Paypal Regulation E Violation: Forced Card Verification For Unauthorized Amazon Charge

Location: Texas

​I am seeking legal advice regarding a 3-month dispute with PayPal over an unauthorized transaction. I believe they have violated Regulation E (12 CFR § 1005.11) through predatory investigation tactics.

​The Issue:

PayPal authorized a charge for an Amazon subscription using PayPal itself as a secondary payment method, pulling from a funding source I never authorized for this specific recurring merchant. They are currently deflecting liability by claiming the transaction was initiated through a "Google payment arrangement." However, as PayPal executed the transfer from my account, they are the covered financial institution.

​Account Coercion:

Upon my initial dispute, PayPal immediately restricted my account access. They held my account hostage and refused to unlock it or allow me to view my records until I "verified my identity" by inputting the full card number of the disputed secondary source. I was locked out of my own account and forced to provide sensitive data regarding the disputed source just to see my transaction history.

​Admission of Error vs. Procedural Denials:

I have a transcribed call with a supervisor named Jeff (on a recorded line, with my personal case reference) who explicitly admitted the charge was an error. Despite this admission, PayPal closed the case in their favor, citing "user error" in my dispute filing category.

​However, I have an automated email from PayPal stating: "We changed your case reason," which proves their system had already corrected the filing category internally before they issued the denial. PayPal is now refusing a cash refund to my original balance and has offered a store voucher instead, which I have rejected.

​Legal Questions:

​Does forcing a consumer to provide the full card details of a disputed source to regain account access violate Regulation E "good faith" investigation requirements?

​Does a third-party arrangement like Google exempt a covered financial institution (PayPal) from liability for an "incorrect electronic fund transfer" under the EFTA?

​Is a store voucher a legally valid resolution for an admitted Reg E error under § 1005.11, or is a cash-equivalent refund to the original balance mandatory?

​I have an active CFPB case and want to ensure my legal arguments are correct.