PayPal To Pay $25 Million To Settle Complaint Of Illegally Enrolling Consumers In Its Online Credit Program

PayPal, Inc., a California-based company that offers online payment services, agreed Tuesday to pay $25 million in fines and customer reimbursement costs to settle a Consumer Financial Protection Bureau (CFPB) complaint, reports said. The federal agency’s complaint accused PayPal of various instances of wrongdoing, including deceptive advertising and illegally enrolling customers in its “PayPal Credit” online program.

“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. “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.”

Illegal enrollment in the PayPal Credit program was one of six allegations outlined in the CFPB’s complaint. The agency also alleged PayPal charged customers deferred interest without providing the necessary explanation, installed PayPal Credit as a default payment method without customer approval, illegally billed customers, failed to properly address payment disputes and failed to honor benefits it promised in advertisements.

The company will pay $15 million in restitution to customers affected by its apparent missteps and $10 million in fines to the CFPB. The agency also demanded PayPal improve transparency in regard to its enrollment and billing practices. PayPal responded to the complaint in a statement to Bloomberg News.

“We continually improve our products and enhance our communications to ensure a superior customer experience,” PayPal spokeswoman Amanda Miller told Bloomberg 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 has been a subsidiary of eBay since 2002. The two companies announced plans to split last September; PayPal is slated to become autonomous later in 2015, Forbes reported.