Last week, the Consumer Financial Protection Bureau (CFPB) issued a Proposed Interpretive Rule (“Proposed Rule”) on the applicability of the Electronic Fund Transfer Act (EFTA) and its implementing Regulation E to new and emerging digital payment mechanisms, including gaming platforms with highly evolved “economies” and certain virtual currencies (VCs) that offer an alternative electronic funds transfer mechanism.
The Proposed Rule is one of a flurry of pronouncements the CFPB has released as the Biden Administration comes to a close. The Trump Administration is almost certain to change the leadership of the CFPB, and many of the Biden Administration’s regulatory activities will be repealed, revised or simply abandoned. As such, it is unlikely that the Proposed Rule will ever actually go into effect. Comments on the Proposed Rule are due by March 31, 2025.
The Proposed Rule is intended to provide financial services providers with a consistent framework for determining the applicability of EFTA and Regulation E to a range of emerging payment mechanisms, rather than relying on case-by-case adjudications by courts. Adopting a broad definition of the term “funds” based on case law, common law and general use meanings, the CFPB proposes to interpret the term “funds” to include assets that act or are used like money, in the sense that they are accepted as a medium of exchange, a measure of value or a means of payment. Under this interpretation, the term “funds” would include stablecoins, as well as any other similarly situated fungible assets that either operate as a medium of exchange or as a means of paying for goods or services.
The CFPB similarly adopts a broad definition of the term “account” and “Other consumer asset account” based on the legislative history of the EFTA and longstanding Official Staff Interpretations to Regulation E. Under the Proposed Rule, depending on the facts and circumstances, the following could be considered “accounts” under EFTA: video game accounts used to purchase virtual items from multiple game developers or players; virtual currency wallets that can be used to buy goods and services or make person-to-person transfers; and credit card rewards points accounts that allow consumers to buy points that can be used to purchase goods from multiple merchants.
Providers of “accounts” subject to Regulation E under the Proposed Rule would be required to comply with various consumer protections, including error resolution requirements, limits on consumers’ liability for unauthorized EFTs, and requirements to provide initial and ongoing disclosures. Accordingly, businesses subject to the Proposed Rule would need to develop policies and procedures to ensure that these requirements are followed. The CFPB’s proposed ability to regulate some of these additional items, particularly gaming platforms, is questionable, as is the proposition that video game accounts would qualify as accounts under Regulation E. As noted above, in any case, this rule making is unlikely to move forward in the Trump Administration.
Last week, the CFPB also issued a Request for Information seeking public input on strengthening privacy protections and preventing “harmful” surveillance in digital payments, particularly those offered through large technology platforms. The CFPB notes that the existing federal framework for financial data privacy protections consists largely of the Gramm-Leach-Bliley Act (GLBA) and its implementing regulation, Regulation P, along with the Fair Credit Reporting Act (FCRA), which may not fully address the challenges posed by modern data surveillance. Comments on the Request for Information must be received on or before April 11, 2025.
The CFPB also published a blog with the release asking video gamers and parents to comment on the Proposed Rule and share their experiences with gaming assets and transactions.
Please contact the authors Jessica Sklute and Eric M. Knight, in addition to our other gaming and crypto professionals Jordan Bromley, Brandon Reilly, Mike Katz and Scott M. Pearson for additional questions.