Trump CFPB Gives Big Tech Another Present by Dropping PayPal Case
Second time administration green-lights Big Tech rule-breaking
By Christine Chen Zinner
Another Musk/Big Tech giveaway occurred this week as the Consumer Financial Protection Bureau dropped its case against PayPal for skirting prepaid card rules that apply to gift cards and re-chargeable payment apps.
The CFPB’s prepaid account and gift card disclosure rule, which took effect in 2019, requires all prepaid accounts and cards to offer a short form disclosure box, like a nutrition label, that clearly discloses the key fees and states that the user account is not FDIC insured (or how to get FDIC coverage). PayPal had sued to overturn the rule because it wants to be exempt from these basic transparency requirements that protect users.
Under the first Trump administration, the CFPB agreed that such disclosure rules apply to prepaid digital wallet accounts as well as physical prepaid debit and gift cards. After all, such short form disclosures aren’t expensive or hard for PayPal to issue, but can greatly benefit PayPal users, who hold a collective $42 billion in uninsured funds in their PayPal accounts; the company’s business model relies on customers storing funds in their accounts. And both digital wallets and apps and physical cards have a raft of confusing fees. It makes sense to have the same transparency requirements for all versions of a prepaid card and that is how other laws are interpreted, including the Electronic Fund Transfer Act, which protects different accounts regardless of whether they are accessed digitally or physically.
Until this week, this was a non-controversial approach. Both the Trump 1.0 CFPB and the Chopra-led CFPB agreed and argued in court that disclosures should apply equally to prepaid cards and digital wallets. This time around, the Trump CFPB is siding with PayPal and against users of digital payment apps (that would be pretty much everyone these days) by filing a joint stipulation with PayPal to drop the case entirely. It looks like those oligarchy risks we warned about last year are coming home to roost.
PayPal mafia billionaires and Trump cronies such as Elon Musk, Peter Theil, and David Sacks and other Big Tech billionaires like Mark Zuckerburg, whose tech companies and start ups were previously under CFPB investigation or oversight, now are suddenly free to do what they wish. Indeed, Musk’s DOGE has sought to dismantle the CFPB while Musk’s X is rolling outX Money, a digital payment system that will be able to gouge users with even less CFPB oversight. With this new cast of characters controlling (non) enforcement, PayPal is benefiting immensely from this latest corporate pardon from the Trump CFPB.
According to Federal Trade Commission reports digital payment apps are the second highest conduit of fraud complaints, second only to credit cards. Earlier this month, the House and Senate majorities voted to roll back a CFPB rule that would have brought supervisory oversight over Big Tech payment apps such as PayPal, Apple Pay, Venmo, and Musk’s X-Money.
Now the Trump administration has sided with PayPal and against its customers to keep them in the dark about the fees and protections on their payment apps. The season of giveaways to digital payment apps is proving fruitful for Musk and his billionaire friends.
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