The CFPB is putting Google’s payments division under federal oversight

Ting Shen/Bloomberg

WASHINGTON. The Consumer Protection Bureau has determined that Google’s payments division is under formal federal oversight.

While the measure could eventually lead to greater bank oversight of Google’s payments division, the bureau cautioned that the order does not require the CFPB to conduct supervisory reviews. The CFPB also emphasized that the order is not a finding of wrongdoing.

“This is a clear case of government abuse of peer-to-peer Google Pay, which never posed a risk and is no longer available in the US, and we are challenging it in court,” Jose Castañeda, a Google spokesman, said in a statement.

The CFPB took action, it said in its order, based on complaints it received about Google Pay, which allowed US users to send cash to each other until June of this year, when Google shut down the product.

“Once an entity has been designated for supervision, the decision whether to conduct an inspection is governed by certain factors set forth in the statute, including, for example, the volume of relevant operations and the nature of the risks associated with those operations,” – it is stated in the supervisory order of the bureau.

According to the CFPB’s order, Google strongly contested the designation. The protests were partly focused on the tech giant’s discontinuation of the products, although the tech giant continues to have a presence in financial services through its Google Wallet product.

“The decision to terminate the Google Pay app may be relevant to the statutory framework governing the Bureau’s exercise of supervisory authority, but it is not determinative of the threshold inquiry into the appropriateness of appointing a supervisory authority,” the CFPB said.

The CFPB’s latest move is one of a series of last-minute actions before the Trump administration takes over next year. CFPB Director Rohit Chopra has long promised increased oversight of big tech companies, and just last month finalized the rule control closer the largest non-bank companies that offer digital money transfers and payment wallets.

The CFPB concluded that there was “substantial basis to determine” that Google was endangering consumers. The CFPB does not have to prove that Google actually engaged in such conduct, only that there is “reasonable cause,” the bureau said.

Specifically, the CFPB found that it had sufficient grounds to believe that Google’s payments department failed to adequately investigate alleged erroneous transfers made through the person-to-person payment platform and that it failed to explain to consumers the results of its investigations when it discovered that the erroneous transmission did not occur.

“Many consumers filed complaints with the Bureau after they notified Google that a transfer was unauthorized or otherwise erroneous, and Google refused to issue a refund or take other steps to correct the error,” the CFPB said.

The complaints also allege that Google failed to provide consumers with additional documentation after identifying potentially erroneous transfers and to protect consumers from liability for those transfers.

The CFPB also said there were reasonable grounds to determine that Google did not take reasonable steps to prevent fraud on its personal communications platform, which is “susceptible to fraud because transactions conducted through these platforms are typically instantaneous and their hard to undo. , and for free.”

“P2P payment platforms may have other features that put consumers at risk of fraud, including, for example, making it easier for fraudsters to hide their identity,” the CFPB said. “The consumer complaints discussed above suggest that Google did not take adequate steps to monitor, prevent and detect fraud or to warn consumers about the risk of fraud and the steps they can take to prevent fraud. Indeed, one-third of all consumers who have filed a complaint with Google allege that they have been the victim of a fraud, scam, or unauthorized transaction on Google’s P2P payment platform.”

The CFPB said Google’s argument that the watchdog’s appointment is unreasonable given its decision to end Google Pay and the P2P platform is “unpersuasive” because the law allows past conduct to be the basis for the appointment.

“If Google is correct that ending the use of Google Pay removed some of the risks to consumers and reduced the need for oversight, then the Bureau may decide not to use its authority to review Google or to use that authority in a manner that is proportionate to the scale of Google’s current operations and the risks for consumers related to these transactions.

According to the CFPB, Google may decide to re-enter the P2P payments market or engage in other conduct that poses similar risks to consumers.