CFPB EFT FAQ Coverage Fin Inst 2 – Can non-bank P2P payment providers be considered financial institutions under Regulation E?

Compliance > Regulation E - EFTA
Q:  Can non-bank P2P payment providers be considered financial institutions under Regulation E?
 
A:   Any P2P payment provider that meets the definition of a financial institution, as discussed in Electronic Fund Transfers Coverage: Financial Institutions Question 1, is a financial institution under Regulation E. Thus, if a P2P payment provider directly or indirectly holds an account belonging to a consumer, they are considered a financial institution under Regulation E. 12 CFR 1005.2(i). An example of an account that a non-bank P2P payment provider may directly or indirectly hold is a prepaid or mobile account whose primary function is to conduct P2P transfers. 12 CFR 1005.2(b)(3); Comment 2(b)(3)(i)-10. Additionally, as discussed in Electronic Fund Transfers Coverage: Financial Institutions Question 1, non-account-holding providers of P2P payment or bill payment services are considered covered financial institutions under Regulation E if the provider issues an access device and agrees with a consumer to provide EFT services. 12 CFR 1005.2(i). For example, a P2P provider may enter into an agreement with a consumer for a mobile wallet that the consumer can use to initiate debit card transactions from their external bank account to another person’s external bank account.
 
Any entity defined as a financial institution under Regulation E has error resolution obligations in the event that a consumer notifies the financial institution of an error, with limited exceptions. 12 CFR 1005.11. See Electronic Fund Transfers Error Resolution Question 2 for more information about these error resolution obligations.
 
 
This Q&A was contained in the CFPB’s Electronic Fund Transfers FAQs that were updated in December 2021 (which may be updated from time to time).  This may be found on the CFPB’s website here:  https://www.consumerfinance.gov/compliance/compliance-resources/deposit-accounts-resources/electronic-fund-transfers/electronic-fund-transfers-faqs/
 

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