PayPal is suing the Consumer Financial Protection Bureau (CFPB) over new “confusing” digital wallet rules. These new rules require PayPal to make “misleading and confusing” disclosures in regards to their fees.

On December 11th the digital payments company filed a lawsuit against the CFPB. Making the argument that the agency has ignored huge differences between products such as digital wallets, and prepaid products such as prepaid debit cards.

CFPB forces PayPal to disclosure about fees that it doesn’t charge

According to the court filings by PayPal, the CFPB requires that digital wallets and prepaid cards should be regulated the same way. Although this would allegedly result in a “fundamentally ill-suited” regulatory regime digital wallet products similar to PayPal.

The lawsuit refers in particular to a new rule from the CFPB known as the “Prepaid Accounts Under the Electronic Fund Transfer Act (Regulation E) and the Truth in Lending Act (Regulation Z) Rule.” The firm claimed that the rules, which took effect in April 2019, require PayPal to provide disclosures about fees that the company does not charge as well as misrepresent the actual fees paid by most customers.

The new structure requires PayPal to only include the highest possible fee

In short, the CFPB’s new rule requires PayPal to simplify its fee disclosures that “undermine PayPal’s own clear disclosures”. Thus banning the firm from providing “the very information that would assist consumers in making an informed decision.”

As part of this rule, PayPal allegedly must disclose the highest possible fee in the worst-case scenario of each required fee category, “even if the fee would rarely be incurred.”

PayPal wrote in the filing: “The Rule mandates that customers be given — and actually view — ‘short form’ fee disclosures. The requirements for this short form disclosure are extremely prescriptive and rigid. Certain fee categories must be placed in specified positions and presented in certain font sizes […] The Rule further prohibits PayPal from including explanatory phrases within the disclosure box to describe the nature of these fee categories.”

PayPal is petitioning the court to deem the CFPB’s rule unconstitutional. As well as requesting the court to award PayPal its costs and reasonable attorney’s fees should they win the case.

