Attention online Shoppers! PayPal has reached an agreement with the Consumer Financial Protection Bureau to pay back $15 million to users and another $10 million penalty to settle a claim that it illegally signed up and billed consumers for PayPal Credit.
According to the CFPB, thousands of consumers who tried to set up a regular PayPal account or buy something online were instead signed up for the credit product without knowing it, sometimes only learning they had done so when contacted by debt collection agencies.
PayPal Credit (formerly Bill Me Later) is a way to have PayPal foot the bill now and the consumer repay it over time, with interest, late fees and other charges, which becomes problematic when the customers do not know they are paying on time.
According to the bureau, PayPal set the default payment option as PayPal Credit, and some consumers were unable to deselect it. The CFPB also said that for those who did know they were signing up for the credit option, PayPal failed to deliver on promised advertised promotions, which CFPB called deceptive advertising, which could also have gotten PayPal in trouble with the Federal Trade Commission if true.
PayPal has also agreed to give clear disclosures during enrollment and checkout and insure that customers get the advertised promotions they are offered.
"Online shopping and the financial products that make it possible are positive features of modern life," said the Bureau in announcing the settlement. "They create great options and accessibility. But financial services providers that enable these transactions need to be careful to make sure that people are treated fairly and according to the law. And we will continue to be vigilant in protecting all consumers."
