In a recently filed Form 10-K, PayPal Holdings, Inc. (PayPal) announced that it received a Civil Investigative Demand (CID) from the Consumer Financial Protection Bureau (CFPB) on January 21 “related to Venmo’s unauthorized funds transfers and collections processes, and related matters.” PayPal owns and operates Venmo as part of its digital wallet portfolio.

While the CID is not publicly available, The Wall Street Journal reported in March 2019 that “[i]n a bid to curb losses on its platform, Venmo is threatening to sic debt collectors on some users who carry negative balances in their accounts, according to customer-service emails reviewed by The Wall Street Journal. Venmo also recently amended its user agreement to give itself the power to recover money its customers owe by seizing it from their other accounts at PayPal.”

This investigation may be our first sign of a more aggressive CFPB impacting the payments industry. In a recent report titled, “Federal Policy Outlook 2021,” Troutman Pepper Strategies predicts that the “Biden-run CFPB will try to strengthen oversight of lending, credit, and target predatory lending.”

While collection practices may be the primary subject of the CFPB’s CID, keep in mind that these types of federal investigations may create unwanted exposure to similar issues for other digital wallet companies and related products. In addition to the risk of federal inquiries, this type of scrutiny could also draw attention from state attorneys general that actively enforce consumer protection statutes, like debt collection or unfair or deceptive acts and practices laws. We will continue to monitor any developments.