENTARY INFORMATION: 

I. Overview 

Section 1024 of the CFPA,1 codified at 

12 U.S.C. 5514, gives the CFPB 

supervisory authority over all nonbank 

covered persons 2 offering or providing 

three enumerated types of consumer 

financial products or services: (1) 

Origination, brokerage, or servicing of 

consumer loans secured by real estate 

and related mortgage loan modification 

or foreclosure relief services; (2) private 

education loans; and (3) payday loans.3

The CFPB also has supervisory 

authority over ‘‘larger participant[s] of a 

market for other consumer financial 

products or services,’’ as the CFPB 

defines by rule.4 In addition, the CFPB 

has the authority to supervise any 

nonbank covered person that it ‘‘has 

reasonable cause to determine by order, 

after notice to the covered person and a 

reasonable opportunity . . . to respond 

. . . is engaging, or has engaged, in 


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80198 Federal Register / Vol. 88, No. 221 / Friday, November 17, 2023 / Proposed Rules 

5 12 U.S.C. 5514(a)(1)(C); see also 12 CFR part 

1091 (prescribing procedures for making 

determinations under 12 U.S.C. 5514(a)(1)(C)). In 

addition, the CFPB has supervisory authority over 

very large depository institutions and credit unions 

and their affiliates. 12 U.S.C. 5515(a). Furthermore, 

the CFPB has certain authorities relating to the 

supervision of other depository institutions and 

credit unions. 12 U.S.C. 5516(c)(1). One of the 

CFPB’s mandates under the CFPA is to ensure that 

‘‘Federal consumer financial law is enforced 

consistently without regard to the status of a person 

as a depository institution, in order to promote fair 

competition.’’ 12 U.S.C. 5511(b)(4). 

6The first five rules defined larger participants of 

markets for consumer reporting, 77 FR 42874 (July 

20, 2012) (Consumer Reporting Rule), consumer 

debt collection, 77 FR 65775 (Oct. 31, 2012) 

(Consumer Debt Collection Rule), student loan 

servicing, 78 FR 73383 (Dec. 6, 2013) (Student Loan 

Servicing Rule), international money transfers, 79 

FR 56631 (Sept. 23, 2014) (International Money 

Transfer Rule), and automobile financing, 80 FR 

37496 (June 30, 2015) (Automobile Financing Rule). 

7As the CFPB noted in its first larger participant 

rule covering the consumer reporting market, the 

CFPB’s supervisory authority ‘‘is not limited to the 

products or services that qualified the person for 

supervision, but also includes other activities of 

such a person that involve other consumer financial 

products or services or are subject to Federal 

consumer financial law.’’ 77 FR 42874, 42880 (July 

20, 2012), cited by Larger Participant Debt 

Collection Rule, 77 FR 65775, 65776 n.15 (Oct. 31, 

2012). For example, selling, providing, or issuing of 

stored value or payment instruments is associated 

with the activity that falls within the proposed 

market definition, and may constitute a consumer 

financial product or service that the CFPB may 

supervise when examining a larger participant of 

the proposed market. 

8 12 U.S.C. 5514(b)(1). The CFPB’s supervisory 

authority also extends to service providers of those 

covered persons that are subject to supervision 

under 12 U.S.C. 5514(a)(1). 12 U.S.C. 5514(e); see 

also 12 U.S.C. 5481(26) (defining ‘‘service 

provider’’). 

9See 12 U.S.C. 5514(b) (authorizing the CFPB 

both to conduct examinations and to require reports 

from entities subject to supervision). 

10 12 CFR 1090.103(d). 

11For further description of the CFPB’s 

supervisory prioritization process, see CFPB 

Supervision and Examination Manual (updated 

September 2023), part I.A at 11–12, available at 

https://www.consumerfinance.gov/compliance/ 

supervision-examinations/ (last visited Oct. 27, 

2023). 

12The CFPB is aware that States have been active 

in regulation of money transmission by money 

services businesses and that many States actively 

examine money transmitters. If the CFPB adopts the 

Proposed Rule, the CFPB would coordinate with 

appropriate State regulatory authorities in 

examining larger participants. 

13 12 CFR 1090.100 through 103. 

conduct that poses risks to consumers 

with regard to the offering or provision 

of consumer financial products or 

services.’’ 5

This proposed rule (the Proposed 

Rule) would be a sixth in a series of 

CFPB rulemakings to define larger 

participants of markets for consumer 

financial products and services for 

purposes of CFPA section 

1024(a)(1)(B).6 The Proposed Rule 

would establish the CFPB’s supervisory 

authority over certain nonbank covered 

persons participating in a market for 

‘‘general-use digital consumer payment 

applications.’’ 7 In establishing the 

CFPB’s supervisory authority over such 

persons, the Proposed Rule would not 

impose new substantive consumer 

protection requirements or alter the 

scope of the CFPB’s other authorities. In 

addition, some nonbank covered 

persons that would be subject to the 

CFPB’s supervisory authority under the 

Proposed Rule also may be subject to 

other CFPB supervisory authorities 

under CFPA section 1024, including, for 

example, as a larger participant in 

another market defined by a previous 

CFPB larger participant rule. Finally, 

regardless of whether they are subject to 

the CFPB’s supervisory authority, 

nonbank covered persons generally are 

subject to the CFPB’s regulatory and 

enforcement authority. 

The proposed market would include 

providers of funds transfer and wallet 

functionalities through digital 

applications for consumers’ general use 

in making payments to other persons for 

personal, family, or household 

purposes. Examples include many 

consumer financial products and 

services that are commonly described as 

‘‘digital wallets,’’ ‘‘payment apps,’’ 

‘‘funds transfer apps,’’ ‘‘person-toperson payment apps,’’ ‘‘P2P apps,’’ and 

the like. Providers of consumer financial 

products and services delivered through 

these digital applications help 

consumers to make a wide variety of 

consumer payment transactions, 

including payments to friends and 

family and payments for purchases of 

nonfinancial goods and services. 

The CFPB is authorized to supervise 

nonbank covered persons subject to 

CFPA section 1024 for purposes of (1) 

assessing compliance with Federal 

consumer financial law; (2) obtaining 

information about such persons’ 

activities and compliance systems or 

procedures; and (3) detecting and 

assessing risks to consumers and 

consumer financial markets.8 The CFPB 

conducts examinations, of various 

scopes, of supervised entities. In 

addition, the CFPB may, as appropriate, 

request information from supervised 

entities prior to or without conducting 

examinations.9 Section 1090.103(d) of 

the CFPB’s existing larger participant 

regulations provides that the CFPB may 

require submission of certain records, 

documents, and other information for 

purposes of assessing whether a person 

is a larger participant of a covered 

market.10

The CFPB prioritizes supervisory 

activity among nonbank covered 

persons on the basis of risk, taking into 

account, among other factors, the size of 

each entity, the volume of its 

transactions involving consumer 

financial products or services, the size 

and risk presented by the market in 

which it is a participant, the extent of 

relevant State oversight, and any field 

and market information that the CFPB 

has on the entity.11 Such field and 

market information can include, for 

example, information from complaints 

and any other information the CFPB has 

about risks to consumers and to markets 

posed by a particular entity. 

The specifics of how an examination 

takes place vary by market and entity. 

However, the examination process 

generally proceeds as follows. CFPB 

examiners contact the entity for an 

initial conference with management and 

often request records and other 

information. CFPB examiners ordinarily 

also review the components of the 

supervised entity’s compliance 

management system. Based on these 

discussions and a preliminary review of 

the information received, examiners 

determine the scope of an on-site or 

remote examination and then coordinate 

with the entity to initiate this portion of 

the examination. While on-site or 

working remotely, examiners spend 

some time discussing with management 

the entity’s compliance policies, 

processes, and procedures; reviewing 

documents and records; testing 

transactions and accounts for 

compliance; and evaluating the entity’s 

compliance management system. 

Examinations may involve issuing 

confidential examination reports, 

supervisory letters, and compliance 

ratings. In addition to the process 

described above, the CFPB also may 

conduct other supervisory activities, 

such as periodic monitoring.12

II. Summary of the Proposed Rule 

The CFPB is authorized to define 

larger participants in markets for 

consumer financial products or services. 

Subpart A of the CFPB’s existing largerparticipant rule, 12 CFR part 1090, 

prescribed procedures, definitions, 

standards, and protocols that apply for 

all markets in which the CFPB defines 

larger participants.13 Those generallyapplicable provisions also would apply 

to the general-use digital consumer 

payment application market described 

by the Proposed Rule. The definitions in 

§ 1090.101 should be used to interpret 

terms in the Proposed Rule unless 

otherwise specified. 

The CFPB includes relevant market 

descriptions and associated largerparticipant tests, as it develops them, in 


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Federal Register / Vol. 88, No. 221 / Friday, November 17, 2023 / Proposed Rules 80199 

14 12 CFR 1090.104 (consumer reporting market); 

12 CFR 1090.105 (consumer debt collection 

market); 12 CFR 1090.106 (student loan servicing 

market); 12 CFR 1090.107 (international money 

transfer market); 12 CFR 1090.108 (automobile 

financing market). 

15 12 CFR 1090.102. 

16 12 CFR 1090.103(d). 

17 12 CFR 1090.103(a). 

18 12 U.S.C. 5514(a)(1)(B), (a)(2). 

19 12 U.S.C. 5514(b)(7). 

20 12 U.S.C. 5512(b)(1). 

21Specifically, 12 U.S.C. 5514(a)(2) directs the 

CFPB to consult, prior to issuing a final rule to 

define larger participants of a market pursuant to 

CFPA section 1024(a)(1)(B), with the FTC. In 

addition, 12 U.S.C. 5512(b)(2)(B) directs the CFPB 

to consult, before and during the rulemaking, with 

appropriate prudential regulators or other Federal 

agencies, regarding consistency with objectives 

those agencies administer. The manner and extent 

to which provisions of 12 U.S.C. 5512(b)(2) apply 

to a rulemaking of this kind that does not establish 

standards of conduct are unclear. Nevertheless, to 

inform this rulemaking more fully, the CFPB 

performed the consultations described in those 

provisions of the CFPA. 

22 5 U.S.C. 553(d). 

23As discussed further below, the general-use 

digital payment applications described in the 

Proposed Rule are ‘‘financial products or services’’ 

under the CFPA. 12 U.S.C. 5481(15)(A)(iv), (vii). 

Nonbanks that offer or provide such financial 

products or services to consumers primarily for 

personal, family, or household purposes are 

covered persons under the CFPA. 12 U.S.C. 

5481(5)(A), (6). 

subpart B.14 Accordingly, the Proposed 

Rule defining larger participants of a 

market for general-use digital consumer 

payment applications would become 

§ 1090.109 in subpart B. 

The Proposed Rule would define a 

market for general-use digital consumer 

payment applications that would cover 

specific activities. The proposed market 

definition generally includes nonbank 

covered persons that provide funds 

transfer or wallet functionalities through 

a digital application for consumers’ 

general use in making consumer 

payments transactions as defined in the 

Proposed Rule. The Proposed Rule 

defines ‘‘consumer payment 

transactions’’ to include payments to 

other persons for personal, household, 

or family purposes, excluding certain 

transactions as described in more detail 

in the section-by-section analysis in part 

IV below. The Proposed Rule also 

provides specific examples of digital 

payment applications that do not fall 

within the proposed market definition 

because they do not have general use for 

purposes of the Proposed Rule. 

The Proposed Rule would set forth a 

test to determine whether a nonbank 

covered person is a larger participant of 

the general-use digital consumer 

payment applications market. A 

nonbank covered person would be a 

larger participant if it satisfies two 

criteria. First, the nonbank covered 

person (together with its affiliated 

companies) must provide general-use 

digital consumer payment applications 

with an annual volume of at least five 

million consumer payment transactions. 

Second, the nonbank covered person 

must not be a small business concern 

based on the applicable Small Business 

Administration (SBA) size standard. As 

prescribed by existing § 1090.102, any 

nonbank covered person that qualifies 

as a larger participant would remain a 

larger participant until two years from 

the first day of the tax year in which the 

person last met the larger-participant 

test.15

As noted above, § 1090.103(d) of the 

CFPB’s existing larger participant 

regulation provides that the CFPB may 

require submission of certain records, 

documents, and other information for 

purposes of assessing whether a person 

is a larger participant of a covered 

market.16 This authority would be 

available to facilitate the CFPB’s 

identification of larger participants of 

the general-use digital consumer 

payment applications market, just as in 

other markets defined in subpart B. In 

addition, pursuant to existing 

§ 1090.103(a), a person would be able to 

dispute whether it qualifies as a larger 

participant in the general-use digital 

payment applications market. The CFPB 

would notify an entity when the CFPB 

intended to undertake supervisory 

activity; the entity would then have an 

opportunity to submit documentary 

evidence and written arguments in 

support of its claim that it was not a 

larger participant.17

The CFPB invites comment on all 

aspects of this notice of proposed 

rulemaking and on the specific issues 

on which it solicits comment elsewhere 

herein, including on any appropriate 

modifications or exceptions to the 

Proposed Rule. 

III. Legal Authority and Procedural 

Matters 

A. Rulemaking Authority 

The CFPB is issuing the Proposed 

Rule pursuant to its authority under the 

CFPA, as follows: (1) sections 

1024(a)(1)(B) and (a)(2), which authorize 

the CFPB to supervise nonbanks that are 

larger participants of markets for 

consumers financial products or 

services, as defined by rule; 18 (2) 

section 1024(b)(7), which, among other 

things, authorizes the CFPB to prescribe 

rules to facilitate the supervision of 

covered persons under section 1024; 19

and (3) section 1022(b)(1), which grants 

the CFPB the authority to prescribe 

rules as may be necessary or appropriate 

to enable the CFPB to administer and 

carry out the purposes and objectives of 

Federal consumer financial law, and to 

prevent evasions of such law.20

B. Consultation With Other Agencies 

In developing the Proposed Rule, the 

CFPB has consulted with or provided an 

opportunity for consultation and input 

to the Federal Trade Commission (FTC), 

as well as with the Board of Governors 

of the Federal Reserve System, the 

Commodity Futures Trading 

Commission, the Federal Deposit 

Insurance Corporation, the Financial 

Crimes Enforcement Network, the 

National Credit Union Administration, 

the Office of the Comptroller of the 

Currency, and the Securities and 

Exchange Commission, on, among other 

things, consistency with any prudential, 

market, or systemic objectives 

administered by such agencies.21

C. Proposed Effective Date of Final Rule 

The Administrative Procedure Act 

generally requires that rules be 

published not less than 30 days before 

their effective dates.22 The CFPB 

proposes that, once issued, the final rule 

for this proposal would be effective 30 

days after it is published in the Federal 

Register. 

IV. Section-by-Section Analysis 

Part 1090 

Subpart B—Markets 

Section 1090.109 General-Use Digital 

Consumer Payment Applications Market 

The Proposed Rule would add a new 

§ 1090.109 to existing subpart B of part 

1090 of the CFPB’s rules to establish 

CFPB supervisory authority over 

nonbank covered persons who are larger 

participants in a market for general-use 

digital consumer payment 

applications.23 Proposed § 1090.109 

includes the proposed market definition 

and market-related definitions in 

paragraph (a) and a test to define larger 

participants in a market for general-use 

digital consumer payment applications 

in paragraph (b). 

Many nonbanks provide consumer 

financial products and services that 

allow consumers to use digital 

applications accessible through personal 

computing devices, such as mobile 

phones, tablets, smart watches, or 

computers, to transfer funds to other 

persons. Some nonbanks also provide 

consumer financial products and 

services that allow consumers to use 

digital applications on their personal 

computing devices to store payment 

credentials they can then use to 

purchase goods or services at a variety 


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80200 Federal Register / Vol. 88, No. 221 / Friday, November 17, 2023 / Proposed Rules 

24 In proposing a larger participant rule for this 

market, the CFPB is not proposing to determine the 

relative risk posed by this market as compared to 

other markets. As explained in its previous larger 

participant rulemakings, ‘‘[t]he Bureau need not 

conclude before issuing a [larger participant rule] 

that the market identified in the rule has a higher 

rate of non-compliance, poses a greater risk to 

consumers, or is in some other sense more 

important to supervise than other markets.’’ 77 FR 

65779. 

