PayPal to Pay $25 Million for Deceiving its Customers

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( — May 21, 2015) — US Consumer Financial Protection Bureau accused PayPal of adding new members to a credit-card-like scheme without making them aware of the fact. Customers later realized they signed up for a credit service after PayPal invoice them for a fee, BBC reported.

Among other offences, the eBay-owned company has mishandled bill disputes, a government watchdog said. Basically, if you want to buy something online and wish to pay via your PayPal card, the service by default will register as a delayed payment acquiring a fee, according to the service.

The payment allows users to spread out bills over several months, paying a monthly interest rate for the privilege. Of course, members face additional fees if any payment is overdue. That is common behavior; however, the issue is that PayPal makes this option a default, without customer approval. Even though it isn’t illegal, there are customer’s rights broken at the start.

“Tens of thousands of consumers who were attempting to enroll in a regular PayPal account or make an online purchase were signed up for the credit product without realizing it”, said Richard Cordray, director of the US Consumer Financial Protection Bureau.

Cordray said that some customers had discovered the fact only after being charged for late fees or having received debt-collection calls.

There is more. PayPal advertises up to $10 worth of credit towards purchases; however this is something that the company failed to provide.

“PayPal [also] failed to post payments properly, lost payment checks and mishandled billing disputes that consumers had with merchants or the company itself”, Cordray added.

The proposed settlement states, which PayPal agreed to, that the company would set up a $15m fund to compensate affected customers. I addition, the settlement says that PayPal will pay a $10m fine to the bureau.

“PayPal Credit takes consumer protection very seriously”, the California-based company said in a statement, adding that the focus of the company is on “ease of use.”

PayPal Credit is also offered to users outside the US, however “UK members have not been affected by the issues raised in connection with this CFPB investigation,” a representative for the firm told the BBC.

This is the second time PayPal has been fined by the US government in recent months; BBC reported adding that the company violated sanctions against Iran, Cuba and Sudan by providing them its services.