For Regulators, Apple Pay May Be Too Big To Bite

Apple Pay, the latest innovation from the iconic tech giant, hasn’t just caught the eye of consumers. It’s also garnered attention from the Consumer Financial Protection Bureau, a three-year-old agency already carrying a heavy workload.

But the popularity of Apple’s new mobile payment system, which launches next month, is likely to put even more pressure on the CFPB, raising questions about whether it has the manpower to keep pace with another high-profile issue.

The CFPB began its foray into mobile payments in June, when it issued a formal request for information such as whether data breaches are more common on cell phones than they are on computers, suggesting privacy protections are a concern.

The Federal Trade Commission, which shares jurisdiction in the electronic payments ecosystem, submitted information to the CFPB over the summer explaining how consumers who make purchases via apps that then charge an associated credit or debit card are protected by the same federal liability laws that cover the physical use of a credit or debit card.

The CFPB says it won’t treat Apple Pay differently than credit card companies, even though Apple says the payments platform will mean iPhones act as a middleman between retailers and credit card companies or banks without any money passing through its hands during transactions. The agency said fraud protection is on its list of concerns.

“The Bureau’s role is not to choose market winners and losers, but to protect consumers and to make sure that companies offering consumer financial products or services play by the same rules,” CFPB spokesperson Moira Vahey said in an email. “By and large, those rules are technologically neutral. Rules that apply to plastic card payments also apply to payments with a phone. For example, disclosures must be clear, consumers must be protected from unauthorized transactions, and conduct towards consumers must not be unfair, deceptive, or abusive.”

In addition to the question of how the CFPB will view Apple Pay is whether the three-year-old agency has the manpower to delve into new regulations pertaining to mobile payments. The agency recently has taken on for-profit colleges, gone after payday lenders and moved ahead with an online database for consumer complaints against banks.

A CFPB employee familiar with the agency’s process for initiating regulatory actions said no such steps have been taken with regard to Apple Pay.

However, as more consumers adopt the new payment method, the more likely federal regulators are to consider new rules for electronic transactions, analysts say.

“Apple is a recognized brand, and people who work at regulatory agencies are consumers too, so I would suggest that it is likely that there will be more attention paid to Apple by various regulatory agencies,” said Jason Oxman, chief executive officer of the Washington-based Electronic Transactions Association.

Apple “is simply raising the profile of mobile payments and the attention of regulatory agencies,” he said, which in turn increases the odds of a “new regulatory environment, one that didn’t exist before last week.” Oxman said that all the credit card companies partnering with Apple Pay are ETA members.

Industry analysts say Apple Pay should be viewed by regulators in a manner similar to credit cards, even though the transactions will work differently than a traditional app.

“The way that Apple Pay is set up, it should be subject to the same protections as swiping your plastic card because it’s still just pulling up your credit card account, it’s just using it in a different way,” said Matt Schulz, a senior a senior industry analyst at, a division of Bankrate Inc. “If there’s a fraudulent charge and you report it, all of those zero liabilities should apply.”

The Information Technology Industry Council, a Washington-based advocacy organization whose members include Apple, did not respond to a request to comment on this story. Apple Inc. did not respond either.

Regardless of regulations, the attention from consumers is already there. According to recent Morning Consult polling data that shows Americans are very much aware of Apple Pay and are willing to give it a try.

Forty-nine percent of respondents in a Sept. 21-23 poll said they had heard of Apple Pay, compared with 45 percent who said they had heard little to nothing about the payment system announced on Sept. 9.

The same poll found that 35 percent of respondents said they were likely to use Apple Pay, while 52 percent put themselves in the “unlikely” category. Six percent said they were already using a mobile phone payments system.



In many ways, Apple Pay is viewed as both a disrupter and a game-changer, not unlike Uber and Lyft’s effect on the taxi-cab industry. But whereas taxi commissions across the country and the world have protested the arrival of their new competitors, no such outcry has accompanied the announcement of the mobile payment system from Cupertino, California-based Apple.

Even credit card companies, which some think run the risk of becoming obsolete if there’s widespread adoption of Apple Pay, are embracing this next step, mainly because they’re partnering with Apple and will very much remain a part of the payments process. That means any calls for regulatory action are likely to stem from consumer complaints regarding fraud protections.

“It kind of remains to be seen what they’re going to do from a regulatory standpoint,” Schulz said. “Some of that’ll depend on how widely it’ll be accepted, and I don’t think we’ll know that for a while.”

Survey results published by this month before the Apple Pay announcement highlighted the small percentage of Americans who said they were inclined to make mobile phones their primary means of making purchases.

Four percent of respondents said they would always use their cell phone to buy something, while 9 percent said they would use their mobile device most of the time. The polling data, when compared with the more recent Morning Consult figures, suggest a growing awareness and willingness to use Apple Pay in just the past month.

So far, no major industry or advocacy groups are calling on the CFPB to flex its regulatory muscles with regard to Apple Pay, though trade associations recognize that doesn’t guarantee changes aren’t on the horizon. For those stakeholders, any delay in taking regulatory actions means more time to educate agencies on the intricacies of electronic and mobile transactions while consumers adopt the new technology.

“The biggest concern that we have is a regulate-first-and-ask-questions-next approach to mobile payments,” Oxman said. “A mistake in setting the regulatory regime can slow or stop innovations that benefit consumers.”

Morning Consult