Online Gaming and Payment Regulations: Insights from the CFPB

Dive Brief:

• The Consumer Financial Protection Bureau on Friday suggested an interpretive regulation that categorizes video game firms alongside certain conventional financial institutions. 

• The organizations that manage virtual gaming environments, such as the well-known online game World of Warcraft, fall under the Electronic Fund Transfer Act, the agency stated in a press release. 

• “The payment frameworks on these gaming platforms have advanced swiftly,” the interpretive regulation notes. “Instead of depending on a business approach where players make a single payment to purchase or engage with the game, some gaming platforms have created intricate economies where the platforms accept US dollars in exchange for virtual currency that can be exchanged among players and other participants of the platform.”

Dive Insight:

The 1978 Electronic Fund Transfer Act established entitlements for consumers who send money electronically, encompassing the right to refunds in certain cases and the right to contest transactions. 

Video game companies with payment frameworks are required to adhere to the law, as per the CFPB’s interpretive regulation.

The agency also seeks input from young gamers and their guardians regarding their experiences with gaming assets and transactions, as mentioned in a blog entry released on Friday. The bureau is interested in understanding how these payment interactions are evolving as video games grow increasingly complex.

CFPB research publicized in April discovered that operators of virtual gaming realms do not appear to provide the same protections as traditional financial entities like banks, which are regulated by consumer protection legislation. 

The bureau highlighted theft, scams, fraud, and money laundering as multiple problems within these virtual marketplaces. According to the report, gamers seem to have few options if they lose funds due to scams, fraud, or theft.

Two associations representing video game developers, the International Game Developers Association and the Entertainment Software Association, did not promptly respond to inquiries regarding the CFPB’s interpretive regulation.

The CFPB is also focused on safeguarding consumer privacy. In its request for information, the bureau expressed a desire to learn about the efficacy of privacy regulations and requested suggestions for enhancing privacy standards along with the types of data the agency should oversee.

“When individuals pay for their family expenses using new forms of digital transactions, they need to be assured that their dealings are not compromised by harmful surveillance or mistakes,” CFPB director Rohit Chopra stated in the press release. 

The agency referred to its own research in the release, which indicated that certain payment methods collect more data than is necessary to complete a payment transaction. According to the press release, some payment systems are gathering users’ location data and browsing history.

Financial technology companies are mandated to provide consumers a means to opt-out of data collection. However, the press release referenced a government accountability office report indicating a relatively small number of consumers opt for that choice.