25See CFPB, ‘‘Issue Spotlight: Analysis of Deposit 

Insurance Coverage Through Payment Apps’’ (June 

1, 2023), available at https://www.consumerfinance.

gov/data-research/research-reports/issue-spotlightanalysis-of-deposit-insurance-coverage-on-fundsstored-through-payment-apps/full-report/ (last 

visited Oct. 23, 2023); see also McKinsey & 

Company, ‘‘Consumer digital payments: Already 

mainstream, increasingly embedded, still evolving’’ 

(Oct. 20, 2023) (describing results of consulting 

firm’s annual survey reporting that for the first time, 

more than 90 percent of U.S. consumers surveyed 

in August 2023 reported using some form of digital 

payment over the course of a year), available at 

https://www.mckinsey.com/industries/financialservices/our-insights/banking-matters/consumerdigital-payments-already-mainstream-increasinglyembedded-still-evolving (last visited Oct. 30, 2023); 

J.D. Power, ‘‘Banking and Payments Intelligence 

Report’’ (Jan. 2023) (reporting results of a survey of 

Americans that found that from the first quarter of 

2021 to the third quarter of 2022, the number of 

respondents who had used a mobile wallet in the 

past three months rose from 38 percent to 49 

percent), available at https://www.jdpower.com/ 

business/resources/mobile-wallets-gain-popularitygrowing-number-americans-still-prefer-convenience 

(last visited Oct. 23, 2023); ‘‘PULSE Study Finds 

Debit Issuers Focused on Digital Payments, Mobile 

Self-Service, Fraud Mitigation’’ (Aug. 17, 2023) 

(reporting that nearly 80 percent of debit card 

issuers reported increases in consumers’ use of 

mobile wallets in 2022), available at https://

www.pulsenetwork.com/public/insights-and-news/ 

news-release-2023-debit-issuer-study/ (last visited 

Oct. 30, 2023); FIS, ‘‘The Global Payments Report’’ 

(2023) at 174 (industry study reporting that in 2022 

digital wallets become the leading payment 

preference of U.S. consumers shopping online), 

available at https://www.fisglobal.com/en/globalpayments-report (last visited Oct. 30, 2023); ‘‘Digital 

Payment Industry in 2023: Payment methods, 

trends, and tech processing payments 

electronically,’’ Insider Intelligence (Jan. 9, 2023) 

(projecting 2023 P2P volume in the United States 

to reach over $1.1 trillion), available at https://

www.insiderintelligence.com/insights/digitalpayment-services (last visited Oct. 30, 2023); 

Consumer Reports Survey Group, ‘‘Peer-to-Peer 

Payment Services’’ (Jan. 10, 2023) (Consumer 

Reports P2P Survey) at 2 (reporting results from a 

survey finding that four in ten Americans use P2P 

services at least once a month), available at https:// 

advocacy.consumerreports.org/wp-content/ 

uploads/2023/01/P2P-Report-4-Surveys-2022.pdf 

(last visited Oct. 23, 2023); Kevin Foster, Claire 

Greene, and Joanna Stavins, ‘‘2022 Survey and 

Diary of Consumer Payment Choice: Summary 

Results’’ (Sept. 17, 2022) at 8 (reporting results of 

2022 survey conducted by Federal Reserve System 

staff reporting that two thirds of consumers had 

adopted one or more online payment accounts in 

the previous 12 months—a share that was nearly 20 

percent higher than five years earlier), available at 

https://www.atlantafed.org/-/media/documents/ 

banking/consumer-payments/survey-diaryconsumer-payment-choice/2022/sdcpc_2022_

report.pdf (last visited Oct. 30, 2023); FDIC, ‘‘FDIC 

National Survey of Unbanked and Underbanked 

Households’’ (2021) at 33 (Table 6.4 reporting 

finding that nearly half of all households (46.4 

percent) used a nonbank app in 2021), available at 

https://www.fdic.gov/analysis/household-survey/ 

2021report.pdf (last visited Oct. 23, 2023). 

26See, e.g., Monica Anderson, ‘‘Payment apps 

like Venmo and Cash App bring convenience—and 

security concerns—to some users’’ (Sept. 8, 2022), 

available at https://www.pewresearch.org/shortreads/2022/09/08/payment-apps-like-venmo-andcash-app-bring-convenience-and-security-concernsto-some-users/ (last visited Oct. 23, 2023). 

27Emily A. Vogels, ‘‘Digital divide persists even 

as Americans with lower incomes make gains in 

tech adoption’’ (June 22, 2021) (reporting results of 

early 2021 survey by Pew Research Center, finding 

76 percent of adults with annual household 

incomes less than $30,000 have a smartphone and 

59 percent have a desktop or laptop consumer, 

compared with 87 percent and 84 percent 

respectively of adults with household incomes 

between $30,000 and $99,999, and 97 percent and 

92 percent respectively of adults with household 

incomes of $100,000 or more), available at https:// 

www.pewresearch.org/short-reads/2021/06/22/ 

digital-divide-persists-even-as-americans-withlower-incomes-make-gains-in-tech-adoption/ (last 

visited Oct. 23, 2023). 

28Consumer Reports P2P Survey at 2. 

29See id. (85 percent of surveyed consumers aged 

18 to 29 and 85 percent of surveyed consumers aged 

30 to 44 reported using a digital payment 

application, compared with 67 percent of 

consumers aged 45 to 59 and 46 percent of 

consumers aged 60 and over); see also ArianaMichele Moore, ‘‘The U.S. P2P Payments Market: 

Surprising Data Reveals Banks are Missing the 

Mark’’ (June 2023 AiteNovarica Impact Report) at 8 

(Figure 13 reporting 94 percent and 86 percent 

adoption of P2P accounts and digital wallets among 

the youngest adult cohort born between 1996 and 

2002, compared with 57 percent and 40 percent 

among the oldest cohort born before 1995), 

available at https://aite-novarica.com/report/usp2p-payments-market-surprising-data-revealsbanks-are-missing-mark (last visited Oct. 23, 2023). 

30See Geoff Williams, ‘‘Retailers are embracing 

alternative payment methods, though cards are still 

king’’ (Dec. 1, 2022) (National Retail Federation 

article citing its 2022 report indicating that 80 

percent of merchants accept Apple Pay or plan to 

do so in the next 18 months, and 65 percent of 

merchants accept Google Pay or plan to do so in the 

next 18 months), available at https://nrf.com/blog/ 

retailers-are-embracing-alternative-paymentmethods-though-cards-are-still-king (last visited 

Oct. 23, 2023); see also The Strawhecker Group 

(TSG), ‘‘Merchants respond to Consumer Demand 

by Offering P2P Payments’’ (June 8, 2022) (reporting 

results of TSG and Electronic Transactions 

Association survey of over 500 small businesses 

merchants finding that 82 percent accept payment 

through at least one digital P2P option), available 

at https://thestrawgroup.com/merchants-respondto-consumer-demand-by-offering-p2p-payments/ 

(last visited Oct. 23, 2023). 

31 June 2023 AiteNovarica Impact Report at 8 

(Figure 1 reporting 66 percent of 5,895 consumers 

surveyed reported making at least one domestic P2P 

payment in 2022 whether via digital means or not, 

and of consumers who made P2P payments in 2022, 

70 percent did so for birthday gifts, 64 percent for 

holiday gifts, 49 percent for other gift occasions, 46 

percent to lend money, 41 percent to make a 

charitable contribution, 39 percent paid for 

services, 39 percent purchased items, 31 percent 

provided funds in an emergency situation, and 18 

percent provided financial support). 

32 Id. at 25 (Figure 14 reporting that 74 percent 

of consumers made P2P payments in cash and 69 

percent used certain alternative digital P2P 

payment services). 

33 Id. at 27–28 (Figure 15 reporting that, compared 

with 20 percent of transactions in cash, 37 percent 

of P2P transactions made through alternative P2P 

payment services, even before including Zelle, 

prepaid cards, and domestic money transfer 

services). 

34See Marqueta, ‘‘2022 State of Consumer Money 

Movement Report’’ (May 26, 2022) at 5 (reporting 

of stores, whether by communicating 

with a checkout register or a selfcheckout machine, or by selecting the 

payment credential through a checkout 

process at ecommerce websites. Subject 

to the definitions, exclusions, 

limitations, and clarifications discussed 

below, the proposed market definition 

generally would cover these consumer 

financial products and services. 

The CFPB is proposing to establish 

supervisory authority over nonbank 

covered persons who are larger 

participants in this market because this 

market has large and increasing 

significance to the everyday financial 

lives of consumers.24 Consumers are 

growing increasingly reliant on generaluse digital consumer payment 

applications to initiate payments.25

Recent market research indicates that 76 

percent of Americans have used at least 

one of four well-known P2P payment 

apps, representing substantial growth 

since the first of the four was 

established in 1998.26 Even among 

consumers with annual incomes lower 

than $30,000 who have more limited 

access to digital technology,27 61 

percent reported using P2P payment 

apps.28 And higher rates of use by U.S. 

adults in lower age brackets may drive 

further growth well into the future.29

Across the United States, merchant 

acceptance of general-use digital 

consumer payment applications also has 

rapidly expanded as businesses seek to 

make it as easy as possible for 

consumers to make purchases through 

whatever is their preferred payment 

method.30

Consumers rely on general-use digital 

consumer payment applications for 

many aspects of their everyday lives. In 

general, consumers make payments to 

other individuals for a variety of 

reasons, including sending gifts or 

making informal loans to friends and 

family and purchasing goods and 

services, among many others.31

Consumers can use digital applications 

to make payments to individuals for 

these purposes, as well as to make 

payments to businesses, charities, and 

other organizations. According to one 

recent market report, nonbank digital 

payment apps have rapidly grown in the 

past few years to become the most 

popular way to send money to other 

individuals other than cash,32 and are 

used for a higher number of such 

transactions than cash.33 For many 

consumers, general-use digital 

consumer payment applications offer an 

alternative, technological replacement 

for non-digital payment methods.34


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results of industry survey finding that 56 percent 

of US consumers felt comfortable leaving their nondigital wallet at home and taking their phone with 

them to make payments), available at https://

www.marqeta.com/resources/2022-state-ofconsumer-money-movement (last visited Oct. 23, 

2023). 

35 June 2023 AiteNovarica Impact Report at 24 

(Figure 13 reporting 81 percent of U.S. adults 

surveyed held one or more P2P accounts and 69 

percent had one or more digital wallets). 

36 ‘‘The Federal Reserve Payments Study: 2022 

Triennial Initial Data Release’’ (indicating a rapid 

increase in core non-cash payments between 2018 

and 2021 and a rapid decline in ATM cash 

withdrawals during the same period), available at 

https://www.federalreserve.gov/paymentsystems/frpayments-study.htm (last visited Oct. 23, 2023). 

37PYMNTS, ‘‘Digital Economy Payments: The 

Ascent of Digital Wallets’’ (Feb. 2023) at 16–17 

(December 2022 survey finding 6.1 percent of 

overall consumer spending by consumers with 

lower incomes made using digital consumer 

payment applications, compared with 9.9 percent of 

consumer spending by consumers with middlelevel incomes), available at https://

www.pymnts.com/study/digital-economypayments-ecommerce-shopping-retail-consumerspending/ (last visited Oct. 23, 2023). 

38See FIS, ‘‘Global Payments Report’’ (2023) at 

176 (reporting 32 percent share of ecommerce 

transactions, by value, made using a digital wallet, 

compared with 30 percent by credit card and 20 

percent by debit card), available at https://

www.fisglobal.com/en/global-payments-report (last 

visited Oct. 23, 2023). 

39See, e.g., ‘‘2023 Pulse Debit Issuer Study’’ (Aug. 

17, 2023) at 11 (reporting that mobile wallet use at 

point of sale doubled in 2022, representing nearly 

10 percent of total debit card purchase transactions 

in 2022), available at https://www.pulsenetwork.

com/public/debit-issuer-study/ (last visited Oct. 30, 

2023); ‘‘Digital Economy Payments: The Ascent of 

Digital Wallets’’ at 12 (December 2022 survey 

finding 7.5 percent of in-person consumer purchase 

volume made with a digital consumer payment 

application). See also CFPB Issue Spotlight, ‘‘Big 

Tech’s Role in Contactless Payments: Analysis of 

Mobile Devices Operating Systems and Tap-to-Pay 

Practices’’ (Sept. 7, 2023) (Competition Spotlight) 

(describing market report by Juniper Research 

forecasting that the value of digital wallet tap-to-pay 

transactions will grow by over 150 percent by 

2028), available at https://

www.consumerfinance.gov/data-research/researchreports/big-techs-role-in-contactless-paymentsanalysis-of-mobile-device-operating-systems-andtap-to-pay-practices/full-report/ (last visited Oct. 

23, 2023). 

40 12 U.S.C. 5514(a)(1)(B). 

41See generally 12 CFR part 1016 (CFPB’s 

Regulation P implementing 15 U.S.C. 6804). 

42 15 U.S.C. 1693 et seq., implemented by 

Regulation E, 12 CFR part 1005. See, e.g., 12 CFR 

1005.11 (Procedures for financial institutions to 

resolve errors). This incentive for improved 

compliance applies not only to nonbank covered 

persons when providing a general-use digital 

consumer payment application, but also when 

providing related products, such as stored value 

accounts. 

43See, e.g., CFPB, ‘‘The Convergence of Payments 

and Commerce: Implications for Consumers’’ (Aug. 

2022) at sec. 4.1 (highlighting the potential that 

consumer financial data and behavioral data are 

used together in increasingly novel ways), available 

at https://files.consumerfinance.gov/f/documents/ 

cfpb_convergence-payments-commerceimplications-consumers_report_2022-08.pdf (last 

visited Oct. 27, 2023). 

44See generally id. 

45For example, some depository institutions and 

credit unions provide general bill payment services 

and other types of electronic fund transfers through 

digital applications for consumer deposit accounts. 

Consumers increasingly have adopted 

general-use digital consumer payment 

applications 35 as part of a broader 

movement toward noncash payments.36

Amid growing merchant acceptance of 

general-use digital consumer payment 

applications, consumers with middle 

and lower incomes use digital consumer 

payment applications for a share of their 

overall retail spending that rivals or 

exceeds their use of cash.37 Such 

applications now have a share of 

ecommerce payments volume that is 

similar to or greater than other 

traditional payment methods such as 

credit cards and debit cards used 

outside of such applications.38 Such 

applications also have been gaining an 

increasing share of in-person retail 

spending.39

The Proposed Rule would bring 

nonbanks that are larger participants in 

a market for general-use digital 

consumer payment applications within 

the CFPB’s supervisory jurisdiction.40

Supervision of larger participants, who 

engage in a substantial portion of the 

overall activity in this market, would 

help to ensure that they are complying 

with applicable requirements of Federal 

consumer financial law, such as the 

CFPA’s prohibition against unfair, 

deceptive, and abusive acts and 

practices, the privacy provisions of the 

Gramm-Leach-Bliley Act and its 

implementing Regulation P,41 and the 

Electronic Fund Transfer Act and its 

implementing Regulation E.42 In 

addition, as firms increasingly offer 

funds transfer and wallet functionalities 

through general-use digital consumer 

payment applications, the rule would 

enable the CFPB to monitor for new 

risks to both consumers and the 

market.43 The CFPB’s ability to monitor 

for emerging risks is critical as new 

product offerings blur the traditional 

lines of banking and commerce.44

Finally, the Proposed Rule can help 

level the playing field between 

nonbanks and depository institutions, 

which the CFPB regularly supervises 

and which also provide general-use 

digital consumer payment 

applications.45 Greater supervision of 

nonbanks in this market therefore 

would further the CFPB’s statutory 

objective of ensuring that Federal 

consumer financial law is enforced 

consistently between nonbanks and 

depository institutions in order to 

promote fair competition. 

109(a)(1) Market Definition— 

Providing a General-Use Digital 

Consumer Payment Application 

Proposed § 1090.109(a)(1) would 

describe the market for consumer 

financial products or services covered 

by the Proposed Rule as encompassing 

‘‘providing a general-use digital 

consumer payment application.’’ The 

term would be defined to mean 

providing a covered payment 

functionality through a digital 

application for consumers’ general use 

in making consumer payment 

transaction(s). This term incorporates 

other terms defined in proposed 

§ 1090.109(a)(2): ‘‘consumer payment 

transaction(s),’’ ‘‘covered payment 

functionality,’’ ‘‘digital application,’’ 

and ‘‘general use.’’ The term ‘‘covered 

payment functionality’’ includes a 

‘‘funds transfer functionality’’ and a 

‘‘wallet functionality,’’ terms which 

proposed § 1090.109(a)(2) also defines. 

The term ‘‘consumer payment 

transaction(s)’’ also incorporates another 

term—‘‘State,’’ which proposed 

§ 1090.109(a)(2) defines. The section-bysection analysis of proposed 

§ 1090.109(a)(2) below discusses these 

and other aspects of the proposed 

definitions of these terms. 

The CFPB seeks comment on all 

aspects of the proposed market 

definition, including whether the 

market definition in proposed 

§ 1090.109(a)(1) or the market-related 

definitions in proposed § 1090.109(a)(2), 

discussed in the section-by-section 

analysis below, should be expanded, 

narrowed, or otherwise modified. 

109(a)(2) Market-Related Definitions 

Proposed § 1090.109(a)(2) would 

define several terms that are relevant to 

the market definition described above. 

Consumer Payment Transaction(s) 

The proposed market definition 

applies to providing covered payment 

functionalities through a digital 

application for a consumer’s general use 

in making consumer payment 

transactions. Proposed § 1090.109(a)(2) 

would define the term ‘‘consumer 

payment transactions’’ to mean the 

transfer of funds by or on behalf of a 

consumer physically located in a State 

to another person primarily for 

personal, family, or household 

purposes. The proposed definition 

would clarify that, except for 

transactions excluded under paragraphs 

(A) through (D), the term applies to 

transfers of consumer funds and 

transfers made by extending consumer 

credit. Paragraphs (A) through (D) of the 

proposed definition would exclude the 


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46Subpart A of the CFPB’s existing largerparticipant rule includes a definition of ‘‘affiliated 

company’’ that would apply to the use of that term 

in the Proposed Rule. See 12 CFR 1090.101. 

