On April 4, 2024, the Consumer Financial Protection Bureau (“CFPB”) issued a report (the “Report”) examining the potential risk to consumer assets and data in the online video game and virtual world spaces. The CFPB gaming Report was preliminary in nature, but highlighted three specific trends and risks. The release of the CFPB gaming Report was accompanied by a statement from Rohit Chopra, the CFPB’s Director. Director Chopra identified certain risks that consumers might encounter while gaming and ensured that the CFPB would continue to monitor the space with an eye towards safeguarding consumers’ finances and data from harm.
As our readers are aware, the CFPB is the principal regulatory body responsible for administering federal consumer financial laws. Its broad jurisdictional reach includes banks, credit unions, payday lenders, and other financial institutions. The CFPB was created by the Consumer Financial Protection Act (“CFPA”), which was enacted to protect consumers from unfair, deceptive, and/or abusive acts and practices. The CFPA is enforced not only by the CFPB, but state attorneys general and various other regulatory agencies. The CFPB’s new gaming Report comes on the heels of the release of its circular that detailed what it considers deceptive financial services marketing practices. While the marketing of banking services falls within the regulatory body’s expected oversight, it remains to be seen whether the gaming Report signals an intent to move beyond overseeing traditional financial institutions.
What Trends and Risks Did the CFPB Gaming Report Identify?
According to the Report, American consumers spent nearly $57 billion on gaming in 2023. Online gaming platforms increasingly resemble traditional banking and payment systems, as they facilitate the storage and processing of ever-increasing aggregate dollar amounts. Accordingly, the CFPB has begun to divert some of its focus to the gaming industry. The CFPB’s gaming Report detailed that:
Gaming products and services resemble conventional financial products. Consumers are able to store and transfer valuable assets, such as in-game currencies and virtual items through digital platforms. Essentially, these platforms operate as real-world marketplaces. Gaming companies have even “begun incorporating financial products and services such as proprietary payment processors and money transmitters.”
Gaming companies provide little customer support when consumers experience financial harm. Accompanying the rise in value of in-game assets has been an associated increase in “scams, phishing attempts, and account thefts.” Complicating matters, consumers report that they receive little assistance when seeking recourse from gaming companies, which often, according to the CFPB, claim no obligation to compensate players for financial losses.
Gaming companies are assembling gamers’ personal and behavioral data. As consumers transact on these platforms, gaming companies are collecting “behavioral data such as financial data, purchasing history, and spending thresholds.” Games that require the disclosure of location data also track consumers’ daily routines based on where they are located during corresponding times of day.
In his statement, Director Chopra explained that the CFPB was aware of the increasing risks to consumers and that, for now, the agency would continue to monitor the financial practices of gaming companies.
Why is the CFPB Gaming Report Important?
Even if your company does not operate a gaming platform, the CFPB’s Report is noteworthy because it reveals that the agency is looking at regulation beyond traditional banking institutions. Consumers that enter into gaming transactions face some of the same risks as those that conduct traditional banking transactions – phishing, collection of personal information, and account lockouts. Consequentially, the CFPB may soon decide that gaming companies are subject to the same CFPA regulations as financial institutions. This would also mean that gaming companies could be subject to the CFPA’s enormous monetary penalties.
Given the foregoing, businesses would be well-advised to stay apprised of the CFPB’s reevaluation of the breadth of its regulatory powers. Companies should retain counsel that is experienced with the regulatory process.
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