UNITED STATES DISTRICT COURT
`FOR THE DISTRICT OF COLUMBIA
`
`19-3700
` Civil Action No. ______________
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`PAYPAL, INC.,
`2211 North First Street
`San Jose, CA 95131,
`
`Plaintiff,
`
`v.
`
`CONSUMER FINANCIAL PROTECTION
`BUREAU,
`1700 G Street NW
`Washington, DC 20552,
`
`and
`
`KATHY KRANINGER, in her official capacity
`as Director, Consumer Financial Protection
`Bureau,
`1700 G Street NW
`Washington, DC 20552,
`
`Defendants.
`
`Plaintiff PayPal, Inc. (“PayPal”), by and through its attorneys, hereby alleges as follows:
`
`COMPLAINT
`
`INTRODUCTION
`
`1.
`
`For nearly two decades, PayPal has been a leader in facilitating fast, secure,
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`convenient, and affordable digital and mobile payments on behalf of consumers and merchants
`
`worldwide. Its mission is to enable its customers to participate fully in the global economy and
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`to improve their financial health by enabling them to access, receive, and move their money
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`across the globe, anytime, on any platform, and through any device. PayPal fully embraces the
`
`mission of the Consumer Financial Protection Bureau (“the CFPB” or “the Bureau”) to protect
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`

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`consumers and regulations that empower consumers to make informed financial decisions. As
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`part of that commitment, PayPal makes its customers the central focus of all that it does and has
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`built a robust compliance program that puts the safeguarding of its consumers at the forefront of
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`its products and services.
`
`2.
`
`This action challenges a rule promulgated by the CFPB that requires PayPal to
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`make misleading and confusing disclosures about the fees and functionalities of its products and
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`places unreasonable restrictions on consumers’ abilities to link certain credit products to their
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`PayPal accounts. As a result, the Bureau’s rulemaking has resulted in consumer
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`misunderstandings and confusion and has deprived PayPal’s customers of access to significant
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`benefits offered by PayPal. The Rule, entitled the “Prepaid Accounts Under the Electronic Fund
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`Transfer Act (Regulation E) and the Truth in Lending Act (Regulation Z) Rule” (“the Prepaid
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`Rule,” “the Final Rule,” or “the Rule”),1 emerged from a CFPB initiative to regulate a product
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`known commonly as a “prepaid card” or “general purpose reloadable card” (“GPR card”). A
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`GPR card typically is a physical card whose core function is to store a consumer’s funds until the
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`consumer wishes to use the card to spend or transfer those funds. GPR cards are generally
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`purchased at retail locations like drugstores and supermarkets, loaded (or reloaded) with funds
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`provided in cash or by direct deposit, and then used by consumers similarly to bank debit cards.
`
`3.
`
`PayPal’s primary consumer offering is a “digital wallet.” Digital wallets are
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`fundamentally different from GPR cards. Like physical wallets, digital wallets permit consumers
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`to keep their payment credentials—such as debit cards, credit cards, and bank account
`
`
`1 PayPal’s references to “the Rule” correspond to several related final rules that collectively
`implement the regulations at issue here. See 81 Fed. Reg. 83,934 (Nov. 22, 2016) (Final Rule);
`82 Fed. Reg. 18,975 (Apr. 25, 2017) (delaying implementation of the Final Rule by six months);
`83 Fed. Reg. 6364 (Feb. 13, 2018) (amending the Final Rule and delaying its implementation
`until April 1, 2019).
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`information—in a single place that can be accessed to make purchases or to transfer funds.
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`When a consumer authorizes a payment with his or her PayPal account, PayPal accesses the
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`consumer’s credentials from its secured electronic platform, interfaces between the consumer
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`and the intended recipient, and transfers money without the need for the consumer to expose his
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`or her full sensitive financial credentials to the payment recipient. Although consumers have the
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`ability to store money with PayPal (if, for example, the consumer receives a payment from
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`another party and does not immediately transfer those funds to a bank account), they can make
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`purchases or send money with PayPal without doing so. Indeed, the majority of PayPal’s
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`customers use PayPal’s services to transfer funds and make purchases using linked financial
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`instruments, not to store and spend cash balances.
`
`4.
