On January 10, 2025, the Consumer Financial Protection Bureau (CFPB or Bureau) published an proposed interpretation rule which would extend the authority for the protection of the office under the law on the transfer of electronic funds (EFTA) and its Rules of implementation, regulation E, to stablecoins, crypto, virtual clearances and other innovative forms of electronic payment, as described below.
Although the Trump administration is unlikely to finalize the proposed interpretation rule, in particular given the support of the administration for the development of crypto and other digital assets, the extensive interpretation of the proposed rule of EFTA and EFT E I could still find a purchase with civil arguments and state regulators.
Overview of the proposed interpretation rule
EFT, promulgated in 1978, establishes rights, responsibilities and protections for consumers and financial institutions involved in electronic funds (EFT). Traditionally, these transactions are supposed to include the use of automatic ticket distributors, debit cards, direct deposits, electronic invoice payments, automated compensation house payments (ACH) and other online payments or Mobiles, including peer-to-peer payments (P2P), among others. The CFPB, and previously the Council of Governors of the Federal Reserve System, implemented the EFTA through regulation E, which was initially published shortly after the adoption of the law in 1978. The CFPB , as the Fed before it, periodically modified regulation E to tackle the emergence of new methods and payment systems, including prepaid accounts in 2016. However, the rule proposed by the office would represent a more fundamental and significant expansion of the coverage of the EFTA than that previously implemented.
EFTA coverage is limited, unsurprisingly, to “electronic funds”. The congress has defined this term to include “any transfer of funds, other than a transaction from check, draft or similar paper instrument, which is launched via an electronic terminal, a telephone instrument or a computer or band Magnetic to order, educate, or authorize a financial institution to debit or credit an account. »15 USC 1693a (7). However, neither the EFTA nor the regulation E defines the term “funds”, which serves as the main lever for the new interpretation of the CFPB of the coverage of the law.
More specifically, the CFPB proposes to adopt an interpretation of the term “funds” in the EFT which would include not only the money held in fiduci currency “are accepted as a means of exchange, a measure of value or a means of payment . ” This broader reading of the term “funds” would include, according to the proposed rule, “Stablecoins, as well as any other fungible active active in a similar way which operates as a means of exchange or as a means of payment for goods or services. “The examples may include cryptocurrencies (for example, bitcoin, stablecoins); digital cupcurrents from the central bank; virtual currency owners, including those used to buy or sell digital assets in online gaming platforms such as Roblox; and credit card rewards, among others.
The legal position of the CFPB is founded on two sources. Firstly, the proposed rule examines various definitions of dictionary of the term “funds” from the passage of the EFTA and concludes that the term is often defined by reference to pecuniary resources in general and not limited to real currency. Second, and more importantly, the CFPB cites several judicial decisions which claim to interpret the term “funds” to include not only money or fiduciary currency, but also assets that could be “easily converted into species”. These include cases under EFTA – above all, the decision in Rider c. Remolt HQ Inc., 657 F. Supp. 3D 491, 498 (SDNY 2023), in which a federal district court judged that cryptocurrency was a “digital form of liquid monetary assets” and should therefore be considered as “funds” under the EFT – as well as decisions interpreting the laws on the transmission of state money. On these bases, the reasons for the CFPB, it has long been clear that the term “funds” in the EFTA is not limited to the fiduciary currency as the US dollars. »»
Based on this large design of “funds”, the proposed rule then turns to the term “account” used in the definition of the EFTA of “Electronic funds”. Unlike the “funds”, the congress has defined the “account” in the EFT – in particular, the law provides that a “account” is “a request for a request for savings or another asset account . . . As described in the (CFPB) regulations, established mainly for personal, family or household purposes ”, subject to limited exceptions. By examining the legislative history and associated regulatory directives, the CFPB explains that the EFTA was not intended to be limited to the transfers of funds in or outside the traditional deposit or savings accounts. The proposed rule rather reads the reference of the law to “other asset accounts” to include any account in which the “funds”, as interpreted, can be filed by the consumer and which has features similar to the deposit accounts or ‘Savings, including the accounts ability to “pay () for the goods or services of several merchants, (the) capacity to withdraw funds or obtain money, or make person transfers to person”.