47 In certain circumstances, consumer credit 

transactions would be excluded from the proposed 

definition of ‘‘consumer payment transaction,’’ for 

example as described in the exclusion in paragraph 

(D) discussed below. 

48See also generally § 1005.12(a) (describing 

relationship between Regulation E and other laws 

including the Truth in Lending Act and its 

implementing regulation, Regulation Z). 49 12 U.S.C. 5481(15)(A)(iv). 50See generally FSOC, ‘‘Report on Digital Asset 

Financial Stability Risks and Regulation’’ (Oct. 3, 

2022) at 7 (‘‘For the purposes of this report, the term 

‘digital assets’ refers to two categories of products: 

‘central bank digital currencies’ (CBDCs) and 

‘crypto-assets.’ This report largely focuses on 

crypto-assets. Crypto-assets are a private sector 

digital asset that depends primarily on 

cryptography and distributed ledger or similar 

technology. For the purpose of this report, the term 

crypto-assets encompasses many assets that are 

commonly referred to as ‘coins’ or ‘tokens’ by 

market participants.’’), available at https://

home.treasury.gov/system/files/261/FSOC-DigitalAssets-Report-2022.pdf (last visited Oct. 23, 2023). 

51United States v. Faiella, 39 F. Supp. 3d 544, 

545 (S.D.N.Y. 2014) (citing examples of financial 

transactions that can be conducted using Bitcoin as 

including purchases of goods and services); see also 

United States v. Iossifov, 45 F.4th 899, 913 (6th Cir. 

2022) (Bitcoin); United States v. Murgio, 209 F. 

Supp. 3d 698, 707 (S.D.N.Y. 2016) (Bitcoin); United 

States v. Ulbricht, 31 F. Supp. 3d 540, 570 (S.D.N.Y. 

2014) (Bitcoin); United States v. Budovsky, No. 13– 

CR–368–DLC, 2015 WL 5602853 at *14 (S.D.N.Y 

Sept. 23, 2015) (E-Gold). 

52This definitional limitation is for purposes of 

defining the market in the Proposed Rule. 

Transactions excluded from the definition of 

consumer payment transaction in this rule may still 

be payment transactions with a consumer purpose. 

53 In addition, when a consumer located in a 

foreign country makes a payment received at a 

location in the United States, that payment would 

not count as an international money transfer as 

defined in that larger participant rule because the 

payment is not made to be received by a designated 

recipient at a location in a foreign country. 

following four types of transactions: (A) 

An international money transfer as 

defined in § 1090.107(a) of this part; (B) 

A transfer of funds that is (1) linked to 

the consumer’s receipt of a different 

form of funds, such as a transaction for 

foreign exchange as defined in 12 U.S.C. 

5481(16), or (2) that is excluded from 

the definition of ‘‘electronic fund 

transfer’’ under § 1005.3(c)(4) of this 

chapter; (C) A payment transaction 

conducted by a person for the sale or 

lease of goods or services that a 

consumer selected from an online or 

physical store or marketplace operated 

prominently in the name or such person 

or its affiliated company; and (D) An 

extension of consumer credit that is 

made using a digital application 

provided by the person who is 

extending the credit or that person’s 

affiliated company.46

The Proposed Rule would define the 

term ‘‘consumer payment transaction’’ 

for purposes of the Proposed Rule. 

Payment transactions that are excluded 

from, or otherwise do not meet, the 

definition of ‘‘consumer payment 

transaction’’ in the Proposed Rule 

would not be covered by the market 

definition in the Proposed Rule. 

However, persons facilitating those 

transactions may still be subject to other 

aspects of the CFPB’s authorities besides 

its larger participant supervisory 

authority established by the Proposed 

Rule. 

The first component of the proposed 

definition of ‘‘consumer payment 

transaction’’ is that the payment 

transaction must result in a transfer of 

funds by or on behalf of the consumer. 

This component therefore focuses on 

the sending of a payment, and not on 

the receipt. The proposed definition 

would encompass a consumer’s transfer 

of their own funds—such as funds held 

in a linked deposit account or in a 

stored value account. It also would 

encompass a creditor’s transfer of funds 

to another person on behalf of the 

consumer as part of a consumer credit 

transaction.47 For example, a nonbank’s 

wallet functionality may hold a credit 

card account or payment credential that 

a consumer uses to obtain an extension 

of credit from an unaffiliated depository 

institution. If the consumer uses the 

digital wallet functionality to purchase 

nonfinancial goods or services using 

such a credit card, the credit card 

issuing bank may settle the transaction 

by transferring funds to the merchant’s 

bank for further transfer to the 

merchant, and a charge may appear on 

the consumer’s credit card account. 

That transfer of funds may constitute 

part of a consumer payment transaction 

under the Proposed Rule regardless of 

whether it is an electronic fund transfer 

subject to Regulation E.48

The CFPA does not include a specific 

definition for the term ‘‘funds,’’ but that 

term is used in various provisions of the 

CFPA, including in section 

1002(15)(A)(iv), which defines the term 

‘‘financial product or service’’ to 

include ‘‘engaging in deposit-taking 

activities, transmitting or exchanging 

funds, or otherwise acting as a 

custodian of funds or any financial 

instrument for use by or on behalf of a 

consumer.’’ 49 Without fully addressing 

the scope of that term, the CFPB 

believes that, consistent with its plain 

meaning, the term ‘‘funds’’ in the CFPA 

is not limited to fiat currency or legal 

tender, and includes digital assets that 

have monetary value and are readily 

useable for financial purposes, 

including as a medium of exchange. 

Crypto-assets, sometimes referred to as 

virtual currency, are one such type of 

digital asset.50 For example, relying on 

plain meaning dictionary definitions, 

courts have found that certain cryptoassets, including Bitcoin, constitute 

‘‘funds’’ for purposes of other Federal 

statutes because they ‘‘can be easily 

purchased in exchange for ordinary 

currency, acts as a denominator of 

value, and is used to conduct financial 

transactions.’’ 51 For these reasons, 

under the Proposed Rule, the transfer of 

funds in the form of the digital assets 

described above by or on behalf of a 

consumer physically located in a State 

to another person primarily for person, 

family, or household purposes would 

qualify as a ‘‘consumer payment 

transaction’’ unless one of the proposed 

exclusions to the definition of that term 

applies. And, by extension, providing a 

covered payment functionality through 

a digital application for consumers’ 

general use in making such consumer 

payment transactions would fall within 

the proposed market definition. 

The second component of the 

proposed definition of ‘‘consumer 

payment transaction’’ is that the 

consumer must be physically located in 

a State, a term the proposal would 

define by reference to jurisdictions that 

are part of the United States as 

discussed in the section-by-section 

analysis below. This component would 

be satisfied, for example, when the 

consumer uses a general-use digital 

consumer payment application on a 

personal computing device or at a point 

of sale that is physically located in a 

State. By contrast, with this limitation, 

if a consumer is physically located 

outside of any State at the time of 

engaging in a payment transaction, then 

the payment transaction would not be a 

consumer payment transaction covered 

by the Proposed Rule.52 Thus, this 

limitation would clarify that the 

proposed market definition does not 

include payments initiated by a 

consumer physically located in a foreign 

country.53 Based on its understanding of 

the market, the CFPB expects that 

participants in the proposed market will 

generally be aware of indicators 

regarding the consumer’s location at the 

time of a transaction (e.g., based on the 

point of sale, the location of the 

consumer’s device, or the consumer’s 

residence). The CFPB requests comment 

on this limitation. 

The third component of the proposed 

definition of ‘‘consumer payment 

transaction’’ is that the funds transfer 

must be made to another person besides 

the consumer. For example, the other 

person could be another consumer, a 

business, or some other type of entity. 

This component would distinguish the 


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54 12 U.S.C. 5481(5)(A). 

55 79 FR 56631, 56635 (Sept. 3, 2014). For 

additional information regarding the remittance 

rule, see CFPB, ‘‘Remittance Transfers,’’ available at 

https://www.consumerfinance.gov/compliance/ 

compliance-resources/deposit-accounts-resources/ 

remittance-transfer-rule/ (last visited Oct. 22, 2023). 

56See CFPB, ‘‘Remittance Rule Assessment 

Report’’ (Oct. 2018, rv. April 2019) at 143 

(describing trends including ‘‘widespread use of 

mobile phones to transfer remittances and the 

growth of online-only providers’’), available at 

https://files.consumerfinance.gov/f/documents/ 

bcfp_remittance-rule-assessment_report.pdf (last 

visited Oct. 25, 2023). 

57 12 CFR 1005.3(c)(4). 

58See 12 CFR 1090.101 (definition of ‘‘affiliated 

company’’). 

59A common industry definition of an online 

marketplace operator is an entity that engages in 

certain activities, including ‘‘[b]ring[ing] together 

[consumer payment card holders] and retailers on 

an electronic commerce website or mobile 

application’’ where ‘‘[i]ts name or brand is: 

[ ]Displayed prominently on the website or mobile 

application[; ]Displayed more prominently than the 

name and brands of retailers using the 

Marketplace[; and is] Part of the mobile application 

name or [uniform resource locator.]’’ VISA, ‘‘Visa 

Core Rules and Visa Product and Service Rules’’ 

(Apr. 15, 2023) (‘‘VISA Rules’’), Rule 5.3.4.1 

(defining the criteria for an entity to qualify as a 

‘‘Marketplace’’ for purposes of the VISA Rules), 

available at https://usa.visa.com/dam/VCOM/ 

download/about-visa/visa-rules-public.pdf (last 

visited Oct. 23, 2023). 

60This aspect of the example is consistent with 

the understanding of some significant payments 

industry participants as to what is considered a 

digital marketplace. See id. 

proposed market for general-use digital 

payment applications that facilitate 

payments consumers make to other 

persons from adjacent but distinct 

markets that include other consumer 

financial products and services, 

including the activities of taking 

deposits; selling, providing, or issuing 

of stored value; and extending consumer 

credit by transferring funds directly to 

the consumer. For example, this 

component of the proposed definition 

would exclude transfers between a 

consumer’s own deposit accounts, 

transfers between a consumer deposit 

account and the same consumer’s stored 

value account held at another financial 

institution, such as loading or 

redemptions, as well as a consumer’s 

withdrawals from their own deposit 

account such as by an automated teller 

machine (ATM). 

The fourth component of the 

proposed definition of ‘‘consumer 

payment transaction’’ is that the funds 

transfer must be primarily for personal, 

family, or household purposes. The 

proposed definition of ‘‘consumer 

payment transaction’’ includes this 

component to define those payment 

transactions that are, by their nature, 

consumer transactions. Under a relevant 

definition of consumer financial 

products and services in CFPA section 

1002(5)(A), a financial product or 

service is a consumer financial product 

or service when it is offered or provided 

for use by consumers primarily for 

personal, family, or household 

purposes.54 The Proposed Rule would 

define a consumer payment transaction 

as one that is primarily for personal, 

family, or household purposes, and 

would define the relevant market 

activity (providing a general-use digital 

consumer payments application) by 

reference to its use with respect to 

consumer payment transactions. 

Although a general-use digital consumer 

payment application also could help 

individuals to make payments that are 

not for personal, family, or household 

purposes, such as purely commercial (or 

business-to-business) payments, those 

payments would not fall within the 

proposed definition of ‘‘consumer 

payment transaction.’’ 

In addition, the proposed definition of 

‘‘consumer payment transaction’’ would 

exclude four types of transfers. First, 

paragraph (A) of the proposed definition 

would exclude international money 

transfers as defined in § 1090.107(a). In 

its 2014 international money transfer 

larger participant rulemaking, the CFPB 

determined that the complexities 

involved in international money 

transfers, such as foreign exchange rates, 

foreign taxes, and legal, administrative, 

and language complexities, as well as 

the CFPB’s remittances rule, justified 

treating that market as a separate market 

from the domestic money transfer 

market for purposes of that larger 

participant rule.55 In proposing this 

larger participant rule, the CFPB is not 

proposing to alter the international 

money transfer larger participant rule. 

Rather, the CFPB is proposing this larger 

participant rule to define a separate 

market, focused on the use of digital 

payment technologies to help 

consumers make payment transactions 

that are not international money 

transfers as defined in the international 

money transfer larger participant rule. 

Accordingly, the proposed definition of 

‘‘consumer payment transaction’’ would 

exclude an international money transfer 

as defined in § 1090.107(a). To the 

extent that nonbank international 

money transfer providers facilitate those 

transactions, whether through a digital 

application or otherwise,56 that activity 

remains part of the international money 

transfer market, and the CFPB may be 

able to supervise such a nonbank if it 

meets the larger-participant test in the 

international money transfer larger 

participant rule. 

Second, for clarity, paragraph (B) the 

proposed definition of ‘‘consumer 

payment transaction’’ would exclude a 

transfer of funds by a consumer (1) that 

is linked to the consumer’s receipt of a 

different form of funds, such as a 

transaction for foreign exchange as 

defined in 12 U.S.C. 5481(16), or (2) that 

is excluded from the definition of 

‘‘electronic fund transfer’’ under 

§ 1005.3(c)(4) of this chapter. Paragraph 

(1) of this proposed exclusion would 

clarify, for example, that the market as 

defined in the Proposed Rule does not 

include transactions consumers conduct 

for the purpose of exchanging one type 

of funds for another, such as exchanges 

of fiat currencies (i.e., the exchange of 

currency issued by the United States or 

of a foreign government for the currency 

of a different government), a purchase of 

a crypto-asset using fiat currency, a sale 

of a crypto-asset in which the seller 

receives fiat currency in return, or the 

exchange of one type of crypto-asset for 

another type of crypto-asset. Paragraph 

(2) would clarify that transfers of funds 

the primary purpose of which is the 

purchase or sale of a security or 

commodity in circumstances described 

in Regulation E section 3(c)(4) and its 

associated commentary also would not 

qualify as consumer payment 

transactions for purposes of the 

Proposed Rule.57

Third, paragraph (C) would exclude a 

payment transaction conducted by a 

person for the sale or lease of goods or 

services that a consumer selected from 

an online or physical store or 

marketplace operated prominently in 

the name of such person or its affiliated 

company.58 This exclusion would 

clarify that, when a consumer selects 

goods or services in a store or website 

operated in the merchant’s name and 

the consumer pays using account or 

payment credentials stored by the 

merchant who conducts the payment 

transaction, such a transfer of funds 

generally is not a consumer payment 

transaction covered by the Proposed 

Rule. 

This exclusion also would clarify that 

when a consumer selects goods or 

services in an online marketplace and 

pays using account or payment 

credentials stored by the online 

marketplace operator or its affiliated 

company,59 such a transfer of funds 

generally is not a consumer payment 

transaction covered by the Proposed 

Rule. For such transactions to qualify 

for this exclusion, the funds transfer 

must be for the sale or lease of a good 

or service the consumer selected from a 

digital platform operated prominently in 

the name (whether entity or trade name) 

of an online marketplace operator or 

their affiliated company.60 However, 


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61 12 U.S.C. 5481(15)(A)(vii). 

62 ‘‘[A] person shall not be deemed to be a 

covered person with respect to financial data 

processing solely because the person . . . is a 

merchant, retailer, or seller of any nonfinancial 

good or service who engages in financial data 

processing by transmitting or storing payments data 

about a consumer exclusively for purpose of 

initiating payments instructions by the consumer to 

pay such person for the purchase of, or to complete 

a commercial transaction for, such nonfinancial 

good or service sold directly by such person to the 

consumer.’’ 12 U.S.C. 5481(15)(A)(vii)(I). The CFPB 

concludes that this narrow exclusion is descriptive 

of the limited role that many merchants play in 

processing consumer payments or financial data. 

63 12 CFR 1090.108. 

this exclusion does not apply when a 

consumer uses a payment or account 

credential stored by a general-use digital 

consumer payment application 

provided by an unaffiliated person to 

pay for goods or services on the 

merchant’s website or an online 

marketplace. For example, when a 

consumer selects goods or services for 

purchase or lease on a website of a 

merchant, and then from within that 

website chooses an unaffiliated person’s 

general-use digital consumer payment 

application as a payment method, then 

paragraph (C) would not exclude the 

resulting consumer payment 

transaction. 

The purpose of this proposed 

exclusion to the definition of ‘‘consumer 

payment transaction’’ is to clarify the 

scope of the proposed market and to 

clarify which transactions count toward 

the proposed threshold in the largerparticipant test in proposed 

§ 1090.109(b). For example, some online 

marketplace operators may provide 

general-use digital consumer payment 

applications for consumers to use for 

the purchase or lease of goods or 

services the consumer selects on 

websites of unaffiliated merchants. 

Absent the exclusion in paragraph (C), 

the providing of such a general-use 

digital consumer payment application 

could result in counting all transactions 

through such an application, including 

for goods and services the consumer 

selects from the online marketplace, 

toward the larger-participant test 

threshold in proposed § 1090.109(b). Yet 

the CFPB is not seeking to define a 

market or determine larger-participant 

status in this rulemaking by reference to 

payment transactions conducted by 

merchants or online marketplaces 

through their own payment 

functionalities for their own sales 

transactions. How a merchant or online 

marketplace conducts payments to itself 

for sales through its own platform raises 

distinct consumer protection concerns 

from the concerns raised by general-use 

digital consumer payment applications 

that facilitate consumers’ payments to 

third parties. The CFPB therefore 

believes it appropriate to exclude the 

former type of payment transactions 

from the market defined in the Proposed 

Rule. 