`
`Although a GPR card is materially different from a digital wallet, the Bureau
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`nevertheless decided, arbitrarily, to subject both offerings to the same regulatory disclosure
`
`regime. PayPal engaged extensively with the CFPB throughout the rulemaking process,
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`presenting evidence to the CFPB that PayPal’s digital wallet offerings differed in significant
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`ways from GPR cards and warning of negative consequences to consumers should the CFPB
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`ultimately apply a GPR-card disclosure regime to digital wallets. Contrary to its mission of
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`protecting U.S. consumers, however, the CFPB unreasonably dismissed PayPal’s evidence and
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`finalized a Rule that treats identically GPR cards and PayPal’s very different digital wallet
`
`products.
`
`5.
`
`The Bureau did not attempt to justify this result by pointing to empirical
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`evidence—it cited no reports, studies, surveys, or research demonstrating that consumers acquire
`
`and use digital wallets in the same way they acquire and use GPR cards. Nor did the Bureau
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`offer any analysis as to whether or how digital wallets posed risks for consumers similar to those
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`posed by GPR cards. The proposed rule instead offered a mere three-paragraph description of
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`digital wallets, which acknowledged that digital wallets are distinct from products such as GPR
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`cards because digital wallets are principally used “to store the consumer’s bank account, debit
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`card, credit card, and/or prepaid card credentials.”2 The proposed rule further noted that “there
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`may be significant variations in how funds are held in digital wallets and how payments are
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`processed by digital wallets and that payment processing by digital wallets is evolving quickly.”3
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`Nevertheless, the Bureau concluded that, because digital wallets may “allow a consumer to store
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`funds in [them] directly,” they should be regulated the same way as the GPR cards that were the
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`real subject of the Bureau’s rulemaking.4 The Bureau thus seized on an occasional and
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`incidental feature of digital wallets to impose on digital wallets a sweeping regulation designed
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`for GPR cards.
`
`6.
`
`The resulting regulatory regime is fundamentally ill-suited to PayPal digital
`
`wallets and is likely to mislead or confuse consumers. The Rule mandates PayPal make
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`disclosures concerning fees that PayPal does not charge and misrepresent the actual fees paid by
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`most customers. These mandatory disclosures undermine PayPal’s own clear disclosures
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`provided when consumers use their PayPal accounts. For example, the Rule mandates that
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`customers be given—and actually view—“short form” fee disclosures. The requirements for this
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`short form disclosure are extremely prescriptive and rigid. Certain fee categories must be placed
`
`in specified positions and presented in certain font sizes, largely because the CFPB deemed these
`
`categories most significant for GPR-card customers—and regardless of their relevance to
`
`
`2 “Prepaid Accounts Under the Electronic Fund Transfer Act (Regulation E) and the Truth in
`Lending Act (Regulation Z),” 79 Fed. Reg. 77,102, 77,110 (Dec. 23, 2014) (emphasis added).
`3 Id.
`4 Id.
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`PayPal’s products. The Rule further prohibits PayPal from including explanatory phrases within
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`the disclosure box to describe the nature of these fee categories. Additionally, for each required
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`fee category, the Rule states that the highest possible fee under the worst-case scenario must be
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`disclosed, even if the fee would rarely be incurred by the typical consumer (and would never be
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`incurred without further customer authorization). In other words, the Rule’s mandated short
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`form disclosure regime forces PayPal to make disclosures that confuse consumers as to the
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`products’ actual costs yet bars PayPal from providing the very information that would assist
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`consumers in making an informed decision.
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`7.
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`As a result of these compulsory disclosure requirements, PayPal must present the
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`following short form to customers:
`
`
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`8.
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`As PayPal foresaw throughout the rulemaking process, this disclosure has
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`confused many PayPal customers. As a result of the mandatory disclosures, customers
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`mistakenly believe that PayPal charges fees to access funds stored as a balance with PayPal, to
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`make a purchase with a merchant, or to send money to friends or family in the United States. To
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`the contrary, PayPal does not charge customers a purchase fee, and sending money to other
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`PayPal accounts within the United States is free. PayPal also does not charge to transfer money
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`from a PayPal account to a bank account, unless the customer elects to pay a small fee—clearly
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`disclosed and agreed to by the customer at the time of transfer—if the customer wants the
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`transfer to be accomplished in 30 minutes or less.
`
`9.
`
`The following comments submitted to PayPal by its customers are just some
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`examples of the misunderstandings caused by the Rule’s mandated short form disclosures:
`
` “[S]eems like you changed things and now there’s fees to spend/use my
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`money. … maybe I misread things but if so, then i’d say your description is
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`not clear.” (PayPal does not charge customers fees to use their funds to make
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`purchases.)
