In a lawsuit filed in the US. District Court for the District of Columbia, technology advocacy organizations TechNet and NetChoice are challenging the Consumer Financial Protection Bureau's (CFPB) authority to regulate digital payment applications. 

The complaint, filed on January 16, alleges that the CFPB’s recent rule targeting "general-use digital consumer payment applications" oversteps its statutory authority and imposes undue regulatory burdens on the tech industry.

The rule, finalized in December 2024, expands CFPB supervision to include larger participants in the digital payment space, a category that could encompass popular platforms such as Apple Pay, Cash App, and PayPal. According to the CFPB, the regulation is aimed at mitigating risks to consumers and ensuring compliance with federal financial laws. However, critics argue that the rule lacks sufficient justification and fails to identify specific consumer risks that warrant such oversight.

The lawsuit claims the CFPB acted beyond its authority under the Dodd-Frank Act, which mandates that the agency’s supervision of nonbank entities be "risk-based." Plaintiffs argue the CFPB did not adequately assess risks or weigh the costs and benefits of its rule, as required by law. "The Bureau’s rulemaking process disregards key statutory safeguards and imposes unnecessary burdens that will stifle innovation in the digital payments sector," the plaintiffs stated in their filing.

The plaintiffs further contend that the CFPB has ignored existing regulatory frameworks already implemented by state authorities. Many digital payment platforms are subject to rigorous state-level oversight, and the lawsuit questions whether additional federal supervision is necessary or effective.The CFPB’s rule marks the first federal regulation specifically targeting digital wallets. The rule defines "general-use digital consumer payment applications" broadly and applies to companies processing at least 50 million transactions annually. 

Critics argue that the rule's vague definitions and high compliance costs could disproportionately impact smaller businesses and inhibit innovation.