January 14, 2025 The Consumer Financial Protection Bureau (CFPB) has proposed an interpretive rule on how the Electronic Fund Transfer Act (EFTA) and its implementing regulation, Regulation E, would apply to new and emerging digital payments. The proposal homes in on crypto wallets and gaming platforms. EFTA and Regulation E contain consumer protections, such as the right to dispute erroneous and liability caps for fraudulent transactions. They have long applied to debit card transactions and ACH transfers for personal, family, or household purposes. More recently in 2016, the CFPB expanded Regulation E to cover “prepaid accounts,” creating a highly specialized regulatory framework governing disclosures, consumer liability, error resolution, periodic statements, and the posting of account agreements. The CFPB’s proposed interpretive rule asks for public comment on its approach to addressing “emerging payment mechanisms” such as stablecoins, crypto, and in-game currencies. The CFPB would broadly interpret “funds,” as that term is used in Regulation E, to cover any “fungible assets that either operate as a medium of exchange or as a means of paying for goods or services.” It would bring into Regulation E’s scope the following offerings: “video game accounts used to purchase virtual items from multiple game developers or players” and “virtual currency wallets that can be used to buy goods and services or make person-to-person transfers.” The CFPB proposes to regulate these emerging payment mechanisms under the existing framework that applies to debit card transactions and ACH transfers. The CFPB is accepting comments on the proposed interpretive rule until March 31, 2025. We encourage businesses interested in and potentially affected by the CFPB’s proposed interpretive rule to submit comments. Wilson Sonsini Goodrich & Rosati routinely advises companies on submitting public comments on proposed rules in the areas of payments and fintech. For more information about this alert, please contact Jess Cheng or any member of the firm’s fintech and financial services practice. |