`
` “I’m not sure if you are going to charge me to hold the money & then the next
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`time I pay with paypal, use it. Would that be free?” (PayPal does not charge
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`customers fees to hold their funds in its digital wallet products or to use those
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`funds to make purchases.)
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` “Seems like there’s a fee for any way you use your money… I don’t
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`understand this new rule.” (PayPal does not charge customers fees to use their
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`funds to make purchases.)
`
` “It sounds like there will be more fees than there was. It was unclear if I can
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`still transfer to my bank without a charge.” (PayPal does not charge
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`customers fees for standard transfers of funds to linked bank accounts.)
`
` “Why do I have to have all these terms and conditions for a small amount of
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`money in my paypal account? Fees to transfer to my bank now … ? This is a
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`really anti-consumer move on your part.” (PayPal does not charge customers
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`fees for standard transfers of funds to linked bank accounts.)
`
`10.
`
`In addition to requiring PayPal to make new and confusing fee disclosures, the
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`Prepaid Rule restricts the ability of consumers to attach their own credit products to digital
`
`wallets. Specifically, in certain circumstances, the Rule bans consumers from linking credit
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`products to PayPal digital wallets for the first 30 days after they acquire the digital wallet
`
`product. This prohibition applies even where a consumer has already acquired the credit product
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`before obtaining the digital wallet, and any concern about consumer welfare should focus on the
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`acquisition of the credit products themselves, not the consumer’s decision that his or her best
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`financial interests are served by utilizing those credit products through PayPal’s secure process.
`
`11.
`
`Finally, the Rule violates PayPal’s constitutional rights by forcing it to convey the
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`government’s chosen message without regard for whether that compelled speech meaningfully
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`advances the government’s professed interests. Indeed, as PayPal repeatedly informed the
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`Bureau, the Rule’s contemplated disclosures are largely inapposite, misleading, or confusing
`
`when applied to digital wallets. What is more, the Bureau has restricted PayPal from providing
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`its customers with the information that would clarify potential misconceptions, a restriction that
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`plainly violates PayPal’s First Amendment rights.
`
`12.
`
`PayPal now brings this action to alleviate the (entirely foreseeable) negative
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`consequences of the Rule for consumers.
`
`THE RULE’S LEGAL DEFECTS
`
`13.
`
`The Prepaid Rule is unlawful under the Administrative Procedure Act (“APA”)
`
`and the U.S. Constitution, for three principal reasons.
`
`14.
`
`First, it axiomatic that an agency has no statutory authority to act unless Congress
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`has conferred that specific power on the agency. Here, the Prepaid Rule contravenes the
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`Bureau’s statutory authority in at least two ways: (1) It establishes a mandatory and misleading
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`disclosure regime nowhere authorized by federal law; and (2) it imposes a 30-day ban on
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`consumers linking certain credit cards to their prepaid account—a prohibition the law nowhere
`
`authorizes the Bureau to impose.5
`
`15.
`
`The Electronic Funds Transfer Act (“EFTA”), 15 U.S.C. § 1693 et seq.,
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`“provide[s] a basic framework establishing the rights, liabilities, and responsibilities of
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`participants in electronic fund and remittance transfer systems” with the “primary objective” of
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`safeguarding “individual consumer rights.”6 Although Congress explicitly noted the “unique
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`characteristics” of various electronic transfer systems and charged the Bureau with “issu[ing]
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`model clauses for optional use by financial institutions,”7 the Rule overlooks the differences
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`between digital wallets and other prepaid accounts and seeks to impose the same mandatory
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`disclosures, prescribed in exacting detail, on both sets of products. The Rule did not merely
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`provide for “optional” disclosures; it mandated a specific set of GPR-card-focused disclosures
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`with essentially no flexibility.8 These disclosures cover fees that are largely inapplicable to the
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`way digital wallet users actually use their products and create serious risks of consumer
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`confusion. EFTA nowhere authorizes the Bureau to impose these requirements, and the Court
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`should set them aside.
`
`16.
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`Similarly, the Bureau claimed to find statutory support for its 30-day ban on
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`linking certain credit products to digital wallets in the Truth in Lending Act (“TILA”), 15 U.S.C.