In this regard, the scope of the term 

‘‘consumer payment transaction’’ is 

narrower than the CFPB’s authority 

under the CFPA, which can extend to 

payment transactions conducted by 

merchants or online marketplaces for 

sales through their own platforms under 

certain circumstances. The CFPA 

defines a consumer financial product or 

service to include ‘‘providing payments 

or other financial data processing 

products or services to a consumer by 

any technological means, including 

processing or storing financial or 

banking data for any payment 

instrument . . . .’’ 61 Such activities 

generally are consumer financial 

products or services under the CFPA 

unless a narrow exclusion for financial 

data processing in the context of the 

direct sale of nonfinancial goods or 

services applies.62 That exclusion 

would not apply if a merchant or online 

marketplace’s digital consumer 

application stores, transmits, or 

otherwise processes payments or 

financial data for any purpose other 

than initiating a payments transaction 

by the consumer to pay the merchant or 

online marketplace operator for the 

purchase of a nonfinancial good or 

service sold directly by that merchant or 

online marketplace operator. Other 

purposes beyond payments for direct 

sales could include using or sharing 

such data for targeted marketing, data 

monetization, or research purposes. The 

exclusion also would not apply if an 

online marketplace operator’s digital 

consumer application processes 

payments or other financial data 

associated with the consumer’s 

purchase of goods or services at 

unaffiliated online or physical stores or 

third-party goods or services on the 

operator’s online marketplace. 

Finally, paragraph (D) would exclude 

an extension of consumer credit that is 

made using a digital application 

provided by the person who is 

extending the credit or that person’s 

affiliated company. The CFPB is 

proposing this exclusion so that the 

market definition does not encompass 

consumer lending activities by lenders 

through their own digital applications. 

In this rulemaking, the CFPB is not 

proposing to define a market for 

extending consumer credit, as it did, for 

example, in the larger participant rule 

for the automobile financing market.63

As a result of this proposed exclusion, 

for example, a nonbank would not be 

participating in the proposed market 

simply by providing a digital 

application through which it lends 

money to consumers to buy goods or 

services. Thus, to the extent consumer 

credit transactions would fall within the 

proposed definition of consumer 

payment transactions, this would be 

because the relevant market participant 

engages in covered payment-related 

activities beyond extending credit to the 

consumer. For example, a nonbank may 

provide a wallet functionality through a 

digital application that stores payment 

credentials for a credit card through 

which an unaffiliated depository 

institution or credit union extends 

consumer credit. The CFPB is proposing 

a market definition that would reach 

that nonbank covered person’s activities 

because their role in the transaction is 

to help the consumer to make a 

payment, not to themselves extend 

credit to the consumer. 

Covered Payment Functionality 

The proposed market definition 

applies to providing covered payment 

functionalities through a digital 

application for a consumer’s general use 

in making payment transactions. 

Proposed § 1090.109(a)(2) would define 

two types of payment functionalities as 

covered payment functionalities: a 

funds transfer functionality and a wallet 

functionality. Proposed § 1090.109(a)(2) 

would define each of those two 

functionalities as described below. 

A nonbank covered person would be 

participating in the proposed market if 

its market activity includes only one of 

the two functionalities, or both 

functionalities. Similarly, a particular 

digital application may provide one or 

both functionalities. A nonbank’s level 

of participation in the proposed market 

would not be based on which 

functionality is involved; rather, it 

would be based on the annual covered 

payment transaction volume as defined 

in proposed § 1090.109(b). 

The CFPB proposes to treat these two 

covered payment functionalities as part 

of a single market for general-use digital 

consumer payment applications. The 

technological and commercial processes 

these two payment functionalities use to 

facilitate consumer payments may differ 

in some ways. However, consumers can 

use both types of covered payment 

functionalities for the same common 

purposes, such as to make payments for 

retail spending and sending money to 

friends and family. For example, a funds 

transfer functionality may transfer a 

consumer’s funds in a linked stored 

value account to a merchant to pay for 

goods or services, or to friends or 

family. Similarly, a wallet functionality 

may transmit a stored payment 


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64Such funds transfer services are consumer 

financial products or services under the CFPA. See 

12 U.S.C. 5481(5)(A) (defining ‘‘consumer financial 

product or service’’ to mean a financial product or 

service ‘‘offered or provided for use by consumers 

primarily for personal, family, or household 

purposes’’). The CFPA defines a ‘‘financial product 

or service’’ to include ‘‘engaging in deposit-taking 

activities, transmitting or exchanging funds, or 

otherwise acting as a custodian of funds or any 

financial instrument for use by or on behalf of a 

consumer.’’ 12 U.S.C. 5481(15)(A)(iv); see also 12 

U.S.C. 5481(29) (defining ‘‘transmitting or 

exchanging funds’’). The CFPA also defines a 

‘‘financial product or service’’ to include generally 

‘‘providing payments or other financial data 

processing products or services to a consumer by 

any technological means, including processing or 

storing financial or banking data for any payment 

instrument,’’ subject to certain exceptions. 12 

U.S.C. 5481(15)(A)(vii). 

65The wallet functionality as described here is a 

consumer financial product or service under the 

CFPA. See 12 U.S.C. 5481(15)(A)(vii) (defining 

‘‘financial product or service’’ to include 

‘‘providing payments or other financial data 

processing products or services to a consumer by 

any technological means, including processing or 

storing financial or banking data for any payment 

instrument, or through any payments systems or 

network used for processing payments data, 

including payments made through an online 

banking system or mobile telecommunications 

network,’’ subject to certain exceptions); see also 12 

U.S.C. 5481(5)(A) (defining ‘‘consumer financial 

product or service’’ to mean a financial product or 

service ‘‘offered or provided for use by consumers 

primarily for personal, family, or household 

purposes’’). 

66Tokens now are often used for wallets to store 

a variety of payment credentials including networkbranded payment cards. See, e.g., Manya Sini, ‘‘Visa 

tokens overtake payments giant’s physical cards in 

circulation,’’ Reuters.com (Aug. 24, 2022) 

(describing how VISA’s token service ‘‘replaces 16- 

digital Visa account numbers with a token that only 

Visa can unlock, protecting the underlying account 

information.’’), available at https://

www.reuters.com/business/finance/visa-tokensovertake-payments-giants-physical-cardscirculation-2022-08-24/ (last visited Oct. 23, 2023); 

In re Mastercard Incorporated, FTC Docket No. C– 

4795 (May 13, 2023) ¶¶ 24–32 (describing how 

payment cards are ‘‘tokenized’’ for use digital 

wallets by ‘‘replacing the cardholder’s primary 

account number (PAN) [ ] with a different number 

to protect the PAN during certain stages of the [ ] 

transaction.’’), available at https://www.ftc.gov/ 

legal-library/browse/cases-proceedings/mastercardinc-matter (last visited Oct. 23, 2023); American 

Express, ‘‘American Express Tokenization Service,’’ 

available at https://network.americanexpress.com/ 

globalnetwork/products-and-services/security/ 

tokenization-service/ (last visited Oct. 23, 2023); 

Discover Digital Exchange, ‘‘Powering digital 

payment experiences,’’ available at https://

www.discoverglobalnetwork.com/solutions/ 

technology-payment-platforms/discover-digitalexchange-ddx/ (last visited Oct. 23, 2023). 

credential to facilitate a consumer’s 

payment to a merchant or to friends and 

family. Indeed, the same nonbank 

covered person may provide a digital 

application that encompasses both 

functionalities depending on the 

payment method a consumer chooses. 

For example, a nonbank covered 

person’s digital application may allow 

the consumer to access a wallet 

functionality to make a payment using 

a credit card for which a third party 

extends credit, or a funds transfer 

functionality to make a payment from a 

stored value account the nonbank 

provides. The role these two 

functionalities play in a single market 

therefore is driven by their common 

uses, not their specific technological 

and commercial processes. 

(A) Funds Transfer Functionality

The first payment functionality

included in the definition in covered 

payment functionality in proposed 

§ 1090.109(a)(2) is a funds transfer

functionality. Paragraph (A) would

define the term ‘‘funds transfer

functionality’’ for the purpose of this

rule to mean, in connection with a

consumer payment transaction: (1)

receiving funds for the purpose of

transmitting them; or (2) accepting and

transmitting payment instructions.64

These two types of funds transfer

functionalities generally describe how

nonbanks help to transfer a consumer’s

funds to other persons, sometimes

referred to as P2P transfers. The

nonbank either already holds or receives

the consumer’s funds for the purpose of

transferring them, or it transmits the

consumers payment instructions to

another person who does so. Paragraph

(1), for example, would apply to a

nonbank transferring funds it holds for

the consumer, such as in a stored value

account, to another person for personal,

family, or household purposes. Even if

the nonbank providing the funds

transfer functionality does not hold or

receive the funds to be transferred, it 

generally would qualify under 

paragraph (2) by transmitting the 

consumer’s payment instructions to the 

person that does hold or receive the 

funds for transfer. Paragraph (2), for 

example, would apply to a nonbank that 

accepts a consumer’s instruction to send 

money from the consumer’s banking 

deposit account to another person for 

personal, family, or household 

purposes, and then transmits that 

instruction to other persons to 

accomplish the fund transfer. A 

common way a nonbank may engage in 

such activities is by acting as a thirdparty intermediary to initiate an 

electronic fund transfer through the 

automated clearinghouse (ACH) 

network. Another common way to do so 

is to transmit the payment instructions 

to a partner depository institution. 

However, in some circumstances, a 

nonbank may be able to execute a 

consumer’s payment instructions on its 

own, such as by debiting the consumer’s 

account and crediting the account of the 

friend or family member, without 

transmitting the payment instructions to 

another person. In those circumstances, 

the nonbank generally would be covered 

by paragraph (1) because, to conduct the 

transaction in this manner, the nonbank 

typically would be holding or receiving 

the funds being transferred. 

The CFPB requests comment on the 

proposed definition of funds transfer 

functionality, and whether it should be 

modified, and if so, how and why. 

(B) Wallet Functionality

The other payment functionality

included in the definition in covered 

payment functionality in proposed 

§ 1090.109(a)(1) is a wallet

functionality. Paragraph (B) would

define the term wallet functionality as a

product or service that: (1) stores

account or payment credentials,

including in encrypted or tokenized

form; and (2) transmits, routes, or

otherwise processes such stored account

or payment credentials to facilitate a

consumer payment transaction.65

Through this proposed definition, the 

proposed market would include 

payment functionalities that work 

together first to store account or 

payment credentials and second, to 

process such data to facilitate a 

consumer payment transaction. 

As indicated above, paragraph (B)(1) 

of the proposed definition of ‘‘wallet 

functionality’’ would clarify that 

‘‘account or payment credentials’’ can 

take the form of encrypted or tokenized 

data. Storage of account or payment 

credentials in these forms would satisfy 

the first prong of the ‘‘wallet 

functionality’’ definition. For example, 

the first prong would be satisfied by 

storing an encrypted version of a 

payment account number or a token 66

that is specifically derived from or 

otherwise associated with a consumer’s 

payment account number. 

Paragraph (B)(2) of the proposed 

definition of ‘‘wallet functionality’’ 

would describe the types of processing 

of stored account or payment 

credentials that would fall within the 

definition. For example, consumers 

commonly use wallet functionalities 

provided through digital applications to 

pay for purchases of goods or services 

on merchant websites. To facilitate such 

a consumer payment transaction, a 

consumer financial product or service 

may transmit a stored payment 

credential to a merchant, its payment 

processor, or its website designed to 

accept payment credentials provided by 

the wallet functionality. This type of 

product or service would be covered by 

paragraph (B)(2). 


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67For purposes of the Proposed Rule, what 

matters is whether the digital application is 

accessible through a personal computing device, 

not whether a particular payment is made using a 

computing device that a consumer personally owns. 

For example, if a consumer logs into a digital 

application through a website using a work or 

library computer and makes a consumer payment 

transaction, the transfer would be subject to the 

Proposed Rule if that digital application is one a 

consumer also may access through a personal 

computing device. 

68For example, some nonbanks allow consumers 

to use interactive voice technology to operate the 

nonbank’s application that resides on the phone 

itself. See, e.g., Lory Seraydarian, ‘‘Voice Payments: 

The Future of Payment Technology?’’ PlatAI Blog 

(Mar. 7, 2022) (software firm analysis reporting that 

major P2P participants’’ allow their customers to 

use voice commands for peer-to-peer transfers.’’), 

available at https://plat.ai/blog/voice-payments/ 

(last visited Oct. 23, 2023). 

69 If a nonbank covered person provides a covered 

payment functionality a consumer may access 

through a digital application provided by a bank or 

credit union, the Proposed Rule would only apply 

to the nonbank. Depository institutions and credit 

unions are not subject to the CFPB’s larger 

participant rules, which rely upon authority in 

CFPA section 1024 that applies to nonbanks. 12 

U.S.C. 5514. 

70See generally CFPB Competition Spotlight, 

supra n.39. 

The CFPB requests comment on the 

proposed definition of the term wallet 

functionality, whether it sufficiently 

encompasses digital wallets in the 

market today, and whether it should be 

modified, and if so, how and why. 

Digital Application 

The proposed market definition 

applies to providing covered payment 

functionalities through a digital 

application for a consumer’s general use 

in making consumer payment 

transactions. Proposed § 1090.109(a)(2) 

would define the term ‘‘digital 

application’’ as a software program 

accessible to a consumer through a 

personal computing device, including 

but not limited to a mobile phone, smart 

watch, tablet, laptop computer, or 

desktop computer.67 The proposed 

definition would specify that the term 

includes a software program, whether 

downloaded to a personal computing 

device, accessible from a personal 

computing device via a website using an 

internet browser, or activated from a 

personal computing device using a 

consumer’s biometric identifier, such as 

a fingerprint, palmprint, face, eyes, or 

voice.68

Market participants may provide 

covered payment functionalities 

through digital applications in many 

ways. For example, a consumer may 

access a nonbank covered person’s 

covered payment functionality through 

a digital application provided by that 

nonbank covered person. Or, a 

consumer may access a nonbank 

covered person’s covered payment 

functionality through a digital 

application provided by an unaffiliated 

third-party such as another nonbank, a 

bank, or a credit union.69 In either case, 

a consumer typically first opens the 

digital application on a personal 

computing device and follows 

instructions for associating their deposit 

account, stored value account, or other 

payment account information with the 

covered payment functionality for use 

in a future consumer payment 

transaction. Then, when the consumer 

is ready to initiate a payment, the 

consumer may access the digital 

application again to authorize the 

payment. 

Moreover, consumers have many 

ways to access covered payment 

functionalities through digital 

applications to initiate consumer 

payment transactions. To make a P2P 

payment, a consumer may use an 

internet browser or other app on a 

mobile phone or computer to access a 

nonbank covered person’s funds transfer 

functionality, such as a feature to 

initiate a payment to friends or family 

or to access a general-use bill payment 

function. The consumer then may direct 

the nonbank covered person to transmit 

funds to the recipient or the consumer 

may provide payment instructions for 

the nonbank covered person to relay to 

the person holding the funds to be 

transferred. Or, in an online retail 

purchase transaction, a consumer may 

access a wallet functionality by clicking 

on or pressing a payment button on a 

checkout screen on a merchant website. 

The consumer then may log into the 

digital application or display a 

biometric identifier to their personal 

computing device to authorize the use 

of a previously-stored payment 

credential. Or, in an in-person retail 

purchase transaction, a consumer may 

activate a covered payment 

functionality by placing their personal 

computing device next to a merchant’s 

retail payment terminal. The digital 

application then may transmit payment 

instructions or payment credentials to a 

merchant payment processor. For 

example, a mobile phone may transmit 

such data by using near-field 

communication (NFC) technology built 

into the mobile phone,70 by generating 

a payment-specific quick response (QR) 

code on the mobile phone screen that 

the consumer displays to the merchant 

payment terminal, or by using the 

internet, a text messaging system, or 

other communications network 

accessible through the mobile phone. 

Through the proposed definition of 

digital application, the Proposed Rule 

excludes from the proposed market 

payment transactions that do not rely 

upon use of a digital applications. For 

example, gateway terminals merchants 

obtain to process the consumer’s 

personal card information are not 

personal computing devices of the 

consumer. Merchants generally select 

these types of payment processing 

services, which are provided to 

consumers at the point of sale to pay for 

the merchant’s goods or services. Their 

providers may be participating in a 

market that is distinct in certain ways 

from a market for general-use digital 

consumer payment applications. In 

addition, the proposed definition of 

‘‘digital application’’ would not cover 

the consumer’s presentment of a debit 

card, a prepaid card, or a credit card in 

plastic, metallic, or similar form at the 

point of sale. In using physical payment 

cards at the point of sale, a consumer 

generally is not relying upon a ‘‘digital 

application’’ because the consumer is 

not engaging with software through a 

personal computing device to complete 

the transaction. However, when a 

consumer uses the same payment card 

account in a wallet functionality 

provided through a digital application, 

then those transactions would fall 

within the market definition. 

In addition, there are other examples 

of payment transactions that do not rely 

upon the use of a digital application, 

including transactions relying upon the 

in-person payment of physical fiat 

currency (cash), and transactions where 

a consumer mails or hand delivers a 

paper payment instrument such as a 

paper check. 

