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As Apple Pay Is Set to Launch, Will It Become the Apple of CFPB’s Eye?

As Apple looks to replace the wallet with its new Apple Pay feature, is the technology giant unwittingly exposing itself to regulation from the Consumer Financial Protection Bureau (CFPB)?

Apple Pay allows iPhone users to store their credit and debit cards on their phones and pay for purchases using their phones as well—essentially making plastic payment cards obsolete.1 While Apple Pay is not set to launch until October, major credit cards—such as Visa, MasterCard, and American Express—and banks— such as Bank of America, Chase, Citi, and Wells Fargo—already have agreed to integrate their cards into the feature.2

While Apple Pay is situated to revolutionize the way users make purchases, Apple could face unintended regulation as a result of the new feature.3 The CFPB regulates two classes of people, “covered persons” and “service providers,” to the extent that they are offering a “financial product or service.”4

A “covered person” is defined as any person that engages in offering or providing a consumer financial product or service, including extending credit and servicing loans, providing real estate services, and “engaging in deposit-taking activities, transmitting or exchanging funds, or otherwise acting as a custodian of funds or any financial instrument for use by or on behalf of a consumer.”5 Because Apple Pay does not actually transmit funds, it does not fall into the “covered persons” category.6

Where Apple could run into trouble is under the “service provider” class of regulated persons. A “service provider” means any person that provides a material service to a covered person in connection with the offering or provision by such covered person of a consumer financial product or service, including a person that participates in designing, operating, or maintaining the consumer financial product or service; or processes transactions relating to the consumer financial product or service.7 Apple could likely fall into this category because it is providing a material service to a covered person—credit card issuers and banks.8

The probability of CFPB regulation over Apple and the Apple Pay feature seems uncertain—at least for now. While it appears that Apple could be categorized as a “service provider” under a reasonable reading of the statute, the likelihood of regulation in the near future is small due to limited resources and more pressing matters.9

The CFPB has made clear that “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.”10 Meanwhile, the CPFB continues its investigation into the broader area of mobile financial services that was launched this summer and aims to ensure that consumers are protected—either when opening their wallets or scanning their phones.11

It seems that only time will tell whether “Apple Pay will forever change the way all of us buy things”—as promised by Apple CEO Tim Cook—and how the CFPB will treat this potentially revolutionary new technology.12

  1. Apple Pay, Apple, (last visited Sept. 28, 2014). 

  2. Id. 

  3. Nathanael Arnold, Will Apple Pay Make Apple a Bank in the Eyes of the Government?, Wall St. Cheat Sheet (Sept. 14, 2014), 

  4. Adam Levitin, Apple Pay and the CFPB, Credit Slips (Sept. 14, 2014, 10:56 PM), 

  5. 12 U.S.C. § 5481 (2010). 

  6. Levitin, supra note 4. 

  7. § 5481. 

  8. Levitin, supra note 4. 

  9. Id. 

  10. Catherine Dunn, Will Apple Pay Earn Oversight by the Consumer Financial Protection Bureau?, Int’l Bus. Times (Sept. 12, 2014), 

  11. Kevin Cirilli & Julian Hattem, Did Apple Just Become a Big Bank?, Hill (Sept. 14, 2014, 6:00 AM), 

  12. Id.