PayPal is suing the Consumer Financial Protection Bureau (CFPB) for requiring the firm to make "misleading and confusing" disclosures nearly its fees.

The digital payments giant filed a lawsuit confronting the CFPB on Dec. 11, arguing that the agency has ignored critical differences between digital wallets and prepaid products similar prepaid debit cards (GPR).

CFPB makes PayPal provide disclosures about fees that it doesn't accuse, the adapt says

According to a Dec. 11 court filing seen by Cointelegraph, the CFPB mandates that digital wallets and GPR cards should exist regulated the same mode, which allegedly resulted in a "fundamentally ill-suited" regulatory regime for PayPal digital wallets.

Specifically, the lawsuit refers to a new CFPB rule known as the "Prepaid Accounts Under the Electronic Fund Transfer Act (Regulation E) and the Truth in Lending Act (Regulation Z) Rule." Adopted in April 2022, the rule allegedly requires PayPal to provide disclosures nearly fees that the company does not charge as well as misrepresent the actual fees paid by most customers, the firm claimed.

Simplified construction of fees requires PayPal to only include the highest possible fee

Basically, the CFPB's dominion requires PayPal to simplify its fee disclosures that "undermine PayPal's own clear disclosures" and ban the firm from providing "the very data that would assist consumers in making an informed decision."

As part of the dominion, PayPal allegedly has to disclose the highest possible fee under the worst-case scenario for each required fee category, "fifty-fifty if the fee would rarely be incurred." PayPal wrote in the filing:

"The Rule mandates that customers be given — and actually view — 'curt 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 sure font sizes [...] The Rule further prohibits PayPal from including explanatory phrases within the disclosure box to describe the nature of these fee categories."

Apart from petitioning the court to deem the CFPB'south rule unconstitutional, PayPal's prayer for relief asks the court to laurels PayPal its costs and reasonable attorney'due south fees every bit appropriate.

Lack of regulatory understanding regarding new technologies

Speaking to Cointelegraph, Ohio-based internet attorney Andrew Rossow said that PayPal's lawsuit serves as a clear demonstration that regulators like the CFPB exercise not empathize emerging technologies similar blockchain, digital money and artificial intelligence:

"I think the CFPB'due south recent expansion of Regulation Eastward (Prepaid Accounts Under the Electronic Fund Transfer Human action) and Regulation Z (Truth in Lending Act) was premature considering information technology still doesn't understand, in my opinion, how these digital wallets (which includes cryptocurrency wallets—hot and common cold) operate and the parties that involved in fifty-fifty the near 'basic' of digital coin transactions."

Rossow added that a ruling in PayPal's favor could testify groundbreaking for the crypto space as "PayPal is stepping up and defending the business concern operation of each of its competitors, protecting themselves from unwarranted and almost endless liability at any given indicate in time."

News of the lawsuit comes afterwards PayPal revealed a amend-than-expected quarterly profit as its payment platform recorded more than users and transactions.

While apparently expanding its business concern, PayPal has cut some major partnerships recently, making more room for cryptocurrencies to fill the gap and enter the payments space. In mid-November, adult entertainment website Pornhub revealed that PayPal had abruptly stopped servicing its models. Equally reported by Cointelegraph, Verge (XVG) — which is supported on Pornhub — skyrocketed in price right after news of PayPal ceasing business with the platform.