Government Scrambles to Understand How Venmo Actually Works
Published Date: 1/15/2025
Proposed Rule
Summary
The Consumer Financial Protection Bureau is proposing new rules to help companies and investors understand how electronic fund transfers work with new payment tools for personal and household accounts. This means clearer guidelines for sending money and making purchases using emerging payment methods. If you’re involved in these payments, get ready to share your thoughts by March 31, 2025, and stay tuned for how this might affect your money moves.
Analyzed Economic Effects
6 provisions identified: 4 benefits, 1 costs, 1 mixed.
Stablecoins Count as “Funds”
The CFPB says the term “funds” under the Electronic Fund Transfer Act (EFTA) can include assets that act like money, including stablecoins and other fungible digital assets used as a medium of exchange or to pay for goods and services. If you hold or use such assets in an account for personal, family, or household purposes, those assets may be treated as "funds" for EFTA and Regulation E purposes.
Providers Must Meet EFTA Consumer Duties
The CFPB notes that financial institutions subject to EFTA and Regulation E must follow duties like investigating errors, limiting consumer liability for unauthorized transfers, and providing initial and periodic disclosures and change-in-terms notices. Providers of emerging-payment accounts used for personal, family, or household purposes should expect these consumer protections to apply when their products meet the definitions.
Game, Wallet, Rewards Accounts May Be “Accounts”
The CFPB explains that “other consumer asset accounts” can include video game accounts, virtual currency wallets, and credit card rewards points accounts when they function like checking or savings accounts (for example, can buy goods from multiple merchants, withdraw funds, or do person-to-person transfers). If your personal account has those features, it could be covered by EFTA and Regulation E.
Nonbank Providers Can Be “Financial Institutions”
The CFPB reiterates that a “financial institution” under EFTA includes nonbank entities that directly or indirectly hold consumer accounts or issue access devices. If your business holds consumer balances or issues access devices for personal accounts, you may be treated as a financial institution under EFTA and Regulation E.
Safe Harbor for Good‑Faith Compliance
The CFPB notes that by operation of EFTA section 916(d), no liability under EFTA sections 916 or 917 would apply to any act done in good faith in conformity with a final interpretive rule. That means firms that follow the final rule in good faith would be protected from certain later liability under those EFTA provisions.
Securities Exception Narrowly Defined
EFTA and Regulation E contain securities and commodities exceptions for transfers whose primary purpose is buying or selling securities or commodities regulated by the SEC or CFTC. But the CFPB says those exceptions do not automatically exclude situations where securities or commodity positions are used as “funds” in an account to buy goods or services—such transfers can fall within EFTA.
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