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Digital markets, payment services and funding
Generally speaking, digital marketplaces for goods and services are not regulated as fintech companies in the United States. Most marketplaces are only regulated based on their underlying goods or services. These digital marketplaces are generally not subject to fintech regulations because either the funds for the purchase of goods flow through a separate payments company, or the marketplaces do process payments but do so under an exemption to fintech regulation (such as 'agent of the payee') or only accept credit card payments, which do not require fintech licences in the United States. However, in recent years, some of these marketplaces have chosen to register with FinCEN as money services businesses (MSBs) and obtain state money transmission licences to enable them to process a wider variety of payments.
In recent years, peer-to-peer lending, social-lending and crowd-lending have become popular alternatives to standard bank loans in the United States. However, many of the consumer protection laws applicable to traditional loans may also apply to loans made via these marketplace lending platforms, including the Truth in Lending Act, the Equal Credit Opportunity Act and the Fair Debt Collection Practices Act. The regulators primarily responsible for enforcing these consumer protection laws include the CFPB and the Federal Trade Commission. Depending on the particular business model, marketplace lenders may also be regulated by the Federal Reserve, the FDIC and the OCC. In addition, marketplace lenders may be subject to state consumer protection laws, including laws prohibiting unfair, deceptive or abusive acts and practices, and may be subject to state licensing requirements to act as a lender, broker, debt collector or solicitor.
Payments services are heavily regulated in the United States and require both registration as a money services business with FinCEN and obtainment of state money transmitter licences. Furthermore, payments services must obtain a licence in each state in which they intend to operate because the United States currently lacks a reciprocity or passporting option as in the European Union. The lack of passporting or reciprocity in the United States is particularly notable because obtaining all state money transmission licences is extremely burdensome, often taking years and costing hundreds of thousands of dollars. While the current US licensing regime is onerous, state regulators have been taking steps towards licence reciprocity and a standardised application process.
Unlike under the EU Revised Payment Services Directive, there is no law or regulation in the US directly requiring financial institutions to share customer data with fintech entities. Section 1033 of the Dodd–Frank Wall Street Reform and Consumer Protection Act (the Dodd–Frank Act) requires banks and other financial service firms to make customers' financial data available to the customer in a usable form; however no rules have been promulgated to define what 'usable form' means or identify sanctions for financial institutions that limit what information they share. Nevertheless, that may change in 2023. In October 2022, the CFPB issued proposed final rules for businesses regarding the sharing of customer financial information that would implement Section 1033 of the Dodd-Frank Act. The initial comment period to the proposed rules closed on 25 January 2023 and final rulemaking may be completed in 2023.
