Online payments company PayPal has been ordered by the Consumer Financial Protection Bureau (CFPB) to pay $15 million in consumer redress and a penalty of $10 million (to the Civil Penalty Fund) in the US, reports Gizmodo. This comes as PayPal allegedly illegally signed up tens of thousands of consumers for an online credit program called PayPal Credit (previously called Bill Me Later) without their permission and billed those accounts on credit instead of their preferred payment method. It also allegedly mishandled billing disputes, failed to post payments and lost payment cheques for purchases made between 2008 and 2013.
Shopping credits not given
PayPal has also been ordered to improve its disclosures and procedures. The CFPB alleged that PayPal deceptively advertised promotional benefits (like credit of $5 or $10 for purchases made on the site) of using the service but did not honor those commitments. It also charged consumers deferred interest even when consumers tried to contact PayPal. Some of these were unable get through to customer service or were given inaccurate info.
No way to sign out of program
The company enrolled even those consumers who tried cancelling or closing the application process, ending up with PayPal Credit accounts they did not want or were unaware of. These accounts, the CFPB states, were discovered only after PayPal sent welcome mails, billing statements or made debt-collection calls for dues, late fees and interest or if the consumer had filed a credit report inquiry.
Consumers incurred late fees and interest after PayPal automatically set or pre-selected the default payment method to PayPal Credit. Consumers were locked out of payments options despite selecting other modes because those purchases were still charged to PayPal Credit without their consent or knowledge.
Gizmodo also outlined some of the users stories where people ended up paying $100 for a $5 purchase even in order to unlock their PayPal account, were not giving access to their accounts, received fake vouchers and were charged 10% for every 90 days of the loan repayment among others.
In 2011, PayPal had informed its Indian users that they wouldn’t be able to receive overseas payments exceeding $500 per transaction. It also stated that the balance in their account would be auto-withdrawn on a daily basis. These changes were made as per RBI’s guidelines with respect to processing export-related payments. RBI regulations deemed that users would get up to 7 days to withdraw the credit from their PayPal accounts, but PayPal auto-withdrew these daily. This meant that its users did not get a choice to get a favourable exchange rate of withdrawal in those 7 days.
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