Paypal, Inc. v. Consumer Fin. Prot. Bureau

Paypal, Inc. v. Consumer Fin. Prot. Bureau

Opinion

 [*3]  MEMORANDUM OPINION

[Dkt. # 19, 20]

Plaintiff PayPal, Inc. ("PayPal" or "plaintiff') brought this suit on December 11, 2019 against the Consumer Financial Protection Bureau and Kathy Kraninger, in her official capacity as Director of the Consumer Financial Protection Bureau, (collectively, "defendants" or the "Bureau") under the Administrative Procedure Act and First Amendment. Plaintiff alleges that two provisions—a short-form disclosure requirement and a thirty-day credit linking restriction—of the Bureau's regulations governing prepaid products are unlawful. PayPal moved for summary judgment on May [**2]  6, 2020, and the Bureau cross-moved for summary judgment on July 7, 2020. Pl.'s Mot. for Summ. J. [Dkt. # 19] ("Pl.'s Mot"); Defs.' Cross-Mot. for Summ. J. [Dkt. # 20] ("Defs.' Mot."). The parties' motions are now ripe for review. For the following reasons, plaintiffs motion for summary judgment [Dkt. # 19] is GRANTED, and defendants' motion for summary judgment is [Dkt. # 20] is DENIED. Further, the short-form disclosure requirement under 12 C.F.R. § 1005.18(b) is VACATED to the extent it provides mandatory disclosure clauses. And the thirty-day credit linking restriction under 12 C.F.R. § 1026.61(c)(1)(iii) is also VACATED.

BACKGROUND

PayPal is a provider of digital wallets. Pl.'s Mot. at 5; Defs.' Mot. at 11. Digital wallets permit consumers to electronically store and access payment credentials—such as credit cards, debit cards, and checking accounts—that will enable consumers to make purchases and transfer money. Pl.'s Mot. at 5 (AR 5862, 5868, 5874); Defs.' Mot. at 7-8 (AR 249).

This case concerns the Bureau's regulation of a certain subset of PayPal's products: digital wallets that qualify as "prepaid products." Prepaid products are financial products that permit a consumer to load funds onto the product for later use in making [**3]  purchases or performing other transactions. Pl.'s Mot. at 8; Defs.' Mot. at 7. While many digital wallets do not store funds and, therefore do not qualify as prepaid products, some do and—under the Bureau's regulatory scheme—qualify as prepaid products. Pl.'s Mot. at 6 (AR 249, 5862); Defs.' Mot. at 7-8 (AR 249).

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