Photo (cc) by Glory Cycles
PayPal is in trouble with the federal government — to the tune of $25 million.
According to the Consumer Financial Protection Bureau, PayPal illegally signed up tens of thousands of consumers for PayPal Credit, its online credit service, previously called Bill Me Later.
The CFPB said consumers were unknowingly signed up for the credit service and promised discounts and payment options they didn’t receive.
“[Consumers] discovered their accounts only after finding a credit-report inquiry or receiving welcome emails, billing statements, or debt-collection calls for amounts past due, including late fees and interest,” the CFPB said.
Click here to see the CFPB’s complaint against PayPal, which was filed with the U.S. District Court for the District of Maryland.
The CFPB is seeking $15 million in refunds to affected customers and a $10 million penalty.
CFPB director Richard Cordray said in a statement:
Online shopping has become a way of life for many Americans and it’s important that they are treated fairly. The CFPB’s action should send a signal that consumers are protected whether they are opening their wallets or clicking online to make a purchase.
The CFPB alleges that PayPal set many consumers’ default payment method to PayPal Credit without their consent, leading to “incurred late fees and interest because [consumers] did not know they had made purchases through PayPal Credit.”
PayPal is also accused of failing to post payments, losing payments and mishandling billing disputes.
PayPal has admitted to no wrongdoing. In a statement, the company said:
PayPal Credit takes consumer protection very seriously. We continually improve our products and enhance our communications to ensure a superior customer experience. 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.
The CFPB said affected customers don’t have to do anything to get a refund. According to The Wall Street Journal, PayPal is required to provide the CFPB with a plan for consumer redress. After the agency approves it, refunds will be made.
Have you had issues with PayPal or its PayPal Credit service? Share your experiences below or on our Facebook page.