DC Circuit finds CFPB Prepaid Rule did not violate ban on model clauses

In 2016, the CFPB issued a rule requiring certain disclosures for digital wallets and other prepaid accounts. Paypal challenged the rule as contrary to statute, unconstitutional, and arbitrary and capricious. The district court agreed with Paypal that the disclosure rules violated the EFTA ban on mandatory model clauses, and thus did not reach the other grounds. Today, a unanimous panel of the DC Circuit reversed, agreeing with the CFPB that the rule does not require use of model clauses. The opinion, authored by Judge Rao, emphasized the narrowness of the issue decided, and remanded to the district court to consider Paypal’s other arguments.