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PayPal to pay $25 million in fines for ‘deceptive’ and shady business practices

Yoni Heisler

We’ve all heard of the term PayPal Mafia, but that’s ordinarily used to reference some of PayPal’s earliest employees, not the company’s actual business practices.

Earlier today, PayPal agreed to fork over $25 million in damages stemming from shady business practices the company used to a) trick consumers into signing up for services that they didn’t really want and b) net more money in the way of fines and late fees than they were entitled to.

The list of PayPal’s offenses is long and should be worrisome for anyone who uses the service regularly, especially if large sums of cash are involved.

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One of the more egregious charges levied against PayPal is that new users were automatically entered into PayPal Credit as opposed to the regular service.

“PayPal Credit is a delayed payment scheme, which allows users to spread out bills over several months, paying a monthly interest rate for the privilege,” BBC reports. “Members face additional fees if any of their payments are overdue.”

As a result, the US Consumer Financial Protection Bureau (CFPB) noted that “tens of thousands of consumers who were attempting to enroll in a regular PayPal account” wound up a part of PayPal’s credit service without their knowledge.”

In a CFPB press release, director Richard Cordray said: “PayPal illegally signed up consumers for its online credit product without their permission and failed to address disputes when they complained.”

Additionally, the PayPal Credit service, which the company advertises heavily, promises new members $10 in free credit. But as it turns out, many customers who signed up for the service never received the $10 credit.

And that’s just the tip of the iceberg.

Some of the other behaviors the CFPB took PayPal to task over include illegal billing practices, billing errors, and mishandling billing disputes when consumers brought them to the company’s attention. As an illustrative example, CFPB notes that PayPal would routinely charge customers late fees and interest charges even when payments couldn’t be processed due to technical problems on the website.

PayPal, not looking for an ugly and public fight over its business practices, quickly agreed to dole out $25 million, $15 million of which will be earmarked for users who were mistakenly enrolled in the PayPal Credit program. The standing $10 million is punitive in nature and will go into the CFPB’s penalty fund.

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This article was originally published on BGR.com