View Report

This article explores the challenges and confusion created by outdated consumer protection laws in the face of modern electronic commerce (e-commerce). Traditional consumer protection statutes use terminology that does not seamlessly apply to new methods of conducting business. For example, it is unclear whether a prepaid card in a digital wallet is legally equivalent to a plastic prepaid card, which raises concerns about how existing laws apply to evolving technology.

A significant issue discussed is how courts determine consumer assent to digital contracts. Courts have differentiated between clickwrap agreements, where consumers actively click “I agree,” and browsewrap agreements, where terms are linked but not explicitly accepted. While courts generally uphold clickwrap agreements, browsewrap agreements face enforcement challenges. The case Kauders v. Uber illustrates how courts analyze website design features to determine whether consumers provided valid assent. However, the process is inconsistent and fact-specific, as website designs frequently change, further complicating the legal landscape.

Robocalls are another contentious issue discussed, specifically the Telephone Consumer Protection Act (TCPA). In Facebook v. Duguid, the Supreme Court narrowly defined “automatic telephone dialing systems,” limiting the scope of the TCPA. This decision frustrated consumer advocates who argue that such rulings undermine the intent of the law to protect consumers from unsolicited calls.

The article also examines Remote Deposit Capture (RDC), where consumers deposit checks by photographing them and sending digital images to their banks. RDC raises questions about which laws apply, as the Uniform Commercial Code (UCC) governs physical checks, while the Electronic Funds Transfer Act (EFTA) regulates electronic transfers. Since both laws predate RDC technology, there is uncertainty regarding consumer liability when deposits fail.

Another point of contention involves the definition of a “bank.” Nonbanks that partner with traditional banks have been accused of exploiting exemptions in state usury laws under “rent-a-bank” arrangements. Although the Comptroller of the Currency issued a rule favoring nonbanks, Congress repealed it in 2021, affirming that such entities should not benefit from protections intended for real banks.

The Consumer Financial Protection Bureau (CFPB) attempted to regulate digital wallets under rules governing prepaid accounts. However, PayPal successfully challenged this, arguing that the CFPB overstepped its authority. This case highlights the legal challenges of applying traditional regulations to emerging technologies like digital wallets.

Virtual currency, particularly bitcoin, further illustrates regulatory ambiguity. Courts and agencies differ in classifying bitcoin as property (IRS), a commodity (CFTC), or as outside the definition of “money” under the UCC. This inconsistency complicates regulatory oversight and leaves businesses and consumers uncertain about its legal status.

The article concludes by emphasizing the widening gap between technological advancements in e-commerce and outdated legal frameworks. As new business practices and technologies continue to emerge, Congress and regulatory agencies must modernize and clarify laws to ensure both consumer protection and business compliance in the digital age.