PayPal may be fined USD 25 million over credit allegations

Moreover, consumers using PayPal to shop online were unknowingly signed up for credit lines and promised discounts and payment options they never received. The agency wants PayPal to pay, besides the USD 25 million fine, USD 15 million in refunds for consumers and a USD 10 million penalty, washingtonpost.com reports. Some people attempting to sign up for regular PayPal accounts did not realise they were signed up for credit with the company, a service formerly known as “Bill me later,” until they noticed the inquiries on their credit reports or received e-mails welcoming them to their credit accounts, according to the agency.

Once they were enrolled for the service, which allowed customers to make purchases and pay their bills later, consumers were often defaulted into using PayPal credit as their primary payment method when they shopped with PayPal. That caused them to use credit during times they intended to pay with a checking account or credit card linked to their accounts.

Some people said their purchases were charged to PayPal Credit even when they chose another payment method and, as such, many consumers faced late payment fees and interest charges because they did not know their purchases had been charged to the credit line, according to the CFPB, the source cites.

PayPal lost payment checks and sometimes took more than a week to process checks, consumers said. The company then failed to refund customers for late payment penalties and interest charges they faced because of website issues. Many people who used the credit option never received promotions they were promised, such as credits for USD 5 or USD 10.

The complaint, filed with the US District Court for the District of Maryland, needs to be approved by a judge. If approved, the company would need to pay customers who were signed up for credit without knowing it, who were charged fees as a result of “inadequate disclosures and flawed customer-service practices” from PayPal. The CFPB said customers would not need to take any other action to receive refunds. It’s not yet clear how many customers were affected.