While PIRG is urging you to buy less, but give more this holiday season, the Big Tech platforms want you to buy more stuff. They’d also prefer you buy through “engagement” on their payments platforms, not with your bank’s credit or debit card. They’re leveraging their trove of your data – collected through their 24-7-365 surveillance business model – to “nudge” you into more buying.
Yes, they’ll be serving more targeted ads aimed only at you. But it’s a much more sophisticated system – based on cross-device tracking, machine learning, artificial intelligence and more – that’s designed to move you instantly through a turbocharged path-to-purchasing “funnel.” In real time, they know where you go, who you communicate with, how you earn your money and how you spend it. They know how to influence you to behave in a certain way, including methods to “reward” or “nudge” you into buying more stuff. You won’t even know it. That’s the way they like it. Buying was never so easy. Oh, another goal is to corner and take over the payments market.
Fortunately, in October, the CFPB formally asked Amazon, Apple, Facebook, Google, Square (owner of Cash App) and Paypal (owner of Venmo) to explain their aggressive move into payments. Even better, it also asked the public for our views.
It’s an important inquiry into Big Tech’s actions. As PIRG, in our joint comment with the Center for Digital Democracy, told the CFPB, “the Big Tech firms have a corporate surveillance business model that has widely different goals than those of publicly chartered and regulated financial institutions; their model is antithetical to fair consumer treatment generally, but which is especially true when financial matters are at stake.”
Yes, I know you’re saying, “My bank already knows a lot about me,” but Big Tech knows more, can leverage the data more quickly and increase shopping “basket size” better. The banks are trying to play catch-up with the platforms in the digital marketplace, but as we explain further in our comment: “Critically, through data analytics, Big Tech can better “predict” how someone might act and then assemble the correct online content to help fulfill that prophecy. A great deal of this is done in near or at real time.”
Our comprehensive comment also described why the takeover of the payments system poses other real threats:
“There is a very real risk that without Bureau action, the digital payments and platform complex will aggressively push Americans to new levels of debt, as the Big Data and artificial intelligence (AI) apparatus now at the core of the consumer digital economy encourages impulse buying and other potentially consequential practices.”
We are encouraged by the Bureau’s investigation into all the ramifications of Big Tech’s entry into payments. Thoughtful comments were also filed by many of our colleagues and others. Posted comments fall generally into two categories: (1) Big Tech’s entry poses competitive threats. (2) Consumers are already facing big problems:
(1) Big Tech’s entry poses competitive threats:
Chair Lina Khan of the Federal Trade Commission’s comment explained the competitive, consumer and marketplace failure threats:
“First, Big Tech companies’ participation in payments and financial services could enable them to entrench and extend their market positions and privileged access to data and AI techniques in potentially anticompetitive and exploitative ways. Second, Big Tech companies’ use of algorithmic decision-making in financial services amplifies concerns of discrimination, bias, and opacity. And third, Big Tech companies’ increasingly commingled roles as payment and authentication providers could concentrate risk and create single points of failure.”
Predictably, most comments from Big Tech associations and “BigLaw” fintech lawyers ignored the CFPB’s questions and responded that “everything is great” or “the CFPB is over-reaching.” The banks, of course, were not so optimistic. We like several of their ideas, including that the CFPB consider rulemaking on “data aggregators,” but, as below, also urge the CFPB to hold the banks accountable to consumers victimized by P2P payment apps linked to their bank accounts.
(2) Consumers are already facing big problems:
The National Consumer Law Center’s group comment (which we co-signed) and payments scholar and professor Mark Budnitz’s comment, among others, explained the difficulty consumers face with rampant fraud and errors with P2P apps, including Venmo and Zelle.
A comment from a bi-partisan coalition of 33 state attorneys general explains:
“Many of our states have seen a notable rise in the number of consumer complaints related to real-time payment platforms, particularly since the beginning of the pandemic. The complaints we have received raise three common issues: 1) difficulties accessing a customer service representative; 2) inability to access and retrieve funds; and 3) fraudulent money transfers often caused by 3rd party scams.”
We note that the states’ findings are virtually identical to the results of our June report on P2P app consumer complaints to the CFPB.
The banks have so far largely ignored or flat-out denied that they have a duty to investigate or reimburse these consumers. Indeed, several of the over 90 filed comments are from consumer-victims of P2P fraud who took the time to tell CFPB their bank didn’t care. We predict that there will be a reckoning. One consumer’s frustration:
“I was defrauded of $1700 on august 18th by people calling posing as national grid threatening to turn off my power if they did not receive payment for my bill immediately through Zelle. I paid but then I became suspicious after the transaction when they asked for more money so then I called zelle and they cancelled it while it was pending. Bank of America would not refund me because theymoney was sent to different banks and I am still waiting for their decision.”
There are other important comments from colleague organizations, including the Leadership Conference on Civil and Human Rights, the National Community Reinvestment Coalition, EPIC.org, Consumer Action, American Economic Liberties Project and other allies.
Our PIRG/CDD comment also explains other payment system changes, including the CFPB’s implementation of Section 1033 of the Consumer Financial Protection Act intended to give consumers more control over their own data and its related inquiry into the rapidly emerging Big Tech successor to department store “layaway plans” known as “Buy Now, Pay Later.”
Fortunately, at the end of the world’s second pandemic year, which not only continues to threaten our health, but family finances as well, the CFPB is back to its only job, protecting consumers. That’s something to be thankful for in the New Year.
Senior Director, Federal Consumer Program, PIRG
Ed oversees U.S. PIRG’s federal consumer program, helping to lead national efforts to improve consumer credit reporting laws, identity theft protections, product safety regulations and more. Ed is co-founder and continuing leader of the coalition, Americans For Financial Reform, which fought for the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010, including as its centerpiece the Consumer Financial Protection Bureau. He was awarded the Consumer Federation of America's Esther Peterson Consumer Service Award in 2006, Privacy International's Brandeis Award in 2003, and numerous annual "Top Lobbyist" awards from The Hill and other outlets. Ed lives in Virginia, and on weekends he enjoys biking with friends on the many local bicycle trails.