`
`
`5 5 U.S.C. § 706(2)(C) (“The reviewing court shall … hold unlawful and set aside agency action
`… in excess of statutory jurisdiction, authority, or limitations.”).
`6 15 U.S.C. § 1693(b).
`7 Id.; id. § 1693b(b) (emphasis added).
`8 See, e.g., id. § 1632(a), (c); id. § 1637(c)(1)(A).
`
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`§ 1601 et seq. TILA, however, is a disclosure statute whose purpose is to promote consumers’
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`“informed use of credit”;9 it does not empower the Bureau to impose substantive restrictions on
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`consumer choice like temporary bans or cooling-off periods. Indeed, nowhere does TILA so
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`much as mention the type of waiting-period requirement the Bureau imposed in the Prepaid
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`Rule.10
`
`17.
`
`Second, even if the Bureau had the statutory authority it claims, its rulemaking
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`process was fundamentally flawed, marked by a misunderstanding of the different characteristics
`
`of digital wallets and tainted by an insufficient cost-benefit analysis that failed to properly weigh
`
`the limited benefits consumers might derive from the Rule against the costs stemming from the
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`unnecessary and confusing changes to digital wallets that the Rule mandates.
`
`18.
`
`In issuing a one-size-fits-all Rule that treats PayPal’s digital wallets as if they
`
`were GPR cards, the Bureau violated the APA’s core requirement of reasoned decision-
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`making.11 The Bureau’s most basic error was ignoring the critical differences between digital
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`wallets and prepaid products like GPR cards. Unlike GPR cards, for example, PayPal’s digital
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`wallets do not charge consumers fees to open, maintain, or access the funds stored there (in the
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`event funds are stored at all), and permit consumers to immediately link existing accounts,
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`including their own previously acquired credit products, to their digital wallet to function as
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`funding sources. And unlike GPR card customers, digital wallet customers primarily use the
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`product to transfer funds from one of their existing credit or deposit accounts to a third party.
`
`
`
`9 15 U.S.C. § 1601(a).
`10 Although TILA permits the Bureau to require certain disclosures in situations not germane to
`the circumstances here, the Bureau claimed to predicate the disclosures at issue here on EFTA.
`11 5 U.S.C. § 706(2)(A) (“The reviewing court shall … hold unlawful and set aside agency
`action … found to be arbitrary, capricious, an abuse of discretion, or otherwise not in accordance
`with the law.”).
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`Further, unlike GPR cards, which are typically purchased in brick-and-mortar stores—the
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`specific acquisition context that drove the Bureau’s fact-finding and analysis—digital wallets are
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`acquired and used electronically.
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`19.
`
`At bottom, the Rule represents a serious category error—one that has serious
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`consequences for digital wallet providers like PayPal and their customers and one that violates
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`the APA’s core mandate that agencies engage in reasoned decision-making. Indeed, the Prepaid
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`Rule was designed for a specific product (GPR cards) acquired in a specific way (in retail
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`stores), but is being applied to a very different product acquired in a very different way. The
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`Bureau has provided no coherent and reasonable explanation for this effort to jam a square peg
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`into a round hole.
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`20. Moreover, the Bureau’s rulemaking was deeply flawed for another reason: It
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`performed a cost-benefit analysis riddled with gaps and omissions. All agencies have a basic
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`obligation to consider the consequences of their regulatory actions, but the Bureau is under a
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`heightened statutory obligation to do so. As mandated by the Dodd-Frank Wall Street Reform
`
`and Consumer Protection Act (“Dodd-Frank Act”), the Bureau must consider a proposed rule’s
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`“potential benefits and costs to consumers and covered persons”—“including the potential
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`reduction of access by consumers to consumer financial products or services” stemming from
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`that rule.12 The Bureau failed to perform the proper analysis here and, as to digital wallets, failed
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`to acknowledge this limitation on its authority. Remarkably, in the Prepaid Rule’s 40-page cost-
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`benefit section, the Bureau never so much as mentions the term “digital wallet”; it never even
`
`attempts to calculate the limited benefits the Rule might offer consumers using digital wallets;
`
`and it wholly fails to quantify the costs the Rule will impose on digital wallet customers who are
`
`
`12 12 U.S.C. § 5512(b)(2)(A).
