Cannot create new folder in Media gadget

Description

When a user has or is part of a group with access rights of create and change on a folder, that user is not able to create new folders or rename existing one.
A user with create and change rights can see the new folder button with the ability to click it [screenshot1] but when they try to create, it shows an error in the console

"403 (Access was denied to content 3. The required access level was "Create, Publish".)".

If we remove the create access rights, the user is shown a grey out option of creating a new folder [screenshot2] and the user is not able to click the button.
It works in 9.12.3