The CFPB requests comment on the 

proposed definition of ‘‘digital 

application,’’ and whether it should be 

modified, and if so, how and why. For 

example, the CFPB requests comment 

regarding whether defining the term 

‘‘digital application’’ by reference to 

software accessible through a personal 

computing device is appropriate, and if 

so, why, and if not, why not and what 

alternative approach should be used and 

why. 

General Use 

The proposed market definition 

applies to providing covered payment 

functionalities through a digital 

application for a consumer’s general use 

in making consumer payment 

transactions. Proposed § 1090.109(a)(2) 

would define the term ‘‘general use’’ as 

the absence of significant limitations on 

the purpose of consumer payment 

transactions facilitated by the covered 

payment functionality provided through 

the digital consumer payment 

application. In proposing the general 


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71See, e.g., CFPB Report, ‘‘Justice-Involved 

Individuals and the Consumer Financial 

Marketplace’’ (Jan. 2022) at sec. 3.1 (n.87 describing 

uses of these types of funds transfers) & sec. 4.1 

(describing how, as observed in a CFPB 

enforcement action and an investigative report on 

prison release cards, ‘‘[w]hen released, people 

exiting jail receive money they had when arrested, 

and prisons disburse the balance of a person’s 

commissary account, including wages from prison 

jobs, public benefits, and money sent by friends and 

family’’), available at https://files.consumer

finance.gov/f/documents/cfpb_jic_report_2022- 

01.pdf (last visited Oct. 23, 2023). 

72The Proposed Rule includes these examples to 

illustrate the scope of the term ‘‘general use’’ in the 

Proposed Rule, and thus the scope of the proposed 

market definition. The examples are not a statement 

of the CFPB’s views regarding the scope of its 

authority over consumer financial products and 

services under the CFPA. 

73The term ‘‘consumer financial product or 

service’’ is defined in CFPA section 1002(5) and 

includes a range of consumer financial products 

and services including those in markets that the 

CFPB supervises, described earlier in the Proposed 

Rule, as well as other consumer financial products 

and services outside of supervised markets over 

which the CFPB generally has enforcement and 

market monitoring authority. See generally 12 

U.S.C. 5481(5) (definition of ‘‘consumer financial 

product or service’’) & 12 U.S.C. 5481(15) 

(definition of ‘‘financial product or service’’). 

74 12 CFR 1005.2(b)(3)(ii). 

use qualification in the market 

definition, the CFPB seeks to confine 

the market definition to those digital 

payment applications that consumers 

can use for a wide range of purposes. 

Digital payment applications with 

general use as described in the Proposed 

Rule can serve broad functions for 

consumers, such as sending funds to 

friends and family, buying a wide range 

of goods or services at different stores, 

or both. As reflected in the nonexhaustive list of examples discussed 

below, other consumer financial 

products and services provide payment 

functionalities for more limited 

purposes. While those other products 

and services also serve important 

functions for consumers, they do not 

have the same broad use cases for 

consumers. As a result, those products 

participate in a market or markets 

distinguishable from a market from 

general-use digital consumer payment 

applications. 

The proposed definition of general 

use would clarify that a digital 

consumer payment application that 

would facilitate person-to-person, or 

peer-to-peer (P2P), transfers of funds 

would qualify as having general use. 

Even if a payment functionality 

provided through a digital application is 

limited to P2P payments, and that 

constitutes a limitation on the purpose 

of payments, that limitation would not 

be significant for purposes of the 

proposed market definition. For 

example, a P2P application that permits 

a consumer to send funds to any family 

member, friend, or other person would 

qualify as general use, even if that P2P 

application could not be used as a 

payment method at checkout with 

merchants, retailers, or other sellers of 

goods or services. A P2P application 

also would have general use for 

purposes of the Proposed Rule even if 

it can only transfer funds to recipients 

who also register with the application 

provider, or otherwise participate in a 

certain network (sometimes referred to 

as ‘‘closed loop’’ P2P systems). 

Although the network of potential 

recipients in a closed loop system may 

be limited in certain respects, often any 

potential recipient may have the option 

of joining such a system (and many 

consumers already may have joined 

such systems), so the universe of 

potential recipients for such payments 

often is still broad. Moreover, a digital 

consumer payment application still may 

have general use even when the 

universe of potential recipients for a 

funds transfer is fixed, such as when a 

consumer can only make a transfer of 

funds to friends or family located in a 

prison, jail, or other secure facility. 

Such funds may be available to the 

recipient for a variety of purposes, 

including to purchase food, toiletries, 

medical supplies, or phone credits 

while incarcerated, and, if not used by 

the recipient while incarcerated, may 

revert to an unrestricted account.71

To provide clarity as to the proposed 

market definition, the proposed 

definition of general use would include 

examples of limitations that would be 

significant for purposes of the proposal, 

such that a covered payment 

functionality offered through a digital 

consumer payment application with 

such limitations would not have general 

use.72 The examples would illustrate 

some types of digital consumer payment 

applications that would not have 

general use. The list of examples is not 

exhaustive, and other types of digital 

consumer payment applications would 

not have general use to the extent they 

cannot be used for a wide range of 

purposes. 

In addition, some payment 

functionalities may be provided through 

two different digital consumer 

applications. For example, from a 

merchant’s ecommerce digital 

application, a consumer may click on a 

payment button that links to a thirdparty general-use digital consumer 

payment application, where the 

consumer authenticates their identity 

and provides payment instructions or 

otherwise authorizes the payment. Even 

if the merchant’s digital application 

would not itself qualify as having 

general use, the consumer’s use of the 

third-party general-use digital consumer 

payment application would still 

constitute covered market activity with 

respect to the third-party provider. 

The first example of a payment 

functionality that would not have 

general use, in paragraph (A) of the 

proposed definition of general use, 

would be a digital consumer payment 

application whose payment 

functionality is used solely to purchase 

or lease a specific type of services, 

goods, or property, such as 

transportation, lodging, food, an 

automobile, a dwelling or real property, 

or a consumer financial products and 

service. For example, when a consumer 

uses a payment functionality in a digital 

application for a consumer financial 

product or service to pay for that 

consumer financial product or service, 

such as by providing payment card 

information to a credit monitoring app 

to pay for credit monitoring services, 

this limited purpose for that payment 

functionality would not have general 

use under the Proposed Rule.73

Paragraph (A) of the proposed definition 

specifies these examples of significant 

limitations, such that a payment 

functionality provided through digital 

consumer payment application with 

these limitations would not have 

general use. 

Second, as indicated in paragraph (B) 

of the proposed definition of general 

use, accounts that are expressly 

excluded from the definition of 

‘‘prepaid account’’ in paragraphs (A), 

(C), and (D) of § 1005.2(b)(3)(ii) of 

Regulation E,74 also would not have 

general use for purposes of the Proposed 

Rule. Those provisions in Regulation E 

exclude certain tax-advantaged health 

medical spending accounts, dependent 

care spending accounts, transit or 

parking reimbursement arrangements, 

closed-loop accounts for spending at 

certain military facilities, and many 

types of gift certificates and gift cards. 

While these types of accounts may 

support payments through digital 

applications with varied purposes to 

different types of recipients, the 

accounts remain sufficiently restricted 

as to the purpose to warrant exclusion 

from the proposed market here. 

Third, as indicated in paragraph (C), 

a payment functionality provided 

through a digital consumer payment 

application that solely supports 

payments to pay a specific debt or type 

of debt or repayment of an extension of 

consumer credit does not have general 

use. For example, a consumer mortgage 

lender’s mobile app or website may 

provide a functionality that allows a 


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75By contrast, as noted in the section-by-section 

analysis of the exclusion in paragraph (C) of the 

definition of a ‘‘consumer payment transaction,’’ if 

a consumer uses a general-use digital consumer 

payment application as a method of making a 

payment to such a payee, that general-use digital 

consumer payment application would be 

participating in the market for those consumer 

payment transactions. 

76See International Money Transfer Larger 

Participant Final Rule, 79 FR 56641. 

77Prior to issuing this proposal, the CFPB 

conducted analysis of data sources as described 

below and in part V and part VI to identify likely 

market participants, and, to the extent of available 

data, to: (1) to inform its general understanding of 

the market; and, relatedly, (2) to estimate the level 

of market activity by market participants, the degree 

to which market participants would be small 

entities, and the level of market activity by larger 

participants. These estimates therefore rely to some 

degree on preliminary entity-level analysis that is 

not dispositive of whether the CFPB would ever 

seek to initiate supervisory activity at a given entity 

or whether, in the event of a person’s assertion that 

it is not a larger participant, the person would be 

found to be a larger participant. 

78See, e.g., 77 FR 42887 (consumer reporting 

larger participant rule describing such discretion); 

77 FR 65785 (same, in consumer debt collection 

larger participant rule). 

79 77 FR 42887 (consumer reporting larger 

participant rule); see also 80 FR 37513 (automobile 

financing larger participant rule describing how 

aggregate annual originations are a ‘‘meaningful 

measure’’ of such participation and impact); 78 FR 

73393–94 (same, for account volume criterion in 

student loan servicing larger participant rule). 

80 77 FR 65785 (consumer debt collection larger 

participant rule). 

81Under the CFPA, the activities of affiliated 

companies are to be aggregated for purposes of 

computing activity levels in larger participant rules. 

See 12 U.S.C. 5514(a)(1)(B), (3)(B). 

consumer to pay a loan. Or a debt 

collector’s website may provide a means 

for a consumer to pay a debt. These 

digital consumer payment applications 

have a use that is significantly limited, 

to only pay a specific debt or type of 

debt. In general, digital applications that 

solely support payments to specific 

lenders, loan servicers, and debt 

collectors would not be within the 

proposed market definition.75 The CFPB 

considers such digital applications 

generally to be more part of the markets 

for consumer lending, loan servicing, 

and debt collection. The CFPB has 

issued separate larger participant rules 

for such markets and CFPA section 

1024(a) also grants the CFPB 

supervisory authority over participants 

in certain lending markets, including 

mortgage lending, private student 

lending, and payday lending. In 

addition, other digital applications may 

only help a consumer to pay certain 

other types of debts, such as taxes or 

other amounts owed to the government, 

including fines. Under this proposed 

example, those payment functionalities 

provided through those applications 

also would not have general use. 

Fourth, as indicated in paragraph (D), 

a payment functionality provided 

through a digital application that solely 

helps consumers to divide up charges 

and payments for a specific type of 

goods or services would be excluded. 

Some payment applications, for 

example, may be focused solely on 

helping consumers to split a restaurant 

bill. This example is a corollary of the 

example in paragraph (A). Since a 

payment functionality limited to paying 

for food would not have general use 

under paragraph (A), paragraph (D) 

would clarify that neither would a 

payment functionality that enables 

splitting a bill for food have general use. 

The CFPB requests comment on the 

proposed definition of general use and 

examples of significant limitations that 

take a payment functionality provided 

through a digital consumer application 

out of the general use category. The 

CFPB also requests comment on 

whether the examples of significant 

limitations should be changed or 

clarified, and whether additional 

examples of significant limitations 

should be included, and if so, what 

examples and why. 

State 

Proposed § 1090.109(a) would define 

the term ‘‘State’’ to mean any State, 

territory, or possession of the United 

States; the District of Columbia; the 

Commonwealth of Puerto Rico; or any 

political subdivision thereof. For 

consistency, the CFPB is proposing to 

use the same definition of ‘‘State’’ as 

used in the international money transfer 

larger participant rule, § 1090.107(a), 

which drew its definition from 

Regulation E subpart A.76 The CFPB 

requests comment on the proposed 

definition of State. 

109(b) Test To Define Larger 

Participants 

Proposed § 1090.109(b) would set 

forth a test to determine which nonbank 

covered persons are larger participants 

in a market for general-use digital 

consumer payment applications as 

described in proposed § 1090.109(a). 

Under the proposed test, a nonbank 

covered person would be a larger 

participant if it meets each of two 

criteria set forth in paragraphs (1) and 

(2) of proposed § 1090.109(b) 

respectively. First, paragraph (1) 

specifies that the nonbank covered 

person must provide annual covered 

consumer payment transaction volume 

as defined in paragraph (3) of proposed 

§ 1090.109(b) of at least five million 

transactions. Second, paragraph (2) 

specifies that the nonbank covered 

person must not be a small business 

concern based on the applicable Small 

Business Administration (SBA) size 

standard listed in 13 CFR part 121 for 

its primary industry as described in 13 

CFR 121.107. Paragraphs (1), (2), and (3) 

of this proposed definition are analyzed 

below.77

Criteria 

The CFPB has broad discretion in 

choosing criteria for assessing whether a 

nonbank covered person is a larger 

participant of a market.78 The CFPB 

selects criteria that provide ‘‘a 

reasonable indication of a person’s level 

of market participation and impact on 

consumers.’’ 79 As the CFPB has noted 

in previous larger participant 

rulemakings, for any given market, there 

may be ‘‘several criteria, used alone or 

in combination, that could be viewed as 

reasonable alternatives.’’ 80

Here, the CFPB is proposing to 

combine the two criteria described 

above: the annual covered consumer 

payment transaction volume and the 

size of the entity by reference to SBA 

size standards. The Proposed Rule’s 

larger-participant test would combine 

these criteria as follows: a nonbank 

covered person would be a larger 

participant if its annual covered 

consumer payment transaction volume 

exceeded the proposed threshold, 

discussed in the section-by-section 

analysis further below, and, during the 

same time period (i.e., the preceding 

calendar year), it was not a small 

business concern. 

The first criterion would be based on 

the number of consumer payment 

transactions. Specifically, proposed 

§ 1090.109(b)(3) would define the term 

‘‘annual covered consumer payment 

transaction volume’’ as the sum of the 

number of the consumer payment 

transactions that the nonbank covered 

person and its affiliated companies 

facilitated by providing general-use 

digital consumer payment applications 

in the preceding calendar year.81 This is 

an appropriate criterion for a market 

defined by reference to products that 

facilitate certain consumer payments. 

Each transaction counted under this 

criterion also generally is a payment. In 

that way, a transaction is essentially a 

well-understood unit of market activity. 

As in the CFPB’s international money 

transfer larger participant rule, here the 

number of transactions also reflects the 

extent of interactions between the 

nonbank covered person providing the 

in-market consumer financial product or 

service. Each one-time consumer 

payment transaction typically results 

from a single interaction with at least 


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82See, e.g., 79 FR 56641 (international money 

transfer larger participant rule noting that the 

absolute number of transactions ‘‘reflects the extent 

of interactions’’ between the provider and the 

consumer because ‘‘each transfer represents a single 

interaction with at least one consumer.’’). 

83See generally NMLS, ‘‘Money Services 

Business Call Report,’’ available at https://

mortgage.nationwidelicensingsystem.org/slr/ 

common/Pages/MoneyServicesBusinessesCall

Report.aspx (last visited Oct. 23, 2023). 

84 In addition, under the SBA’s regulations, a 

concern’s size is measured by aggregating the 

relevant size metric across affiliates. See 13 CFR 

121.103(a)(6) (‘‘In determining the concern’s size, 

the SBA counts the receipts, employees, or other 

measure of size of the concern whose size is at issue 

and all of its domestic and foreign affiliates, 

regardless of whether the affiliates are organized for 

profit.’’). 

85 12 U.S.C. 5514(a)(1)(C). See generally 12 CFR 

part 1091 (regulations implementing CFPA section 

1024(a)(1)(C)). 

86The CFPB notes that the available data do not 

always conform to the precise market scope of 

covered consumer payment transactions. For 

example, the data do not always distinguish 

between transactions in which a business sent 

funds, which would not be covered consumer 

payment transactions, from transactions in which a 

consumer sent funds. In addition, in some cases the 

data may include funds a consumer transfers 

between one deposit or stored value account and 

another, both of which belong to the consumer. The 

current analysis includes transaction volume 

broadly defined, and the CFPB cannot distinguish 

between this overall activity and covered market 

activity (to the extent they differ). Therefore, the 

current analysis may be an overestimate of covered 

market activity and larger-participant status of 

providers of general-use digital consumer payment 

applications subject to the larger-participant 

threshold. 

87As discussed above and below, the exclusion 

would apply to any nonbank that, together with its 

affiliated companies, is a small business concern 

based on the applicable SBA size standard listed in 

13 CFR part 121 for its primary industry as 

described in 13 CFR 121.107. The SBA defines size 

standards using North American Industry 

Classification System (NAICS) codes. The CFPB 

believes that many—but not all—entities in the 

proposed market for general-use digital consumer 

payment applications are likely classified in NAICS 

code 522320, ‘‘Financial Transactions Processing, 

Reserve, and Clearinghouse Activities,’’ or NAICS 

code 522390, ‘‘Other Activities Related to Credit 

Intermediation.’’ Entities associated with NAICS 

code 522320 that have $47 million or less in annual 

receipts are currently defined by the SBA as small 

business concerns; for NAICS code 522390, the size 

standard is $28.5 million. However, other entities 

that the CFPB believes to be operating in the 

proposed market may be classified in other NAICS 

codes industries that use different standards, 

including non-revenue-based SBA size standards, 

such as the number of employees. While the CFPB 

has data to estimate the SBA size status of some 

Continued 

one consumer.82 And, in the case of 

recurring consumer payment 

transactions, consumers also have at 

least one interaction with the covered 

persons in the market. The number of 

transactions also is a common indicator 

of market participation. State regulators, 

for example, require money transmitters 

to report this metric.83

The CFPB considered proposing 

different criteria, such as the dollar 

value of transactions or the annual 

receipts from market activity. However, 

it is not proposing either of those 

alternatives. First, the proposed market 

includes digital wallets which often are 

used for consumer retail spending, 

which can grow in amount through 

inflation. For this market, a dollar value 

criterion may become affected by 

inflation or other factors. In addition, as 

discussed in the impacts analyses in 

parts V and VI, some of the data sources 

the CFPB relied upon in formulating the 

Proposed Rule may be overinclusive by 

including certain payments that are not 

within the market defined in the 

Proposed Rule, such as certain businessto-business payments. Those payments 

may have higher dollar values. By 

proposing number of transactions as a 

criterion, the Proposed Rule is less 

affected by those data distortions. At the 

same time, in general, a higher number 

of transactions also may often comprise 

a higher dollar value of transactions. 

