Last week, the Consumer Financial Protection Bureau (CFPB) released a Proposed Interpretive Rule (“Proposed Rule”) regarding the relevance of the Electronic Fund Transfer Act (EFTA) along with its implementing Regulation E to new and developing digital payment systems, encompassing gaming platforms with advanced “economies” and some virtual currencies (VCs) that provide an alternative method for electronic funds transfers.
The Proposed Rule is part of a series of announcements the CFPB has made as the Biden Administration nears its conclusion. The Trump Administration is highly likely to alter the management of the CFPB, with many regulatory initiatives from the Biden Administration expected to be reversed, modified, or altogether discarded. Therefore, it is improbable that the Proposed Rule will take effect. Feedback on the Proposed Rule is due by March 31, 2025.
The purpose of the Proposed Rule is to offer financial service providers a uniform framework for assessing the relevance of EFTA and Regulation E to a variety of new payment systems, rather than depending on individual adjudications by the judiciary. By adopting an expansive definition of the term “funds” grounded in case law, common law, and general usage interpretations, the CFPB suggests that “funds” encompasses assets that function or are utilized as money, as they are recognized as mediums of exchange, value measures, or payment methods. Under this interpretation, “funds” would cover stablecoins and any other fungible assets that operate as either mediums of exchange or means of payment for goods and services.
The CFPB likewise embraces a broad interpretation of the terms “account” and “Other consumer asset account” based on the legislative history surrounding the EFTA and well-established Official Staff Interpretations of Regulation E. Following the Proposed Rule, the following could be classified as “accounts” under EFTA, depending on context: video game accounts utilized for acquiring virtual items from various game developers or players; virtual currency wallets available for purchasing goods and services or facilitating person-to-person transfers; and credit card rewards points accounts permitting consumers to acquire points usable for purchases at multiple retailers.
Providers of “accounts” falling under the purview of Regulation E as per the Proposed Rule would need to adhere to numerous consumer protection regulations, including error resolution protocols, limits on consumer liability for unauthorized EFTs, and obligations to supply both initial and ongoing disclosures. As a result, businesses governed by the Proposed Rule would have to establish policies and procedures to guarantee compliance with these mandates. The CFPB’s proposed authority to oversee a few of these additional aspects, particularly regarding gaming platforms, remains unclear, as does the assertion that video game accounts would qualify as accounts under Regulation E. Furthermore, as previously noted, it is unlikely this rulemaking will progress in the Trump Administration.
Last week, the CFPB also released a Request for Information seeking community feedback on enhancing privacy safeguards and averting “harmful” surveillance in digital payments, particularly those rendered via large technology platforms. The CFPB maintains that the current federal system for financial data privacy protections is primarily governed by the Gramm-Leach-Bliley Act (GLBA) and its accompanying regulation, Regulation P, alongside the Fair Credit Reporting Act (FCRA), which may not adequately address the modern challenges posed by data surveillance. Feedback on the Request for Information must be received by April 11, 2025.
The CFPB also published a blog accompanying the release, inviting video gamers and parents to respond to the Proposed Rule and share their experiences regarding gaming assets and transactions.
Please reach out to the authors Jessica Sklute and Eric M. Knight, along with our other gaming and crypto experts Jordan Bromley, Brandon Reilly, Mike Katz, and Scott M. Pearson for further inquiries.