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`forced to navigate misleading and inapplicable disclosures and are barred from immediately
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`linking certain credit products to PayPal’s platform in order to pay for goods and services or to
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`transfer money to third parties. The Bureau’s failure to properly perform the cost-benefit
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`analysis mandated by Congress requires that the Prepaid Rule be set aside.
`
`21.
`
`Third, the Prepaid Rule is invalid, and may not be enforced against PayPal,
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`because it violates the First Amendment of the U.S. Constitution. Generally, when the
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`government compels private commercial speakers to convey the government’s chosen message,
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`it must satisfy a heightened standard by demonstrating that the law or regulation directly
`
`advances a substantial government interest.13 Here, the Bureau’s onerous compulsory
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`disclosures require PayPal to prominently feature items that are irrelevant to the core use of its
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`digital wallet offering, such as “periodic,” “per purchase,” “customer service,” and “inactivity”
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`fees.
`
`22.
`
`Additionally, the Prepaid Rule requires PayPal to use certain fee terminology
`
`mandated by the Bureau without permitting any clarification within the short form itself about
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`what the terminology means. For example, the Rule’s mandatory short form template requires
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`mention of “cash reload” fees using those exact words or words “substantially similar,” and bans
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`any clarification in the short form that “cash reload” does not include electronic receipt of funds
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`into digital wallets via third-party transfers or electronic fund transfers into digital wallets
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`originating from linked bank accounts. Further, the Rule’s short form disclosure requirements
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`dictate that fee categories must mention only the highest possible fee that can be incurred in a
`
`worst-case scenario and do not permit an explanation of the circumstances when the fee will be
`
`
`13 See Nat’l Inst. of Family & Life Advocates v. Becerra, 138 S. Ct. 2361 (2018); Central
`Hudson Gas & Elec. Corp. v. Public Serv. Comm’n, 447 U.S. 557 (1980).
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`lower and by how much, even when substantially lower fees are typical and customers will have
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`clear prior notice when higher fees would be incurred.
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`23.
`
`As a result, the Prepaid Rule’s ill-suited disclosure obligations functionally impair
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`the speech in which PayPal might otherwise engage. The effect of the Rule’s inflexible
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`application to PayPal is to muddle PayPal’s ability to present and describe its products to
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`consumers in a manner that accurately informs, not confuses, them about the key product
`
`features. This interference with truthful, non-misleading commercial speech violates the First
`
`Amendment. And the Bureau can hardly have a substantial interest in forcing PayPal and other
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`digital wallet providers to prominently feature disclosures that are largely irrelevant to the
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`principal uses of their products and that actively mislead consumers about the features of those
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`products.
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`24.
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`For all these reasons, the Rule should be set aside in whole or in part, and its
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`application to PayPal should be enjoined.
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`JURISDICTION AND VENUE
`
`25.
`
`This action arises under the Administrative Procedure Act and the
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`U.S. Constitution. The Court has subject matter jurisdiction over this action under 28 U.S.C.
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`§ 1331. The Court is authorized to issue the relief sought pursuant to the APA, 5 U.S.C. §§ 701-
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`706.
`
`26.
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`PayPal has standing to bring this action because it is directly regulated and
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`adversely affected by the Rule.
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`27.
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`Venue is proper in this Court under 28 U.S.C. §1391(e) because Defendants
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`CFPB and Kathy Kraninger reside in this District and because a substantial part of the events or
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`omissions giving rise to the claims occurred in this District.
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`PARTIES
`
`28.
`
`PayPal is a leading technology company that enables digital and mobile payments
`
`on behalf of consumers and merchants worldwide. PayPal is incorporated in Delaware and
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`headquartered at 2211 North First Street, San Jose, California 95131. It is a subsidiary of PayPal
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`Holdings, Inc., a publicly traded corporation.
`
`29.
`
`Defendant Consumer Financial Protection Bureau is an agency of the United
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`States Government, located at 1700 G Street NW, Washington, D.C. 20552.
`
`30.
`
`Defendant Kathy Kraninger is the Director of the CFPB, an agency of the United
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`States Government, located at 1700 G Street NW, Washington, D.C. 20552. Defendant
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`Kraninger is sued in her official capacity as Director of the CFPB.
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`FACTUAL ALLEGATIONS
`
`I.
`
`PAYPAL AND DIGITAL WALLETS
`
`31.
