PayPal spends $25 million to settle Bill Me Later claims

May 19, 2015 11:36 AM

(Bloomberg)—PayPal Inc., a unit of eBay Inc., will forfeit $25 million in restitution and fines to settle Consumer Financial Protection Bureau claims that it illegally enrolled customers in an online credit product.

“PayPal illegally signed up consumers for its online credit product without their permission and failed to address disputes when they complained,” CFPB Director Richard Cordray said in a statement Tuesday. “Online shopping has become a way of life for many Americans and it’s important that they are treated fairly.”

PayPal, which announced plans to split from eBay last year after activist investor Carl Icahn said the parent firm was slowing its growth, often signed up customers for its credit product without their consent, CFPB said. The company also failed to post payments properly, lost payment checks and didn’t resolve billing disputes.

In particular, CFPB said, PayPal used deferred-interest promotions, including Bill Me Later, which push off payments to a later date, to rope in customers. The company then made it difficult to avoid the deferred fees, which customers can typically do by paying off a loan before a specified date, the agency said.

A spokeswoman for PayPal said the company “takes consumer protection very seriously.”

“We continually improve our products and enhance our communications to ensure a superior customer experience,” she said in an email. “Our focus is on ease of use, clarity and providing high-quality products that are useful to consumers and are in compliance with applicable laws.”

PayPal agreed to refund $15 million to consumers who were unjustly charged and pay $10 million in penalties.





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