Bankers to CFPB: Time to Regulate FarmVille's Virtual Currency

For more than a year, the American Bankers Association has pushed to limit the power and budget of the government’s newest consumer watchdog agency. The association, which includes the nation’s largest banks as members, is spending about $2 million every four months on lobbying, according to the Associated Press, most of it to limit the authority of the Consumer Financial Protection Bureau and the Dodd-Frank Wall Street reform act that created it.

But there’s at least one area where the ABA wants more regulation instead of less: FarmVille.

In a letter to the Consumer Financial Protection Bureau, the bank association asked the new Consumer Financial Protection Bureau to consider regulating virtual currencies, like those used on FarmVille and Second Life.

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“We understand that in some instances virtual currencies, which were initially developed to help individuals manage virtual credits earned through online games, have also been used to pay developers of applications, and their use can be expected to expand even further,” the ABA wrote.

Of course, when it comes to real currencies, the bankers association is much less gung-ho about new regulations. Last summer, the ABA wrote a stongly-worded letter of opposition to the Dodd-Frank act. The letter specifically criticized the new bureau, saying it was given “unprecedented authority to impose new requirements on all banks.”

But when it comes to regulating banks’ competitors, the ABA appears to support the bureau’s efforts just fine. The letter, sent to the bureau on Aug. 15, concerns the CFPB’s efforts to define which nondepository institutions it will oversee. That could include large mortgage originators, payday lenders and private education lenders.

Other banking industry groups have made the same reversal. The Credit Union National Association lobbied this summer to limit the CFPB’s power by giving other federal bank regulators more authority to overrule the bureau’s decisions, according to a press release from the group. But in a letter dated Aug. 12, the association urged the new bureau to write tough rules regulating nondepository lenders.

“We urge the CFPB to define non-depository-institution ‘larger participants'” the same way as depository institutions like credit unions, which “are already subject to robust consumer protection law compliance examination and enforcement by federal and/or state regulators,” Michael S. Edwards, CUNA’s chief lawyer, wrote in his letter to the bureau.

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Image: www.farmville.com

This article was updated Aug. 23, 2011 to clarify that CUNA lobbied to limit the CFPB’s power by giving other regulators more power to overrule the bureau’s decisions, not by changing the bureau’s leadership structure.