`
`Founded nearly two decades ago, PayPal is a leading online payments company,
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`with more than 295 million active user accounts around the world as of October 2019. PayPal
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`Holdings, Inc. became an independent publicly traded company in July 2015. PayPal’s offerings
`
`in the United States include consumer and business accounts under the PayPal brand name as
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`well as accounts under the Venmo brand name. Both PayPal-branded and Venmo-branded
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`consumer accounts are regulated by the Prepaid Rule.
`
`32.
`
`PayPal’s technology enables digital and mobile payments on behalf of consumers
`
`and merchants worldwide, and the company is committed to providing financial tools for
`
`consumers to participate fully in the global economy and improve their financial health. In
`
`furtherance of this goal, PayPal strives to empower its customers by honoring and facilitating
`
`their choices to access, receive, and move their money anywhere across the globe in an efficient
`
`and secure manner.
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`33.
`
`PayPal’s main consumer offering is a “digital wallet.” Digital wallets are used
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`primarily to access and consolidate a consumer’s traditional payment devices (or “funding
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`instruments”) such as credit cards, debit cards, and checking accounts in order to permit the
`
`consumer to make electronic peer-to-peer transfers of funds or to purchase products from third-
`
`party merchants. PayPal also enables customers to receive payments for sales of goods at online
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`auction sites or at other electronic marketplaces. Additionally, only if customers choose to do so,
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`PayPal allows customers to hold and transfer stored value in their accounts.
`
`34.
`
`To use a digital wallet, a consumer links the wallet to the credentials for the
`
`consumer’s underlying funding instrument. Just as a physical wallet enables consumers to
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`organize and access tangible payment cards, a digital wallet organizes and enables access to the
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`electronic credentials for the consumer’s underlying funding instruments. Given the sensitivity
`
`of this data—which includes account numbers, expiration dates, and other personally identifying
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`information—digital wallet providers like PayPal devote significant resources to data security
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`and strive to safeguard their users’ payment credentials.
`
`35.
`
`Once a funding instrument has been linked to a digital wallet, the digital wallet
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`provider can complete transactions on the consumer’s behalf. For example, if a PayPal digital
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`wallet customer based in California wishes to purchase a widget from a merchant based in
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`Washington, D.C., the customer indicates which payment credentials she would like to use (a
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`credit card, a checking account, etc.), and PayPal accesses those payment credentials to complete
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`the transaction. Customers do not expose their full financial credentials to merchants; PayPal
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`facilitates the entire process. This anonymity is an especially attractive feature for customers
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`who would like to make purchases from merchants who have not yet earned the customers’ full
`
`trust to safeguard their financial credentials. PayPal functions as a trusted intermediary to
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`complete this type of economically beneficial transaction. This is one of the core functionalities
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`offered by the service.
`
`36.
`
`Generally, prepaid card issuers—like the financial institutions that issue GPR
`
`cards—generate revenue by charging a series of fees for the basic services they provide to their
`
`customers. These fees might include charges to open an account, to make individual purchases,
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`to load or reload cash into the account, to obtain customer service, or to maintain an account for
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`more than a pre-established amount of time.
`
`37.
`
`PayPal charges customers fees in limited circumstances as fully disclosed both in
`
`its user agreement and at the time a customer orders a transaction to which a fee might be
`
`applied. For example, although PayPal does not charge a customer a fee to transfer balance from
`
`his PayPal account to a linked bank account or debit card using the default standard service
`
`(which may take up to one to three business days to complete), a customer can choose to pay a
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`fee of 1% of the transferred amount, capped at $10, for expedited service that effectuates the
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`transfer in 30 minutes or less. PayPal does not charge fees to open or maintain accounts, to make
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`purchases from merchants, or to obtain customer service, and the majority of PayPal customers
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`in the United States do not incur any fees to use PayPal’s services. Rather, PayPal’s transaction
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`revenues are generated primarily from fees charged to merchants.
`
`II.
`
`THE STATUTORY AND REGULATORY LANDSCAPE
`
`38.
`
`Three statutes—EFTA, TILA, and the Dodd-Frank Act—provide the framework
`
`that authorizes and constrains the Bureau’s rulemaking authority in this area of commerce.14
`
`
`
`
`14 See, e.g., 81 Fed. Reg. at 83,958-83,960.
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`A.
`
`The Electronic Funds Transfer Act
`
`39.