Although the proposed rule acknowledges that the characteristics of a particular payment product stimulate the determination of whether it is considered as an “account” under EFT, it nevertheless offers several examples of what can constitute ” Accounts »Under the EFTA on the basis of his proposed advice. These include video game accounts that can be used to buy digital assets from several merchants or players, virtual currency portfolios that can be used to buy goods or services or make P2P payments, and Credit card rewards exchangeable for several merchants. But it is not difficult to imagine other contexts to which the same logic could lead.
Main to remember
The proposed rule is one of the many rules, reports and other initiatives announced by the director of the director of the CFPB Chopra in the last days of the Biden administration. It is unlikely that CFPB leadership in the Trump administration will issue a final rule of interpretation expanding the scope of EFT and regulation E in this way. This seems particularly improbable, given the announced support of the Trump administration for the development of crypto and other digital donkeys and the desire to reduce the regulatory administrative formalities they contained stifle innovation. Indeed, on January 23, President Trump published a decree, entitled Strengthen American leadership in digital technologyWho stipulates that it is the Trump administration policy to support the growth and use responsible for digital assets.
We nevertheless propose several observations:
First of allAlthough the proposed rule is the first effort of the CFPB to reinterpret the scope of the EFT to extend it to the crypto and other digital assets, it is not necessarily unexpected. More than a year ago, in November 2023, the CFPB previewed its broader understanding of the term “funds” in the context of a rule proposed to define a market for payment applications for digital consumers for general use and to extend its surveillance competence to larger participants on this market. The proposed rule of greater participation, which was finalized in November 2024, noted that the point of view of the CFPB “according to which, in accordance with its simple sense, the term” funds “in the CFPA is not limited to the fiduciary currency or legality, and includes digital assets that have monetary value and can easily be used for financial purposes, including as a means of exchange. Crypto-active, sometimes called virtual currency, are one of these types of digital assets. The rule proposed by the CFPB is the logical extension of this stated position, extending the definition of the “funds” of the CFPA to the EFT.
SecondAlthough the interpretation by the CFPB of EFT coverage is not likely to take effect, it will nevertheless be impatiently adopted by the barrel of the complainants capable of introducing private actions under the EFT against suppliers of new payment products. The proposal will bring a force to a wave of private disputes already in bankruptcy under EFT against financial institutions and, technically, increases exposure to providers who may not have previously considered being subject to disclosure , to the resolution of errors and other consumer protection obligations imposed by the EFTA.
ThirdThe reading proposed by the CFPB of CHOPRA of EFT coverage can be adopted by state regulators in states which have similar laws on transfers of electronic funds. For example, Massachusetts has adopted an almost identical definition of “electronic funds transfer” and extends similar protections of consumers under the law of the State, including by limiting consumer responsibility for unauthorized FEFs. Faced with the federal application potentially softened under EFT, State regulators may well adopt the reading by the CFPB of EFT coverage and seek to apply their own specific state plans to the news Payment offers.
FourthThe proposed rule makes no effort to treat the practical implications of the extended vision of the EFTA CFPB and the E. When the Fed considered the potential changes in regulation E to cover the stored value cards at the end of 1990s, for example, he carefully considered the implications of the extension of the coverage of regulation E to a payment form then emerging and promulgated a proposed rule which exempt exceptions and adjustments to the obligations of disclosure and resolution of errors of the regulation E that it deemed appropriate. On the other hand, the rule proposed by the CFPB does not even try to respond to the potential consequences of the extended vision of the EFT office, which suggests that this exercise was more focused on sending a signal to The industry, to private litigants, the leadership team considers important in emerging payment systems on taking with the practical implications to impose existing legal requirements in this context.
The CFPB asked that any comment be submitted no later than March 31, 2025. If you plan to submit a comment or if you wish to discuss the recent CFPB activities concerning electronic payments, the Wilmerhale financial institutions team includes Former CFPB officials, office of the currency controller, the American treasure and the Federal Reserve Bank of New York, and we are happy to help you.
