Breaking: PayPal Wins Lawsuit Against CFPB Challenging Fee Disclosures

April 1st, 2024 — Paypal wins a significant legal battle against the U.S. Consumer Financial Protection Bureau (CFPB) against a rule requiring it to disclose fees associated with digital wallets.

Overview

The ruling signifies that Courts are starting to understand the payments space.  Specifically, the ability to differentiate prepaid cards from digital wallets.  The court held that the CFPB “ignore[d]” the features of a digital wallet and highlighted that there were many distinctions between the products.

The court gaining insight is supported by that it originally stated that digital wallets were the same as prepaid cards.   Those of us in the space would never classify a prepaid card as a digital wallet despite that certain wallets may share some characteristics with prepaid cards.

Significance

The significance of the ruling is that regulators are going to have to get more specific when seeking to regulate payments products. The court rejected that digital wallets might in the future charge usage fees or share characteristics with prepaid cards.  Meaning that the CFPB can’t issue regulations on where it thinks that a product or industry may go.

This allows for more creativity and growth for those in the industry seeking to introduce new products.

The court also rejected the CFPB’s arguments that it’s proposed rule would fill a gap in an otherwise unregulated market and bought PayPal’s argument that the EFTA and Reg. E already covered digital wallets.  Now that one looks like clever lawyering, but a solid win for innovators in the payments space.

To download/read the official opinion from Judge Richard J. Leon, click here.