The vaunted Consumer Financial Protection Bureau that’s been such a lightning rod since its inception is apparently targeting some aspects of PayPal’s private enterprise training financial transaction system in a way that the verification company says is unfair.
Reuters reports the CFPB is looking at Venmo and its alleged “unauthorized funds transfer and collection processes.”
Some might be surprised to know that Venmo has been part of the PayPal stable since 2013. The service transferred $47 billion in processing in the fourth quarter of 2020.
While the new investigation into Venmo began last month, according to Reuters staff, other judgments by the same agency against PayPal date back several years.
Looking into the archives, you can see the back-and-forth that happened in court about the ‘prepaid card rule’ where PayPal alleged the CFPB mis-categorized digital wallets.
“The CFPB rule will ensure that entities that store consumer funds will limit potential loss to consumers in the event their card or account is compromised, according to the Wall Street Journal,” reported Ruth Reader in a Fast Company piece October 2016. “Card providers and mobile wallets will also have to make disclosures more clear to their users. Apple Pay and other apps that merely store payment credentials rather than cash, will not be affected by the new law. The ruling is in part a response to a debate over whether prepaid accounts should have the ability to overdraft (and thus incur fees).”
Since then, PayPal has also added Bitcoin purchasing to its platform. It’s a bold move putting the company closer to the heart of fintech advancements and the ways that our financial systems are fundamentally changing.
Whether PayPal and Venmo will face additional challenges from the CFPB, or the SEC or other agencies, remains to be seen. Generally speaking, we’ve seen the cryptocurrency sector bloom over the past two years, and more investors, including corporate treasuries, are getting into the game. Interested traders are looking with a keen eye at how regulation responds to these changes. Make this part of your contextual due diligence for any crypto trading plan.
