Consumer Finance Watchdog Orders Supervision of Google Payment Corp.

(Reuters) – The US watchdog for consumer finance announced on Friday that it is ordering federal supervision of Google Payment Corp., the internet giant's payment arm. Google immediately stated it will challenge this decision in court.

The Consumer Financial Protection Bureau (CFPB) explained that services offered by Google Payment posed a risk to consumers. This step, along with the lawsuit, marks a significant government tussle with a Silicon Valley giant in the waning weeks of President Joe Biden's administration. This decision could be reversed if President-elect Donald Trump returns to the White House in January.

Under Biden, the CFPB has scrutinized the growing sector of financial services from Silicon Valley more than traditional banks. The agency cited nearly 300 consumer complaints, many about fraud, scams, and unauthorized transactions, suggesting wrongdoing on Google Payment’s part.

Despite the order, the CFPB noted that consumer complaints indicated Google Payment failed to properly investigate claims of erroneous transfers and other potential violations. The law permits supervision even if the company has ceased the implicated services.

In response to the CFPB announcement, Google Payment Corp. filed a lawsuit claiming the regulator based its decision on a small number of unsubstantiated complaints regarding a product they no longer offer. The company's complaint argued, "As a matter of common sense, a product that no longer exists is incapable of posing such risk."

The CFPB declined to comment on the lawsuit. Financial regulators conduct confidential supervisory exams to identify and address company violations of the law.

Last month, the CFPB finalized new regulations imposing the same supervision on tech companies as banks if they provide digital wallets and payment services. The agency continues to push forward with rulemaking in the final weeks of Biden’s presidency, despite requests from Republican lawmakers to halt these efforts.