With respect to annual receipts, that 

data is less available, especially for 

market participants that are not publicly 

traded or that do not file call reports on 

money transmission at the State level. In 

addition, in the context of the market at 

issue in the Proposed Rule, an annual 

receipts criterion could miss significant 

market participation and consumer 

impacts, such as where a provider is 

subsidizing a product or otherwise not 

earning significant per-transaction 

revenues. For example, when a 

consumer links their deposit account 

directly to a general-use digital 

consumer payment application, the 

provider may receive lower revenue for 

funds sent to friends and family, 

compared with paying a merchant or 

using a network branded payment card 

(where there is an interchange fee that 

may provide a source of revenue). Yet, 

the risks to and impact on the consumer 

may be just as significant from 

payments they make to individuals from 

a linked deposit account. 

As noted above, the CFPB is 

proposing a second criterion that also 

must be satisfied for a nonbank covered 

person to be a larger participant, in 

addition to the annual covered payment 

volume criterion. Under the second 

criterion, the nonbank must not be a 

‘‘small business concern’’ as that term is 

defined by section 3(a) of the Small 

Business Act, 15 U.S.C. 632(a), and 

implemented by the SBA under 13 CFR 

part 121, or any successor provisions. 

Thus, under the Proposed Rule, an 

entity would be a small business 

concern if its size were at or below the 

SBA standard listed in 13 CFR part 121 

for its primary industry as described in 

13 CFR 121.107.84

The CFPB is proposing this second 

criterion because it does not seek to use 

this rulemaking as a means of 

expending its limited supervisory 

resources to examine small business 

concerns. The consumer digital 

payments applications market is 

potentially broad and dynamic, with 

rapid technological developments and 

new entrants. But many well-known 

market participants have large business 

operations that have an impact on 

millions of consumers. In light of its 

resources, the CFPB believes that it 

would be preferable to focus on larger 

entities, instead of requiring all entities 

with an annual covered consumer 

payment transaction volume over five 

million to be subject to supervisory 

review under the Proposed Rule. If a 

particular nonbank covered person were 

a small business concern participating 

in this market in a manner that posed 

risks to consumers, the CFPB has 

authority to pursue risk-based 

supervision of such an entity pursuant 

to CFPA section 1024(a)(1)(C).85

The CFPB requests comment on its 

proposed criteria, including whether, 

instead of basing the annual volume 

criterion described above on number of 

consumer payment transactions, it 

should be based on a different metric, 

such as the dollar value of consumer 

payment transactions, and, if so, why. 

Threshold 

Under the Proposed Rule, a nonbank 

covered person would be a larger 

participant in the market for general-use 

digital consumer payment applications 

if the nonbank covered person satisfies 

two criteria. First, it must facilitate an 

‘‘annual covered consumer payment 

transaction volume,’’ as defined in 

proposed § 1090.109(b)(3) and discussed 

above, of at least five million 

transactions. As explained in proposed 

§ 1090.109(b)(3)(i) and discussed above, 

the volume is aggregated across 

affiliated companies. Thus, the 

proposed threshold includes the 

aggregate annual volume of both 

consumer-to-consumer or consumer-tobusiness transactions facilitated by all 

general-use digital consumer payment 

applications provided by the nonbank 

covered person and its affiliated 

companies in the preceding year.86

Second, under proposed 

§ 1090.109(b)(2) and explained above, 

the CFPB also proposes to exclude from 

larger-participant status any entity in 

the proposed market that is a small 

business concern based on applicable 

SBA size standards.87 The CFPB 


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market participants, such as publicly-traded 

companies, the CFPB lacks data sufficient to 

estimate the SBA size status of some market 

participants. See SBA, Table of Small Business Size 

Standards Matched to North American Industry 

Classification System Codes, effective March 17, 

2023, Sector 52 (Finance and Insurance), available 

at https://www.sba.gov/document/support-tablesize-standards (last visited Oct. 26, 2023). 

88The CFPB has identified approximately 190 

entities from available data that provide general-use 

digital consumer payment applications and may be 

subject to the Proposed Rule. Of those entities, the 

CFPB has data on about half sufficient to estimate 

larger-participant status, including whether those 

entities would be subject to the small business 

exclusion built into the larger-participant test. The 

estimate that approximately 17 entities would be 

larger participants is based on the set of entities for 

which the CFPB has sufficient information to 

estimate larger participant status. 

89 In developing this estimate of 17 entities, the 

CFPB excluded entities where either (1) available 

information indicates that the small entity 

exclusion applies or (2) the CFPB lacks sufficient 

information regarding the entity’s size to assess 

whether the small entity exclusion applies. 

90The CFPB based its market estimates on data 

from several sources. The CFPB obtained 

transaction and revenue data from six technology 

platforms offering payment services through a CFPB 

request pursuant to CFPA section 1022(c)(4). See 

‘‘CFPB Orders Tech Giants to Turn Over 

Information on their Payment System Plans,’’ (Oct. 

21, 2021), available at https://www.consumer

finance.gov/about-us/newsroom/cfpb-orders-techgiants-to-turn-over-information-on-their-paymentsystem-plans/ (last visited Oct. 23, 2023). The CFPB 

was also able to access nonpublic transaction and 

revenue data for potential larger participants from 

the Nationwide Mortgage Licensing System & 

Registry (NMLS), a centralized licensing database 

used by many States to manage their license 

authorities with respect to various consumer 

financial industries, including money transmitters. 

Specifically, the CFPB accessed quarterly 2022 and 

2023 filings from nonbank money transmitters in 

the Money Services Businesses (MSB) Call Reports 

data (for a description of the types of data reported 

in MSB call reports, see https://

mortgage.nationwidelicensingsystem.org/slr/ 

common/Pages/MoneyServicesBusinessesCall

Report.aspx (last visited Oct. 23, 2023)). 

Additionally, the CFPB compiled a list of likely 

market participants, as well as transaction and 

revenue data where available, from several industry 

sources (including Elliptic Enterprises Limited) and 

various public sources including the CFPB’s 

Prepaid Card Agreement Database, available at 

https://www.consumerfinance.gov/data-research/ 

prepaid-accounts/search-agreements (last visited 

Oct. 23, 2023), company websites, press releases, 

and annual report filings with the U.S. Securities 

and Exchange Commission. 

91The CFPB’s estimate that approximately 190 

entities are participating in the market may be an 

underestimate because, for certain entities, the 

CFPB lacks sufficient information to assess whether 

they provide a general-use digital consumer 

payment application. In addition, for some entities 

that are among the approximately 190 participants 

in the market, the CFPB lacks sufficient information 

to assess whether certain products they offer 

constitute a general-use digital consumer payment 

application. 

92See supra n.86–n.91. The 88 percent estimate 

is calculated among all of the entities for which the 

CFPB has transaction information. 

93See id. & supra n.86–n.91. 

94See id. & supra n.86–n.91. 

believes that this proposed threshold 

and the proposed small entity 

exclusion, discussed above, are a 

reasonable means of defining larger 

participants in this market.88

The CFPB estimates that the proposed 

threshold would bring within the 

CFPB’s supervisory authority 

approximately 17 entities,89 about 9 

percent of all known nonbank covered 

persons in the market for general-use 

digital consumer payment 

applications.90 The CFPB notes at the 

outset that this is a rough estimate 

because the available data on entities 

operating in the proposed market for 

general-use digital consumer payment 

applications is incomplete.91

The CFPB anticipates that the 

proposed annual covered consumer 

payment transaction volume threshold 

of five million would allow the CFPB to 

supervise market participants that 

represent a substantial portion of the 

market for general-use digital consumer 

payment applications and have a 

significant impact on consumers. 

Available data indicates that the market 

for general-use digital consumer 

payment applications is highly 

concentrated, with a few entities that 

facilitate hundreds of millions or 

billions of consumer payment 

transactions annually, and a much 

larger number of firms facilitating fewer 

transactions. The CFPB believes that a 

threshold of five million is reasonable, 

in part, because it would enable the 

CFPB to cover in its nonbank 

supervision program both the very 

largest providers of general-use digital 

consumer payment applications as well 

as a range of other providers of generaluse digital consumer payment 

applications that play an important role 

in the marketplace. Further, certain 

populations of consumers, including 

more vulnerable consumers, may not 

transact with the very largest providers 

and instead may transact with the range 

of other providers that exceed the five 

million transaction threshold. 

According to the CFPB’s estimates, 

the approximately 17 providers of 

general-use digital consumer payment 

applications that meet the proposed 

threshold collectively facilitated about 

12.8 billion transactions in 2021, with a 

total dollar value of about $1.7 trillion. 

The CFPB estimates that these nonbanks 

are responsible for approximately 88 

percent of known transactions in the 

nonbank market for general-use digital 

consumer payment applications.92 At 

the same time, this threshold would 

likely subject to the CFPB’s supervisory 

authority only entities that can 

reasonably be considered larger 

participants of the market defined in the 

Proposed Rule. 

Proposed § 1090.109(b)(3)(i) also 

would clarify how the activities of 

affiliated companies of the nonbank 

covered person are included in the test 

when the affiliated companies also 

participate in the proposed market. It 

provides that, in aggregating 

transactions across affiliated companies, 

an individual consumer payment 

transaction would only be counted once 

even if more than one affiliated 

company facilitated the transaction. It 

also provides that the annual covered 

consumer payment transaction volumes 

of the nonbank covered person and its 

affiliated companies are aggregated for 

the entire preceding calendar year, even 

if the affiliation did not exist for the 

entire calendar year. 

Because the general-use digital 

consumer payment applications market 

has evolved rapidly and market 

participants can grow quickly, the CFPB 

also is not proposing a test that is based 

on averaging multiple years of market 

activity. As a result, if an entity has less 

than the threshold amount for one or 

more calendar years but exceeds the 

threshold amount in the most recent 

calendar year, it would be a larger 

participant. This will ensure that the 

CFPB can supervise nonbanks that 

quickly become larger participants, 

without waiting several years. 

The CFPB also is considering a lower 

or higher threshold. For example, an 

annual covered consumer payment 

transaction volume threshold of one 

million might allow the CFPB to 

supervise approximately 19 entities, 

still representing approximately 88 

percent of activity in this market.93

Lowering the threshold would not 

substantially increase the number of 

entities subject to supervision, in part 

because many entities that exceed a 

lower threshold would be excluded as 

small entities, and would result in only 

a marginal increase in market coverage. 

In comparison, the CFPB estimates that 

an annual covered consumer payment 

transaction volume threshold of 10 

million would allow the CFPB to 

supervise approximately 14 entities, 

representing approximately 87 percent 

of activity in this market.94 However, at 

this higher threshold the CFPB would 

not be able to supervise as varied a mix 

of nonbank larger participants that, as 

discussed above, have a substantial 

impact on the full spectrum of 

consumers in the market. 

The CFPB seeks comment, including 

suggestions of alternatives on the 

proposed threshold for defining larger 

participants of the market for generaluse digital consumer payment 


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95Specifically, 12 U.S.C. 5512(b)(2)(A) calls for 

the CFPB to consider the potential benefits and 

costs of a regulation to consumers and covered 

persons, including the potential reduction of access 

by consumers to consumer financial products or 

services, the impact on depository institutions and 

credit unions with $10 billion or less in total assets 

as described in 12 U.S.C. 5516, and the impact on 

consumers in rural areas. In addition, 12 U.S.C. 

5512(b)(2)(B) directs the CFPB to consult, before 

and during the rulemaking, with appropriate 

prudential regulators or other Federal agencies, 

regarding consistency with objectives those 

agencies administer. The manner and extent to 

which the provisions of 12 U.S.C. 5512(b)(2) apply 

to a rulemaking of this kind that does not establish 

standards of conduct are unclear. Nevertheless, to 

inform this rulemaking more fully, the CFPB 

performed the analysis and consultations described 

in those provisions of the CFPA. 

96 12 CFR 1090.102. 

97The CFPB has discretion in any rulemaking to 

choose an appropriate scope of analysis with 

respect to potential benefits and costs and an 

appropriate baseline. The CFPB, as a matter of 

discretion, has chosen to describe a broader range 

of potential effects to inform the rulemaking more 

fully. 

98See supra n.90. 

99As stated above, the CFPB estimates that 

approximately 190 entities operate in the market for 

providing general-use digital consumer payment 

applications defined in the Proposed Rule. Of those 

entities, the CFPB has data on roughly half 

sufficient to estimate larger-participant status, 

including whether those entities would be subject 

to the exclusion for small business concerns; 

approximately 17 of those would be larger 

participants under the proposed larger-participant 

test. 100 12 U.S.C. 5514(b)(2). 

applications as defined in the Proposed 

Rule. 

V. Dodd-Frank Act Section 1022(b) 

Analysis 

A. Overview 

The CFPB is considering potential 

benefits, costs, and impacts of the 

Proposed Rule.95 The CFPB requests 

comment on the preliminary analysis 

presented below as well as submissions 

of additional data that could inform the 

CFPB’s analysis of the costs, benefits, 

and impacts of the Proposed Rule. 

The Proposed Rule would define a 

category of nonbank covered persons 

that would be subject to the CFPB’s 

nonbank supervision program pursuant 

to CFPA section 1024(a)(1)(B). The 

proposed category would include 

‘‘larger participants’’ of a market for 

‘‘general-use digital consumer payment 

applications’’ described in the Proposed 

Rule. Participation in this market would 

be measured on the basis of aggregate 

annual transactions, defined in the 

Proposed Rule as ‘‘annual covered 

consumer payment transaction 

volume.’’ If a nonbank covered person, 

together with its affiliated companies, 

has an annual covered consumer 

payment transaction volume (measured 

for the preceding calendar year) of at 

least five million and is not a small 

business concern, it would be a larger 

participant in the market for general-use 

digital consumer payment applications. 

As prescribed by existing § 1090.102, 

any nonbank covered person that 

qualifies as a larger participant would 

remain a larger participant until two 

years after the first day of the tax year 

in which the person last met the largerparticipant test.96

B. Potential Benefits and Costs to 

Consumers and Covered Persons 

This analysis considers the benefits, 

costs, and impacts of the key provisions 

of the Proposed Rule against a baseline 

that includes the CFPB’s existing rules 

defining larger participants in certain 

markets.97 Many States have 

supervisory programs relating to money 

transfers, which may consider aspects of 

consumer financial protection law. 

However, at present, there is no Federal 

program for supervision of nonbank 

covered persons in the market for 

general-use digital consumer payment 

applications with respect to Federal 

consumer financial law compliance. 

The Proposed Rule extends the CFPB’s 

supervisory authority to cover larger 

participants of the defined market for 

general-use digital consumer payment 

applications. 

The CFPB notes at the outset that 

limited data are available with which to 

quantify the potential benefits, costs, 

and impacts of the Proposed Rule. As 

described above, the CFPB has utilized 

various sources for quantitative 

information on the number of market 

participants, their annual revenue, and 

their number and dollar volume of 

transactions.98 However, the CFPB lacks 

detailed information about their rate of 

compliance with Federal consumer 

financial law and about the range of, 

and costs of, compliance mechanisms 

used by market participants. Further, as 

noted above in the section-by-section 

analysis of the proposed threshold, the 

CFPB lacks sufficient information on a 

substantial number of known market 

participants necessary to estimate their 

larger-participant status.99

In light of these data limitations, this 

analysis generally provides a qualitative 

discussion of the benefits, costs, and 

impacts of the Proposed Rule. General 

economic principles, together with the 

limited data that are available, provided 

insight into these benefits, costs, and 

impacts. Where possible, the CFPB has 

made quantitative estimates based on 

these principles and data as well as on 

its experience of undertaking 

supervision in other markets. 

The discussion below describes three 

categories of potential benefits and 

costs. First, the Proposed Rule, if 

adopted, would authorize the CFPB’s 

supervision of larger participants of a 

market for general-use digital consumer 

payment applications. Larger 

participants of the proposed market 

might respond to the possibility of 

supervision by changing their systems 

and conduct, and those changes might 

result in costs, benefits, or other 

impacts. Second, if the CFPB undertakes 

supervisory activity of specific 

providers of general-use digital 

consumer payment applications, those 

entities may incur costs from 

responding to supervisory activity, and 

the results of these individual 

supervisory activities might also 

produce benefits and costs. Third, the 

CFPB analyzes the costs that might be 

associated with entities’ efforts to assess 

whether they would qualify as larger 

participants under the rule. 

