Ting Shen/Bloomberg
WASHINGTON — The Consumer Financial Protection Bureau has designated that Google’s payments arm is under its formal federal supervision.
While the measure could eventually lead to more bank-like oversight of Google’s payments division, the bureau cautioned that the order doesn’t require the CFPB to conduct supervisory examinations. The CFPB also highlighted that the order does not constitute a finding of wrongdoing.
The CFPB took the action, it says in its order, based on complaints it received about Google Pay, which allowed U.S. users to send each other cash, until this June when Google shuttered the product.
“Once an entity has been designated for supervision, the decision of whether to conduct an examination is guided by separate factors set forth in the statute including, for example, the volume of relevant transactions and the nature of the risks posed by those transactions,” the bureau said in the supervisory order.
Google hotly contested the designation, according to the CFPB’s order. The protests centered partly around the fact that the tech giant has discontinued the products, although the tech giant does maintain a presence in financial services via its Google Wallet product.
“The decision to discontinue the Google Pay App may be relevant to the statutory framework that guides the Bureau’s exercise of supervisory authority, but it is not determinative of the threshold inquiry of whether a supervisory designation is appropriate,” the CFPB said.
The CFPB’s latest move is one in a series of last-minute actions before the Trump administration takes charge next year. CFPB Director Rohit Chopra has
The CFPB found that there is “reasonable cause to determine” that Google engaged in conduct that poses risks to consumers. The CFPB does not have to prove that Google did engage in that behavior, only that there is “reasonable cause,” the bureau said.
Specifically, the CFPB found that it has reasonable cause to believe that the payments arm of Google didn’t adequately investigate allegedly erroneous transfers made via its person-to-person payment platform, and that it failed to explain to consumers the results of investigations when it found that no erroneous transfer had occurred.
“Many consumers submitted complaints to 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 remediate the error,” the CFPB said.
The complaints also indicated that Google didn’t provide consumers further documentation after making a determination about allegedly erroneous transfers, and didn’t protect consumers from liability for those transfers.
The CFPB also said that there’s reasonable cause to determine that Google didn’t take reasonable steps to prevent fraud on its person-to-person platform, which are “susceptible to fraud because the transactions conducted through these platforms are typically instantaneous, not easily reversible, and free.”
“P2P payment platforms may have other features that put consumers at risk of fraud, including, for example, making it easy for scammers to hide their identity,” the CFPB said. “The consumer complaints discussed above suggest that Google has not taken adequate steps to monitor, prevent, and detect fraud or to alert consumers to the risk of fraud and steps that can be taken to prevent fraud. Indeed, one-third of all consumers who submitted a complaint about Google alleged that they were a victim of a fraud, scam, or unauthorized transaction perpetrated on Google’s P2P payment platform.”
The CFPB said that Google’s argument that a supervisory designation is unwarranted given its decision to discontinue the Google Pay app and the P2P platform is “unpersuasive” because the law allows past conduct to be the basis for a designation.
“If Google is correct that the discontinuation of the Google Pay App has eliminated some risks to consumers and lessens the need for supervision, then the Bureau may elect not to exercise its authority to examine Google or to exercise that authority in a manner proportional to the magnitude of Google’s ongoing operations and the risks to consumers posed by those operations.
Google may decide to reenter the P2P payment market, or engage in other conduct that poses similar risks to consumers, the CFPB said.