PayPal has been hit with a staggering bill of $25 million (£16.1m) after allegations emerged suggesting the company was deceiving customers.
A US government watchdog claimed the online payment service was signing new members up to a credit scheme without their knowledge.
“The CFPB alleges that PayPal deceptively advertised promotional benefits that it failed to honour, signed consumers up for credit without their permission, made them use PayPal Credit instead of their preferred payment method, and then mishandled billing disputes,” the complaint, written by the Consumer Financial Protection Bureau, states.
The company didn’t actually lose a case in court; instead, it opted to settle, without actually admitting to deceiving customers.
The furore surrounds the PayPal Credit scheme, a delayed payment plan that lets users spread out their bills over a period of time.
This finance system results in users having to pay a monthly interest rate for the privilege of acquiring credit.
What’s more, if payments are overdue, additional fees are levied against the customer.
PayPal allegedly made the service a default option for new members, without making it sufficiently clear that this was the case.
“Tens of thousands of consumers who were attempting to enrol in a regular PayPal account or make an online purchase were signed up for the credit product without realising it,” explained Richard Cordray, the US CFPB’s director.
According to Cordray, some customers only realised they were part of the scheme after they received bills demanding payment.
He continued: “PayPal [also] failed to post payments properly, lost payment checks and mishandled billing disputes that consumers had with merchants or the company itself.”
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Of the total fine, $15 million (£9.6m) will be given to customers as compensation, while the remaining $10 million (£6.4m) is a fine destined for the CFPB’s coffers.
According to PayPal, the company “takes consumer protection very seriously,” writing in a statement.
“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,” the statement continued.