1. Benefits and Costs of Responses to the 

Possibility of Supervision 

The Proposed Rule would subject 

larger participants of a market for 

general-use digital consumer payment 

applications to the possibility of CFPB 

supervision. That the CFPB would be 

authorized to undertake supervisory 

activities with respect to a nonbank 

covered person who qualified as a larger 

participant would not necessarily mean 

that the CFPB would in fact undertake 

such activities regarding that covered 

person in the near future. Rather, 

supervision of any particular larger 

participant as a result of this rulemaking 

would be probabilistic in nature. For 

example, the CFPB would examine 

certain larger participants on a periodic 

or occasional basis. The CFPB’s 

decisions about supervision would be 

informed, as applicable, by the factors 

set forth in CFPA section 1024(b)(2),100

relating to the size and transaction 

volume of individual participants, the 

risks their consumer financial products 

and services pose to consumers, the 

extent of State consumer protection 

oversight, and other factors the CFPB 

may determine are relevant. Each entity 

that believed it qualified as a larger 

participant would know that it might be 

supervised and might gauge, given its 

circumstances, the likelihood that the 

CFPB would initiate an examination or 

other supervisory activity. 

The prospect of potential CFPB 

supervisory activity could create an 

incentive for larger participants to 

allocate additional resources and 

attention to compliance with Federal 

consumer financial law, potentially 

leading to an increase in the level of 


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101Another approach to considering the benefits, 

costs, and impacts of the Proposed Rule would be 

to focus almost entirely on the supervision-related 

costs for larger participants and omit a broader 

consideration of the benefits and costs of increased 

compliance. As noted above, the CFPB has, as a 

matter of discretion, chosen to describe a broader 

range of potential effects to inform the rulemaking 

more fully. 102 12 U.S.C. 5531. 

compliance. They might anticipate that 

by doing so (and thereby decreasing risk 

to consumers), they could decrease the 

likelihood of their actually being subject 

to supervisory activities as the CFPB 

evaluated the factors outlined above. In 

addition, an actual examination would 

be likely to reveal any past or present 

noncompliance, which the CFPB could 

seek to correct through supervisory 

activity or, in some cases, enforcement 

actions. Larger participants might 

therefore judge that the prospect of 

supervision increases the potential 

consequences of noncompliance with 

Federal consumer financial law, and 

they might seek to decrease that risk by 

taking steps to identify and cure or 

mitigate any noncompliance. 

The CFPB believes it is likely that 

many market participants would 

increase compliance in response to the 

CFPB’s supervisory activity authorized 

by the Proposed Rule. However, because 

finalization of the Proposed Rule itself 

would not require any provider of 

general-use digital consumer payment 

applications to alter its conduct, any 

estimate of the amount of increased 

compliance would require both an 

estimate of current compliance levels 

and a prediction of market participants’ 

behavior in response to a final rule. The 

data that the CFPB currently has do not 

support a specific quantitative estimate 

or prediction. But, to the extent that 

nonbank entities allocate resources to 

increasing their compliance in response 

to the Proposed Rule, that response 

would result in both benefits and 

costs.101

Benefits From Increased Compliance 

Increased compliance with Federal 

consumer financial laws by larger 

participants in the market for generaluse digital consumer payment 

applications would be beneficial to 

consumers who use general-use digital 

payment applications. Increasing the 

rate of compliance with Federal 

consumer financial laws would benefit 

consumers and the consumer financial 

market by providing more of the 

protections mandated by those laws. 

The CFPB would be examining for 

compliance with applicable provisions 

of Federal consumer financial laws, 

including the Electronic Fund Transfer 

Act and its implementing Regulation E, 

as well as the privacy provisions of the 

Gramm-Leach-Bliley Act. In addition, 

the CFPB would be examining for 

whether larger participants of the 

market for general-use digital consumer 

payment applications engage in unfair, 

deceptive, or abusive acts or 

practices.102 Conduct that does not 

violate an express prohibition of another 

Federal consumer financial law may 

nonetheless constitute an unfair, 

deceptive, or abusive act or practice. To 

the extent that any provider of generaluse digital consumer payment 

applications is currently engaged in any 

unfair, deceptive, or abusive acts or 

practices, the cessation of the unlawful 

act or practice would benefit consumers. 

Providers of general-use digital 

consumer payment applications might 

improve policies and procedures in 

response to possible supervision in 

order to avoid engaging in unfair, 

deceptive, or abusive acts or practices. 

The possibility of CFPB supervision 

also may help make incentives to 

comply with Federal consumer financial 

laws more consistent between the likely 

larger participants and banks and credit 

unions, which are subject to Federal 

supervision with respect to Federal 

consumer financial laws. Although 

some nonbanks are already subject to 

State supervision, introducing the 

possibility of Federal supervision could 

encourage nonbanks that are likely 

larger participants to devote additional 

resources to compliance. It could also 

help ensure that the benefits of Federal 

oversight reach consumers who do not 

have ready access to bank-provided 

general-use digital consumer payment 

applications. 

Costs of Increased Compliance 

To the extent that nonbank larger 

participants would decide to increase 

resources dedicated to compliance in 

response to the possibility of increased 

supervision, the entities would bear any 

cost of any changes to their systems, 

protocols, or personnel. Whether and to 

what extent entities would increase 

resources dedicated to compliance and/ 

or pass those costs to consumers would 

depend not only on the entities’ current 

practices and the changes they decide to 

make, but also on market conditions. 

The CFPB lacks detailed information 

with which to predict the extent to 

which increased costs would be borne 

by providers or passed on to consumers, 

to predict how providers might respond 

to higher costs, or to predict how 

consumers might respond to increased 

prices. 

2. Benefits and Costs of Individual 

Supervisory Activities 

In addition to the responses of market 

participants anticipating supervision, 

the possible consequences of the 

Proposed Rule would include the 

responses to and effects of individual 

examinations or other supervisory 

activity that the CFPB might conduct in 

the market for general-use digital 

consumer payment applications. 

Benefits of Supervisory Activities 

Supervisory activity could provide 

several types of benefits. For example, 

as a result of supervisory activity, the 

CFPB and an entity might uncover 

compliance deficiencies indicating 

harm or risks of harm to consumers. In 

its supervision and examination 

program, the CFPB generally prepares a 

report of each examination. The CFPB 

would share examination findings with 

the entity because one purpose of 

supervision is to inform the entity of 

problems detected by examiners. Thus, 

for example, an examination might find 

evidence of widespread noncompliance 

with Federal consumer financial law, or 

it might identify specific areas where an 

entity has inadvertently failed to 

comply, or it may identify weaknesses 

in compliance management systems 

including policies and procedures. 

These examples are only illustrative of 

the kinds of information an examination 

might identify. 

Detecting and informing entities about 

such problems should be beneficial to 

consumers. When the CFPB notifies an 

entity about risks associated with an 

aspect of its activities, the entity is 

expected to adjust its practices to reduce 

those risks. That response may result in 

increased compliance with Federal 

consumer financial law, with benefits 

like those described above. Or it may 

avert a violation that would have 

occurred if CFPB supervision did not 

detect the risk promptly. The CFPB may 

also inform entities about risks posed to 

consumers that fall short of violating the 

law. Action to reduce those risks would 

also be a benefit to consumers. 

Given the obligations providers of 

general-use digital consumer payment 

applications have under Federal 

consumer financial law and the 

existence of efforts to enforce such law, 

the results of CFPB supervision also 

may benefit providers under 

supervision by detecting compliance 

problems early. When an entity’s 

noncompliance results in litigation or 

an enforcement action, the entity must 

face both the costs of defending its 

action and the penalties for 

noncompliance, including potential 


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103Further potential benefits to consumers, 

covered persons, or both might arise from the 

CFPB’s gathering of information during supervisory 

activities. The goals of supervision include 

informing the CFPB about activities of market 

participants and assessing risks to consumers and 

to markets for consumer financial products and 

services. The CFPB may use this information to 

improve regulation of consumer financial products 

and services and to improve enforcement of Federal 

consumer financial law, in order to better serve its 

mission of ensuring consumers’ access to fair, 

transparent, and competitive markets for such 

products and services. Benefits of this type would 

depend on what the CFPB learns during 

supervision and how it uses that knowledge. For 

example, because the CFPB would examine a 

number of covered persons in the market for 

general-use digital consumer payment applications, 

the CFPB would build an understanding of how 

effective compliance systems and processes 

function in that market. 

104For an estimate of the length of examination, 

see Board of Gov. of Fed. Res. System Office of 

Inspector General, ‘‘The Bureau Can Improve Its 

Risk Assessment Framework for Prioritizing and 

Scheduling Examination Activities’’ (Mar. 25, 2019) 

at 13, available at https://oig.federalreserve.gov/ 

reports/bureau-risk-assessment-frameworkmar2019.pdf (last visited Oct. 31, 2023). 

105For current U.S. Bureau of Labor Statistics 

(BLS) estimates of mean hourly wages of these 

occupations, see BLS, ‘‘Occupational Employment 

and Wages, May 2022, 13–10141 Compliance 

Officers’’, available at https://www.bls.gov/oes/ 

current/oes131041.htm#(1) (last visited Oct. 26, 

2023); BLS, ‘‘Occupational employment and Wages, 

May 2021, 23–1011 Lawyers,’’ available at https:// 

www.bls.gov/oes/2021/may/oes231011.htm (last 

visited Oct. 26, 2023). 

106See BLS, ‘‘Employer Costs for Employee 

Compensation—June 2023’’ (Sept. 12, 2023) (Table 

1 for 2023 Q2 estimates of the share of wages and 

salaries in total compensation of private sector 

workers), available at https://www.bls.gov/ 

news.release/pdf/ecec.pdf (last visited Oct. 26, 

2023). This cost is calculated as follows: ((((0.1 × 

$71.17) + $37.01)/0.706)) × 40 hours × 10 weeks. 

107The CFPB declines to predict at this time 

precisely how many examinations it would 

undertake at each provider of general-use digital 

consumer payment applications if the Proposed 

Rule is adopted. However, if the CFPB were to 

examine each entity that would be a larger 

participant of the market under the Proposed Rule 

once every two years, the expected annual labor 

cost of supervision per larger participant would be 

approximately $12,500.50 (the cost of one 

examination, divided by two). 

liability for damages to private 

plaintiffs. The entity must also adjust its 

systems to ensure future compliance. 

Changing practices that have been in 

place for long periods of time can be 

expected to be relatively difficult 

because they may be severe enough to 

represent a serious failing of an entity’s 

systems. Supervision may detect flaws 

at a point when correcting them would 

be relatively inexpensive. Catching 

problems early can, in some situations, 

forestall costly litigation. To the extent 

early correction limits the amount of 

consumer harm caused by a violation, it 

can help limit the cost of redress. In 

short, supervision might benefit 

providers of general-use digital 

consumer payment applications under 

supervision by, in the aggregate, 

reducing the need for other more 

expensive activities to achieve 

compliance.103

Costs of Supervisory Activities 

The potential costs of actual 

supervisory activities would arise in 

two categories. The first would involve 

any costs to individual providers of 

general-use digital consumer payment 

applications of increasing compliance in 

response to the CFPB’s findings during 

supervisory activity and to supervisory 

actions. These costs would be similar in 

nature to the possible compliance costs, 

described above, the larger participants 

in general might incur in anticipation of 

possible supervisory actions. This 

analysis will not repeat that discussion. 

The second category would be the cost 

of supporting supervisory activity. 

Supervisory activity may involve 

requests for information or records, onsite or off-site examinations, or some 

combination of these activities. For 

example, in an on-site examination, 

CFPB examiners generally contact the 

entity for an initial conference with 

management. That initial contact is 

often accompanied by a request for 

information or records. Based on the 

discussion with management and an 

initial review of the information 

received, examiners determine the 

scope of the on-site exam. While on-site, 

examiners spend some time in further 

conversation with management about 

the entity’s policies, procedures, and 

processes. The examiners also review 

documents, records, and accounts to 

assess the entity’s compliance and 

evaluate the entity’s compliance 

management system. As with the 

CFPB’s other examinations, 

examinations of nonbank larger 

participants in the market for generaluse digital consumer payment 

applications could involve issuing 

confidential examination reports and 

compliance ratings. The CFPB’s 

examination manual describes the 

supervision process and indicates what 

materials and information an entity 

could expect examiners to request and 

review, both before they arrive and 

during their time on-site. 

The primary costs an entity would 

face in connection with an examination 

would be the cost of employees’ time to 

collect and provide the necessary 

information. If the Proposed Rule is 

adopted, the frequency and duration of 

examinations of any particular entity 

would depend on a number of factors, 

including the size of the entity, the 

compliance or other risks identified, 

whether the entity has been examined 

previously, and the demands on the 

CFPB’s supervisory resources imposed 

by other entities and markets. 

Nevertheless, some rough estimates may 

provide a sense of the magnitude of 

potential staff costs that entities might 

incur. 

The cost of supporting supervisory 

activity may be calibrated using prior 

CFPB experience in supervision. 

Examinations of larger participants in 

the market for general-use digital 

consumer payment applications are 

anticipated to be approximately 8 weeks 

on average, with an additional two 

weeks of preparation.104 This estimate 

assumes that each exam requires two 

weeks of preparation time by staff of 

providers of general-use digital 

consumer payment applications prior to 

the exam as well as on-site assistance by 

staff throughout the duration of the 

exam. The CFPB has not suggested that 

counsel or any particular staffing level 

is required during an examination. 

However, for the purposes of this 

analysis, the CFPB assumes, 

conservatively, that an entity might 

dedicate the equivalent of one full-time 

compliance officer and one-tenth of the 

time of a full-time attorney to assist with 

an exam. The national average hourly 

wage of a compliance officer is $37; the 

national average hourly wage for an 

attorney is $71.105 Assuming that wages 

and salaries account for 70.6 percent of 

total compensation for private industry 

workers, the total employer cost of labor 

to comply with an exam amounts to 

approximately $25,001.106

The overall costs of supervision in the 

market for general-use digital consumer 

payment applications would depend on 

the frequency and extent of CFPB 

examinations. Neither the CFPA nor the 

Proposed Rule specifies a particular 

level or frequency of examinations.107

The frequency of examinations would 

depend on a number of factors, 

including the CFPB’s understanding of 

the conduct of market participants and 

the specific risks they pose to 

consumers; the responses of larger 

participants to prior examinations; and 

the demands that other markets’ make 

on the CFPB’s supervisory resources. 

These factors can be expected to change 

over time, and the CFPB’s 

understanding of these factors may 

change as it gathers more information 

about the market through its supervision 

and by other means. The CFPB therefore 

declines to predict, at this point, 

precisely how many examinations in the 

market for general-use digital consumer 

payment applications it would 

undertake in a given year. 


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108The States have been active in regulation of 

money transmission by money services businesses, 

with 49 States and the District of Columbia 

requiring entities to obtain a license to engage in 

money transmission, as defined by applicable law. 

Further, many States also actively examine money 

transmitters, including the number of products and 

services they provide through general-use digital 

consumer payment applications. See, e.g., CSBS, 

Reengineering Nonbank Supervision, Ch. 4: 

Overview of Money Services Businesses (Oct. 2019) 

at 4 (discussing how providers of digital wallets 

hold and transmit monetary value), available at 

https://www.csbs.org/sites/default/files/other-files/

Chapter%204%20-%20MSB%20Final%20FINAL_

updated_0.pdf (last visited Oct. 27, 2023). 

3. Costs of Assessing Larger-Participant 

Status 

A larger-participant rule does not 

require nonbanks to assess whether they 

are larger participants. However, the 

CFPB acknowledges that in some cases 

providers of general-use digital 

consumer payment applications might 

decide to incur costs to assess whether 

they qualify as larger participants or 

potentially dispute their status. 

Larger-participant status would 

depend on both a nonbank’s aggregate 

annual transaction volume and whether 

the entity is a small business concern 

based on the applicable SBA size 

standard. The CFPB expects that many 

market participants already assemble 

general data related to the number of 

transactions that they provide for 

general-use digital consumer payment 

applications. Moreover, many providers 

are required to report transaction data to 

State regulators.108

To the extent that some providers of 

general-use digital consumer payment 

applications do not already know 

whether their transactions exceed the 

threshold, such nonbanks might, in 

response to the Proposed Rule, develop 

new systems to count their transactions 

in accordance with the proposed 

market-related definitions of ‘‘consumer 

payment transactions,’’ ‘‘covered 

payment functionality,’’ ‘‘general use,’’ 

and ‘‘digital application’’ discussed 

above. The data that the CFPB currently 

has do not support a detailed estimate 

of how many providers of general-use 

digital consumer payment applications 

would engage in such development or 

how much they would spend. 

Regardless, providers of general-use 

digital consumer payment applications 

would be unlikely to spend significantly 

more on specialized systems to count 

transactions than it would cost to be 

supervised by the CFPB as larger 

participants. 

The CFPB notes that larger-participant 

status also depends on whether an 

entity is subject to the proposed small 

business exclusion. In certain 

circumstances, larger-participant status 

may depend on determinations of which 

SBA size standard applies, and by 

extension, which NAICS code is most 

applicable. Therefore, providers of 

general-use digital consumer payment 

applications may incur some 

administrative costs to evaluate whether 

the small business exclusion applies. 

