PayPal faces a $25 million bill to settle a complaint from US regulators that it illegally signed people up to its online credit product.
The Consumer Financial Protection Bureau (CFPB) has hit the firm with a $10 million penalty and told it to hand over another $15 million in refunds to customers that it signed up to PayPal Credit, formerly called Bill Me Later.
According to the CFPB, 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. Tens of thousands of people were affected by the issues.
PayPal - which is in the process of being spun off from eBay - has neither admitted nor denied the allegations but under the enforcement action will not only pay $25 million but also improve its disclosures for enrolment to the credit product.
CFPB Director Richard Cordray, director, CFPB, say: "Online shopping has become a way of life for many Americans and it’s important that they are treated fairly. The CFPB’s action should send a signal that consumers are protected whether they are opening their wallets or clicking online to make a purchase."