Wal-Mart and Apple may not fit the profile of a financial services firm, but they’re sure starting to act like one.
The world’s biggest retailer offers just about everything you can get at a bank, including prepaid debit cards, check cashing, credit cards and, starting in October, checking accounts. Meanwhile, the world’s most valuable company has rolled out its own mobile payment system, Apple Pay, that lets shoppers make purchases using an app on their smartphones.
Apple and Wal-Mart are going head to head with banks, credit cards and other financial firms, so shouldn’t they be subject to the same government oversight from the Consumer Financial Protection Bureau?
In many ways, they will be. The products Wal-Mart and Apple offer are essentially covered by consumer protection laws that the CFPB enforces, which means the companies could be hit with fines for engaging in unfair, deceptive or abusive business practices.
This point was not lost on Georgetown law professor Adam Levitin, who questioned the regulatory implications of Apple’s introduction of Apple Pay in a blog post earlier this month. He observed that the law governing unfair and deceptive practices is not limited to consumer finance, so “anything Apple does is therefore fair game for state [attorneys general].”
It’s possible that the bureau could examine Apple or Wal-Mart as third-party service providers to companies already under supervision. All of the big banks are subject to CFPB supervision, and Apple’s new mobile payments platform works with many of these banks to load consumer credit or debit cards onto an iPhone. Apple did not immediately responded to requests for comment.
Wal-Mart also partners with financial firms, including American Express for its BlueBird prepaid debit card and Green Dot for GoBank checking accounts, that are supervised by the CFPB. Yet the retailer has been strategic in teaming with companies that do a lot of the heavy financial lifting, making them more likely to shoulder the responsibility for violating consumer protection laws.
As Wal-Mart spokeswoman Molly Blakeman put it: “The compliance obligations associated with the issuance and management of a GoBank account apply to its issuer, Green Dot Bank.”
Still, the arrangement does not preclude Wal-Mart from being the target of a CFPB investigation. If the CFPB wanted to, it could conduct routine examinations of Wal-Mart’s or Apple’s operations. But there is no telling if the bureau is heading down this road, since officials declined to comment on the subject.
“The bureau’s role is to protect consumers and to make sure that companies offering consumer financial products or services play by the same rules. By and large, those rules are technologically neutral and apply regardless of whether consumer financial services are offered online, on a phone, or in-person,” said CFPB spokeswoman Moira Vahey.
During the summer, the CFPB requested public comment on the consumer impact of mobile banking and other new technologies in financial services. CFPB director Richard Cordray raised concerns about parity in consumer protection at a recent meeting of the bureau’s advisory board.
“We need to make sure that the legal and regulatory framework can keep up effectively, so that all consumers can be well served and remain protected, whether they are opening their wallet or scanning the screen on their smartphone,” he said.