The Consumer Finance Protection Bureau fined PayPal $US25 million this week for signing people up for its credit arm, PayPal Credit (previously Bill Me Later), without them realising it.
$US15 million of the fine is going toward reimbursing PayPal customers who were erroneously signed up for PayPal Credit, and the other $US10 million is a penalty.
According to a CFPB statement, “The CFPB alleges that many consumers who were attempting to enroll in a regular PayPal account, or make an online purchase, were signed up for a credit product without realising it. The company also failed to post payments properly, lost payment checks, and mishandled billing disputes that consumers had with merchants or the company.”
The CFPB says tens of thousands of customers were affected.
This part of the complaint we found particularly interesting:
Often consumers do not discover that PayPal Credit was used as the method of payment until late fees and interest have accrued and the consumer receives debt-collection calls. This is in part because many consumers do not realise that PayPal Credit automatically enrolls consumers in electronic billing at the time of their enrollment and, in many cases, electronic billing statement notices go into spam email folders.
A PayPal spokesperson told Business Insider that the accounts that the CFPB had a problem with were only 0.01% of Paypal Credit accounts, and that the time frame of the CFPB investigation was from 2008 to 2013. PayPal updated its disclosures in the first quarter of 2013. The spokesperson also suggested that the fine PayPal received was incredibly small compared to other similar fines from the CFPB against banks which had similar issues.
In 2014, the CFPB ordered Bank of America to pay $US772 million “to settle allegations that the bank used deceptive marketing and billing practices involving credit card products,” the New York Times reports. However, most of that was for refunds to customers affected. The punitive fines were $US20 million and $US25 million, to the CFPB and to the Office of the Comptroller of the Currency, respectively.
Amanda Miller, PayPal’s head of global communications, said in an emailed statement to Business Insider: “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.”