PayPal vs. Consumers?
American Banker reports that payments giant PayPal is taking on the Consumer Financial Protection Bureau (CFPB) in a lawsuit that could have far-reaching implications in the fintech industry.
American Banker notes:
The online payments giant sued the CFPB in 2019, claiming digital wallets should not be subject to the same fee disclosures as prepaid cards because they are inherently different products. A ruling in favor of PayPal could limit the CFPB’s authority under the Dodd-Frank Act to mandate and prescribe consumer disclosures, experts said.
Brian Tate, president and CEO of the Innovative Payments Association, an industry trade group, called the PayPal lawsuit “one of the most important and least-covered stories in payments, depending on which way the court rules. … This case has the potential to have a huge impact on the marketplace.”
The move by PayPal comes as a newly energized CFPB under Biden appointee Rohit Chopra is seeking greater authority in the fintech space:
Consumer Bureau Conducting Review of “Big Tech” Payment Systems
Move is First Step Toward Consumer Protection Measures
Who is Watching Out for Consumers?
New leadership at Consumer Bureau changes focus: Will it be a win for consumers?
According to American Banker:
From a practical standpoint, if the appeals court sides with PayPal, the short-form disclosure for prepaid accounts would be thrown out, gutting an important provision of the CFPB’s prepaid rule that was eight years in the making.
PayPal’s Venmo service is currently under investigation by the CFPB for unauthorized transfers. PayPal is also facing a potential class action lawsuit related to its “PayPal Pay in 4” product — a Buy Now, Pay Later service.
Is PayPal’s Pay Later Plan a Risky Scheme?
PayPal faces suit over buy now, pay later product
Why Consumers Should be Cautious with Buy Now, Pay Later
Convenience comes with a cost
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