The Consumer Financial Protection Bureau (CFPB), which turns four years old this month, has enjoyed unprecedented scope and depth of jurisdiction to regulate financial services firms since its inception. The federal consumer watchdog’s recent case against the online payments company PayPal Inc. sheds new light on the CFPB’s application of regulatory powers in the financial technology sector. Although ambiguous sections within Title X of the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010 offer limited guidance for compliance, a comparison of the claims in the PayPal case asserted by the agency illuminate emerging patterns in its enforcement docket and reveal significant insights on the direction in which things are headed.

Background of the Case

On May 19, the CFPB filed a six-count complaint in federal court in Maryland against PayPal and its wholly owned subsidiary, Bill Me Later Inc. The claims focus on the defendants’ process for enrolling customers into the credit product, PayPal Credit, formerly known as Bill Me Later (BML), and for servicing the resulting consumer credit accounts. Concurrently, the parties filed a stipulated final judgment and order pursuant to which PayPal and BML did not admit or deny any of the charges but agreed jointly to pay $15,000,000 in consumer redress and $10,000,000 in civil penalties.

Key Takeaways

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