CFPB Proposal to Broaden EFTA/Reg E Scope has Implications for Crypto, Gaming and Credit Cards


4 minute read | January.15.2025

Navigating the CFPB’s Proposed Expansion of EFTA

On Friday, January 10, the Consumer Financial Protection Bureau (CFPB) proposed an interpretive rule that could significantly broaden the scope of the Electronic Fund Transfer Act (EFTA) to encompass a wide range of digital assets. The CFPB acknowledges that its interpretation will have significant implications, as it would expand the scope of the EFTA to potentially include the following, if they meet certain conditions:

  • Cryptocurrency Accounts
  • Credit Card Rewards Accounts
  • Video Game Accounts

For impacted businesses, this development could introduce a complex set of compliance requirements that were built for the banking and financial services industries, and now may suddenly apply to non-traditional asset accounts.

What is the EFTA?

The EFTA is the federal statute that provides the basic framework of protections to consumers in connection with most electronic payments involving “funds” to and from covered consumer deposit “accounts.”

At its core, the statute was conceived for banks (or any depository institution) to protect their consumer customers. Most of the obligations under the law fall on the financial institution holding a consumer’s account. For example, the EFTA is one of the reasons why consumers are entitled to receive monthly bank statements. Those obligations also include things like providing disclosures at account opening and requiring institutions to follow a complicated process for investigating and resolving alleged “errors” in covered accounts. On top of it all, the financial institution holding the account bears almost all of the risk for fraud losses – consumer liability is strictly limited and often zero.

Until a patchwork of recent lower-court judicial decisions, the EFTA’s application was generally limited to deposit accounts denominated in fiat currency. Covered types of transactions historically included common payment types such as consumer ACH, debit cards and P2P transfers. The interpretive rule seeks to change that by significantly broadening its application.

Understanding the Proposed Rule: Broadening the Definitions of “Funds” and “Account”

The CFPB’s proposal clarifies that “funds” under EFTA are not limited to traditional fiat currencies like the U.S. dollar. Instead, the rule includes non-fiat currencies, such as stablecoins, Bitcoin and even in-game currencies if they meet certain conditions:

The CFPB interprets the term “funds” to include assets that act or are used like money, in the sense that they are accepted as a medium of exchange, a measure of value, or a means of payment. Under this interpretation, the term “funds” would include stablecoins, as well as any other similarly-situated fungible assets that either operate as a medium of exchange or as a means of paying for goods or services.

The proposed rule would likewise clarify that the definition of a covered “account” under the EFTA is broader than the consumer asset accounts held by traditional banks – so long as the accounts hold “funds” under the broad definition outlined in the proposed rule and contain the characteristics of a traditional account, such as “paying for goods and services from multiple merchants, the ability to withdraw funds or obtain cash, or conducting person-to-person transfers.” The Bureau points to several examples:

  • Cryptocurrency Accounts if they can be used to make person-to-person transfers.
  • Credit Card Rewards Accounts that allow consumers to buy points that can be used to purchase goods from multiple merchants.
  • Video and Mobile Game accounts used to purchase virtual items either from multiple game developers or to conduct transactions between players, even if within the same game environment.

Implications for Stakeholders

The Bureau had previously flirted with the possibility of the EFTA covering certain cryptocurrencies in a prior rulemaking, but by recognizing this broad variety of consumer digital assets as “funds” in covered “accounts,” the CFPB could extend the statute’s consumer protections to a significantly larger swath of commerce.

This interpretation – if implemented – would require companies to consider how these protections apply to their digital currency transactions, and would significantly alter their compliance obligations, risk management and operational strategies.

Gaming companies, in particular, could face unique challenges as their industry is often the furthest from traditional financial services.

Conclusion

By including digital currencies and expanding account definitions, the Bureau believes it can provide consumers with consistent protections across various payment mechanisms. At a minimum, the change would mark a significant step in adapting a regulatory framework to new areas of digital commerce, which are unlikely to be prepared for the rigors of EFTA requirements. The 50-year-old statute is likewise unlikely to be an easy fit for markets and products conceived of in the current century.

As the comment period progresses and political dynamics evolve, stakeholders must stay informed and proactive in addressing the implications of this proposed rule. Whether through strategic advocacy during the comment period or preemptive compliance adjustments, preparing for the potential adoption of this rule is crucial for navigating the future of electronic fund transfers in a digital economy.

The comment period is open until March 31, 2025. The CFPB is encouraging impacted stakeholders to actively participate to help shape the final outcome of this significant regulatory development.