However, providers would not need to 

engage in this evaluation if they could 

establish that their annual covered 

consumer payment transaction volume 

was below five million. In any event, 

the data that the CFPB currently has do 

not support a detailed estimate of how 

many providers of general-use digital 

consumer payment applications would 

engage in such efforts or how much they 

would spend. 

It bears emphasizing that even if a 

nonbank market participant’s 

expenditures on an accounting system 

enabled it to successfully prove that it 

was not a larger participant (which, 

again, it would not need to do if it was 

a small business concern according to 

SBA standards), it would not 

necessarily follow that this entity could 

not be supervised under other 

supervisory authorities the CFPB has 

that this rulemaking does not establish. 

For example, the CFPB can supervise a 

nonbank entity whose conduct the 

CFPB determines, pursuant to CFPA 

section 1024(a)(1)(C) and regulations 

implementing that provision, poses 

risks to consumers. Thus, a nonbank 

entity choosing to spend significant 

amounts on an accounting system 

directed toward the larger-participant 

transaction volume test could not be 

sure it would not be subject to CFPB 

supervision notwithstanding those 

expenses. The CFPB therefore believes 

very few if any nonbank entities would 

be likely to undertake such 

expenditures. 

4. Considerations of Alternatives 

The CFPB is considering one major 

alternative: choosing a different 

transaction volume threshold to define 

larger participants. One alternative 

would be to set the threshold 

substantially higher—for example at 10 

million aggregate annual consumer-toconsumer or consumer-to-business 

transactions. Under such an alternative, 

the benefits of supervision to both 

consumers and covered persons would 

likely be reduced because entities 

impacting a substantial number of 

consumers and/or consumers in 

important market segments might be 

omitted. On the other hand, the 

potential costs to covered persons 

would of course be reduced if fewer 

entities were defined as larger 

participants and thus fewer were subject 

to the CFPB’s supervisory authority on 

that basis. Conversely, lowering the 

threshold would subject more entities to 

the CFPB’s supervisory authority, but 

the total direct costs for actual 

examination activity might not change 

substantially because the CFPB 

conducts exams on a risk basis and 

would not necessarily examine more 

entities even if the rule’s coverage were 

broader. 

C. Potential Specific Impacts of the 

Proposed Rule 

1. Depository Institutions and Credit 

Unions With $10 Billion or Less in Total 

Assets, as Described in Dodd-Frank Act 

Section 1026 

The Proposed Rule would not apply 

to depository institutions or credit 

unions of any size. However, as 

discussed in the section-by-section 

analysis of ‘‘digital application’’ above, 

it may apply to nonbank covered 

persons that provide covered payment 

functionalities through a digital 

application of a bank or credit union. In 

addition, it might have some 

competition-related impact on 

depository institutions or credit unions 

that provide general-use digital 

consumer payment applications. For 

example, if the relative price of 

nonbanks’ general-use digital consumer 

payment applications were to increase 

due to increased costs related to 

supervision, then depository 

institutions or credit unions of any size 

might benefit by the relative change in 

costs. These effects, if any, would likely 

be small. 

2. Impact of the Provisions on 

Consumers in Rural Areas 

Because the Proposed Rule would 

apply uniformly to consumer payment 

transactions that both rural and nonrural consumers make through generaluse digital consumer payment 

applications, the rule should not have a 

unique impact on rural consumers. The 

CFPB is not aware of any evidence 

suggesting that rural consumers have 

been disproportionately harmed by the 

failure of providers of general-use 

digital consumer payment applications 

to comply with Federal consumer 

financial law. The CFPB seeks 

information from commenters related to 

how digital consumer payments affect 

rural consumers. 

VI. Regulatory Flexibility Act Analysis 

The Regulatory Flexibility Act (RFA), 

as amended by the Small Business 

Regulatory Enforcement Fairness Act of 

1996, requires each agency to consider 

the potential impact of its regulations on 


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109 5 U.S.C. 601 et seq. The term ‘‘ ‘small 

organization’ means any not-for-profit enterprise 

which is independently owned and operated and is 

not dominant in its field, unless an agency 

establishes [an alternative definition after notice 

and comment].’’ 5 U.S.C. 601(4). The term ‘‘ ‘small 

governmental jurisdiction’ means governments of 

cities, counties, towns, townships, villages, school 

districts, or special districts, with a population of 

less than fifty thousand, unless an agency 

establishes [an alternative definition after notice 

and comment].’’ 5 U.S.C. 601(5). The CFPB is not 

aware of any small governmental units or small notfor-profit organizations to which the Proposed Rule 

would apply. 

110 5 U.S.C. 601(3). The CFPB may establish an 

alternative definition after consultation with SBA 

and an opportunity for public comment. As 

mentioned above, the SBA defines size standards 

using NAICS codes that align with an entity’s 

primary line of business. The CFPB believes that 

many—but not all—entities in the proposed market 

for general-use digital consumer payment 

applications are primarily engaged in financial 

services industries. See, e.g., SBA, Table of Small 

Business Size Standards Matched to North 

American Industry Classification System Codes, 

effective March 17, 2023, Sector 52 (Finance and 

Insurance), available at https://www.sba.gov/ 

document/support--table-size-standards (last 

visited Oct. 26, 2023). 

111 5 U.S.C. 605(b). 

112 5 U.S.C. 609. 

113 12 U.S.C. 5514(e); 12 U.S.C. 5514(a)(1). 

114The CFPB is aware that there are likely 

hundreds of service providers to potential larger 

participants of the proposed market, particularly in 

light of the market complexity. 

small entities, including small 

businesses, small governmental units, 

and small not-for-profit 

organizations.109 The RFA defines a 

‘‘small business’’ as a business that 

meets the size standard developed by 

the SBA pursuant to the Small Business 

Act.110

The RFA generally requires an agency 

to conduct an initial regulatory 

flexibility analysis (IRFA) of any 

proposed rule subject to notice-andcomment rulemaking requirements, 

unless the agency certifies that the 

proposed rule would not have a 

significant economic impact on a 

substantial number of small entities.111

The CFPB also is subject to certain 

additional procedures under the RFA 

involving the convening of a panel to 

consult with small entity 

representatives prior to proposing a rule 

for which an IRFA is required.112

The Director of the CFPB certifies that 

the Proposed Rule, if adopted, would 

not have a significant economic impact 

on a substantial number of small entities 

and that an IRFA therefore is not 

required. 

The Proposed Rule would define a 

class of providers of general-use digital 

consumer payment applications as 

larger participants of a market for 

general-use digital consumer payment 

applications and thereby authorize the 

CFPB to undertake supervisory 

activities with respect to those nonbank 

covered persons. The Proposed Rule 

would use a two-pronged test for 

determining larger-participant status. 

First, the proposed threshold for largerparticipant status would be five million 

in annual covered consumer payment 

transaction volume. Second, the 

proposed larger-participant test would 

incorporate a small entity exclusion. As 

a result, larger-participant status would 

only apply to a nonbank covered person 

that, together with its affiliated 

companies, both meets the proposed 

five-million transaction threshold and is 

not a small business concern based on 

the applicable SBA size standard. 

Because of that exclusion, the number of 

small entities participating in the 

market that would experience a 

significant economic impact due to the 

Proposed Rule is, by definition, zero. 

Finally, CFPA section 1024(e) 

authorizes the CFPB to supervise service 

providers to nonbank covered persons 

encompassed by CFPA section 

1024(a)(1), which includes larger 

participants.113 Because the Proposed 

Rule would not address service 

providers, effects on service providers 

need not be discussed for purposes of 

this RFA analysis. Even were such 

effects relevant, the CFPB believes that 

it would be very unlikely that any 

supervisory activities with respect to the 

service providers to the approximately 

17 larger participants of the proposed 

nonbank market for general-use digital 

consumer payment applications would 

result in a significant economic impact 

on a substantial number of small 

entities.114

VII. Paperwork Reduction Act 

The CFPB has determined that the 

Proposed Rule would not impose any 

new recordkeeping, reporting, or 

disclosure requirements on covered 

entities or members of the public that 

would constitute collections of 

information requirement approval under 

the Paperwork Reduction Act, 44 U.S.C. 

3501, et seq. 

VIII. Signing Authority 

The Director of the CFPB, having 

reviewed and approved this document, 

is delegating the authority to 

electronically sign this document to 

Emily Ross, Executive Secretary, for 

purposes of publication in the Federal 

Register. 

List of Subjects 

Consumer protection, Electronic 

funds transfers, Electronic products. 

Authority and Issuance 

For the reasons set forth above, the 

CFPB proposes to amend 12 CFR part 

1090 as follows: 

PART 1090—DEFINING LARGER 

PARTICIPANTS OF CERTAIN 

CONSUMER FINANCIAL PRODUCT 

AND SERVICE MARKETS 

■ 1. The authority citation for part 1090 

continues to read as follows: 

Authority: 12 U.S.C. 5514(a)(1)(B); 12 

U.S.C. 5514(a)(2); 12 U.S.C. 5514(b)(7)(A); 

and 12 U.S.C. 5512(b)(1). 

■ 2. Add § 1090.109 to read as follows: 

§ 1090.109 General-use digital consumer 

payment applications market. 

(a)(1) Market definition. Providing a 

general-use digital consumer payment 

application means providing a covered 

payment functionality through a digital 

application for consumers’ general use 

in making consumer payment 

transaction(s) as defined in this subpart. 

(2) Market-related definitions. As 

used in this section: 

Consumer payment transaction(s) 

means, except for transactions excluded 

under paragraphs (A) through (D) of this 

definition, the transfer of funds by or on 

behalf of a consumer physically located 

in a State to another person primarily 

for personal, family, or household 

purposes. The term applies to transfers 

of consumer funds and transfers made 

by extending consumer credit, except 

for the following transactions: 

(A) An international money transfer 

as defined in § 1090.107(a); 

(B) A transfer of funds by a consumer: 

(1) That is linked to the consumer’s 

receipt of a different form of funds, such 

as a transaction for foreign exchange as 

defined in 12 U.S.C. 5481(16); or 

(2) That is excluded from the 

definition of ‘‘electronic fund transfer’’ 

under § 1005.3(c)(4) of this chapter; 

(C) A payment transaction conducted 

by a person for the sale or lease of goods 

or services that a consumer selected 

from an online or physical store or 

marketplace operated prominently in 

the name of such person or its affiliated 

company; and 

(D) An extension of consumer credit 

that is made using a digital application 

provided by the person who is 

extending the credit or that person’s 

affiliated company. 

Covered payment functionality means 

a funds transfer functionality as defined 

in paragraph (A) of this definition, a 

wallet functionality as defined in 

paragraph (B) of this definition, or both. 

(A) Funds transfer functionality 

means, in connection with a consumer 

payment transaction: 


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80216 Federal Register / Vol. 88, No. 221 / Friday, November 17, 2023 / Proposed Rules 

(1) Receiving funds for the purpose of 

transmitting them; or 

(2) Accepting and transmitting 

payment instructions. 

(B) Wallet functionality means a 

product or service that: 

(1) Stores account or payment 

credentials, including in encrypted or 

tokenized form; and 

(2) Transmits, routes, or otherwise 

processes such stored account or 

payment credentials to facilitate a 

consumer payment transaction. 

Digital application, for purposes of 

this subpart, means a software program 

a consumer may access through a 

personal computing device, including 

but not limited to a mobile phone, smart 

watch, tablet, laptop computer, desktop 

computer. Examples of digital 

applications covered by this definition 

include an application a consumer 

downloads to a personal computing 

device, a website a consumer accesses 

by using an internet browser on a 

personal computing device, or a 

program the consumer activates from a 

personal computing device using a 

consumer’s biometric identifier, such as 

a fingerprint, palmprint, face, eyes, or 

voice. 

General use, for purposes of this 

subpart, refers to the absence of 

significant limitations on the purpose of 

consumer payment transactions 

facilitated by the covered payment 

functionality provided through the 

digital consumer payment application. 

Restricting use of the covered payment 

functionality to person-to-person 

transfers is not an example of a 

significant limitation; such a covered 

payment functionality would have 

general use for purposes of this subpart. 

A payment functionality provided 

through a digital consumer payment 

application solely for the following 

consumer payment transactions would 

not have general use for purposes of this 

subpart: 

(A) For purchase or lease of a specific 

type of services, goods, or other 

property, such as one of the following: 

(1) Transportation; 

(2) Lodging; 

(3) Food; 

(4) An automobile as defined in 

§ 1090.108 of this subpart; 

(5) A dwelling or real property; 

(6) A consumer financial product or 

service as defined in 12 U.S.C. 5481(5); 

(B) Using accounts described in 

§ 1005.2(b)(3)(ii)(A), (C), or (D) of this 

chapter; 

(C) To pay a specific debt or type of 

debt including repayment of an 

extension of consumer credit; or 

(D) To split a charge for a specific 

type of goods or services (e.g., restaurant 

or other similar bill splitting). 

State means any State, territory, or 

possession of the United States; the 

District of Columbia; the 

Commonwealth of Puerto Rico; or any 

political subdivision thereof. 

(b) Test to define larger participants. 

A nonbank covered person is a larger 

participant of the general-use digital 

consumer payment application market if 

the nonbank covered person meets both 

of the following criteria: 

(1) It provides annual covered 

consumer payment transaction volume 

as defined in paragraph (b)(3) of this 

section of at least five million 

transactions; and 

(2) During the preceding calendar year 

it was not a ‘‘small business concern’’ as 

that term is defined by section 3(a) of 

the Small Business Act, 15 U.S.C. 632(a) 

and implemented by the Small Business 

Administration under 13 CFR part 121, 

or any successor provisions. 

(3) Annual covered consumer 

payment transaction volume means the 

sum of the number of consumer 

payment transactions that the nonbank 

covered person and its affiliated 

companies facilitated in the preceding 

calendar year by providing general-use 

digital consumer payment applications. 

(i) Aggregating the annual covered 

consumer payment transaction volume 

of affiliated companies. The annual 

covered consumer payment transaction 

volume of each affiliated company of a 

nonbank covered person is first 

calculated separately, treating the 

affiliated company as if it were an 

independent nonbank covered person 

for purposes of the calculation. The 

annual covered consumer payment 

transaction volume of a nonbank 

covered person then must be aggregated 

with the separately-calculated annual 

covered consumer payment transaction 

volume of any person that was an 

affiliated company of the nonbank 

covered person at any time in the 

preceding calendar year. However, if 

more than one affiliated company 

facilitates a single consumer payment 

transaction, that consumer payment 

transaction shall only be counted one 

time in the annual covered consumer 

payment volume calculation. The 

annual covered consumer payment 

transaction volumes of the nonbank 

covered person and its affiliated 

companies are aggregated for the entire 

preceding calendar year, even if the 

affiliation did not exist for the entire 

calendar year. 

Emily Ross, 

Executive Secretary, Consumer Financial 

Protection Bureau. 

[FR Doc. 2023–24978 Filed 11–16–23; 8:45 am] 

BILLING CODE 4810–AM–P 

DEPARTMENT OF TRANSPORTATION 

Federal Aviation Administration 

14 CFR Part 39 

[Docket No. FAA–2023–2151; Project 

Identifier AD–2023–00984–T] 

RIN 2120–AA64 

Airworthiness Directives; The Boeing 

Company Airplanes 

AGENCY: Federal Aviation 

Administration (FAA), DOT. 

ACTION: Notice of proposed rulemaking 

(NPRM). 

SUMMARY: The FAA proposes to adopt a 

new airworthiness directive (AD) for all 

The Boeing Company Model 777 

airplanes. This proposed AD was 

prompted by a report of a 5-inch crack 

on the right wing upper wing skin at a 

certain wing station. This proposed AD 

would require repetitive inspections for 

cracking of the upper wing skin 

common to certain fasteners and 

applicable on-condition actions. The 

FAA is proposing this AD to address the 

unsafe condition on these products. 

DATES: The FAA must receive comments 

on this proposed AD by January 2, 2024. 

ADDRESSES: You may send comments, 

using the procedures found in 14 CFR 

11.43 and 11.45, by any of the following 

methods: 

• Federal eRulemaking Portal: Go to 

regulations.gov. Follow the instructions 

for submitting comments. 

• Fax: 202–493–2251. 

• Mail: U.S. Department of 

Transportation, Docket Operations, M– 

30, West Building Ground Floor, Room 

W12–140, 1200 New Jersey Avenue SE, 

Washington, DC 20590. 

• Hand Delivery: Deliver to Mail 

address above between 9 a.m. and 5 

p.m., Monday through Friday, except 

Federal holidays. 

AD Docket: You may examine the AD 

docket at regulations.gov under Docket 

No. FAA–2023–2151; or in person at 

Docket Operations between 9 a.m. and 

5 p.m., Monday through Friday, except 

Federal holidays. The AD docket 

contains this NPRM, any comments 

received, and other information. The 

street address for Docket Operations is 

listed above. 

Material Incorporated by Reference: 

• For service information identified 

in this NPRM, contact Boeing 

Commercial Airplanes, Attention: 

Contractual & Data Services (C&DS), 

2600 Westminster Blvd., MC 110–SK57, 

Seal Beach, CA 90740–5600; telephone 

562–797–1717; website 

myboeingfleet.com. 


khammond on DSKJM1Z7X2PROD with PROPOSALS