Today the Consumer Financial Protection Bureau (CFPB) filed a Complaint and proposed Consent Order in federal court against PayPal, Inc. for illegally signing up consumers for its online credit product, PayPal Credit, formerly known as Bill Me Later.
The CFPB alleges that PayPal deceptively advertised promotional benefits that it failed to honor, signed consumers up for credit without their permission, made them use PayPal Credit instead of their preferred payment method, and then mishandled billing disputes.
Specifically, the CFPB alleges that the company:
- Deceptively advertised promotional benefits
- Abusively charged consumers deferred interest
- Enrolled consumers in PayPal Credit without their knowledge or consent
- Made consumers use PayPal Credit for purchases instead of their preferred payment method
- Engaged in illegal billing practices
- Mishandled consumer disputes about payments
The last category of allegations (mishandled consumer disputes about payments) is part of an overall theme of CFPB inquiries in the past. It is clear that handling of disputes of any type is a hot button at CFPB.
Under the terms of the proposed consent order filed today, PayPal would:
- Pay $15 million in redress to victims: PayPal would reimburse consumers who were mistakenly enrolled in PayPal Credit, who mistakenly paid for a purchase with PayPal Credit, or who incurred fees or deferred interest as a result of the company’s inadequate disclosures and flawed customer-service practices.
- Improve disclosures: PayPal would be required to take steps to improve its consumer disclosures related to enrollment in PayPal Credit to ensure that consumers know they are enrolling or using the product for a purchase. These improved disclosures would also apply to fees and deferred interest to ensure that consumers understand how their payments will be allocated.
- Pay $10 million civil penalty: PayPal would pay $10 million to the CFPB’s Civil Penalty Fund.
The proposed consent order is not a finding or ruling that the company has actually violated the law. It has been filed with the U.S. District Court for the District of Maryland, and would have the force of law only if it is approved by the presiding judge.