If you make a lot online purchases, odds are you have a PayPal account. Now the company is in hot water after the Consumer Financial Protection Bureau filed a complaint against the company accusing it of using some really shady business practices to victimize consumers. PayPal has agreed to pay out millions of dollars to victims to make things right.
According to the CFPB, PayPal signed up some users for its PayPal Credit service without their knowledge. To make matters worse, it allegedly set PayPal Credit as the default payment option on many of those accounts. This caused some customers to rack up hefty credit charges with PayPal without even knowing it. And, that's not all.
The CFPB also alleges that PayPal Credit often failed to process payments in a timely manner or lost payment checks, leading to late fees and interest charges for consumers. On top of that, the CFPB claims that even when PayPal’s own systems were down, such that users couldn’t make payments, it would hit them with penalties.
Some people even switched their default payment method to some other form like a bank account or outside credit card, only to have PayPal automatically switch it back to PayPal Credit without their knowledge.
PayPal has agreed to pay a $25 million penalty to resolve the complaint. Of that payout, $15 million will go to customers affected by the scam. The other $10 million will be paid as a fine.
Nothing is worse than suddenly finding out about a bunch of unknown credit charges. I'm glad that PayPal is being held responsible for this and customers will be offered restitution.
“PayPal Credit takes consumer protection very seriously,” Amanda Christine Miller, a PayPal spokeswoman, said in an emailed statement. “We continually improve our products and enhance our communications to ensure a superior customer experience.”