`
`Congress enacted EFTA in 1978.15 Although cognizant that the “use of electronic
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`systems to transfer funds” offered “substantial benefits to consumers,” Congress was concerned
`
`that the “application of existing consumer protection legislation” to those systems was
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`“unclear.”16 EFTA represents Congress’s effort to “provide a basic framework establishing the
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`rights, liabilities, and responsibilities of participants in electronic fund transfer systems” that
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`keeps “individual consumer rights” at the forefront.17
`
`40.
`
`EFTA initially authorized the Board of Governors of the Federal Reserve (“the
`
`Board”) to prescribe regulations to carry out the statute’s purposes. Upon passage of the Dodd-
`
`Frank Act, most rulemaking authority under EFTA shifted from the Board to the Bureau.18
`
`41.
`
`The Bureau does not have carte blanche authority to write rules under EFTA.
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`Rather, the Bureau’s authority is constrained by the general requirement that any rule
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`promulgated by the Bureau “shall consider the potential benefits and costs to consumers and
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`covered persons, including the potential reduction of access by consumers to consumer financial
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`products or services resulting from such rule.”19 Further, under EFTA, financial institutions
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`involved in facilitating consumer electronic transactions must make certain disclosures to
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`consumers before and after they engage in those transactions.20 To assist financial institutions in
`
`
`15 EFTA is codified at 15 U.S.C. § 1693 et seq.
`16 Pub. L. No. 95-630, § 902, 92 Stat. 3641, 3728 (1978); see also 15 U.S.C. § 1693(a).
`17 Pub. L. No. 95-630, § 902, 92 Stat. at 3728.; see also 15 U.S.C. § 1693(b).
`18 Pub. L. 111-203, § 1084, 124 Stat. 1376, 2081 (2010); 12 U.S.C § 5581(b).
`19 12 U.S.C. § 5512(b)(2).
`20 For example, EFTA requires that financial institutions disclose, “at the time the consumer
`contracts for an electronic fund transfer service,” information like the “consumer’s liability for
`unauthorized electronic fund transfers” and the “type and nature of electronic fund transfers
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`that process, EFTA requires that the Bureau “issue model clauses for optional use by financial
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`institutions.”21 For example, with respect to disclosures at the heart of this case—those
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`pertaining to “charges for electronic fund transfers”—EFTA specifically directs the Bureau to
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`“take account of variations in the services and charges under different electronic fund transfer
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`systems” when issuing model clauses.22 This flexibility is one of EFTA’s hallmarks: The statute
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`never states that the mandated disclosures must be presented in any specific format or use any
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`specific phrasing nor does it state that only maximum fees under worst-case scenarios should be
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`disclosed. Instead, it largely leaves the presentation format, layout, font size, and phrasing to the
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`discretion of financial institutions.
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`42.
`
`The Board’s initial rulemaking efforts under EFTA were codified in what is
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`known as “Regulation E.”23 Between 1994 and 2010, the Board amended Regulation E multiple
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`times and considered initiatives to “add consumer protection for certain prepaid and other stored-
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`value products.”24 Although the Board specifically considered whether to use EFTA and
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`Regulation E to regulate GPR cards and other similar prepaid financial products, it never
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`finalized any of those proposals during this period.25 And at no point since EFTA went into
`
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`which the consumer may initiate.” Pub. L. No. 95-630, § 905(a), 92 Stat. at 3730-3731; see also
`15 U.S.C. § 1693c. It also requires financial institutions to “notify a consumer in writing at least
`twenty-one days prior to the effective date” of any changes to certain terms, id. § 905(b), 92 Stat.
`at 3731, and mandates certain periodic disclosures about the specifics of a consumer’s
`transactions, id. § 906, 92 Stat. at 3731-3732; see also 15 U.S.C. § 1693c.
`21 Pub. L. No. 95-630, § 904, 92 Stat. at 3730 (emphasis added); see also 15 U.S.C. § 1693b.
`22 Pub. L. No. 95-630, §§ 904-905, 92 Stat. at 3730-3731; see also 15 U.S.C. §§ 1693b, 1693c.
`23 12 C.F.R. § 205 et seq. When responsibility for Regulation E was transferred from the Board
`to the Bureau, the regulation was renumbered as 12 C.F.R. § 1005 et seq. See 81 Fed. Reg. at
`83,946 n.116.
`24 81 Fed. Reg. at 83,946.
`25 Id.
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`effect more than 40 years ago, did the Board or the Bureau ever so much as mention “digital
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`wallets” as a target for regulation under that statute unti