SoylentNews is people
SoylentNews
The U.S. Consumer Financial Protection Bureau is asking a federal court to penalize PayPal for "illegally signing up and billing tens of thousands of consumers for its online credit product, PayPal Credit." Under the proposed order, PayPal would return $15 million to customers, pay a fine of $10 million for its actions, and make its PayPal Credit practices more clear:
Since 2008, the company has offered PayPal Credit, formerly called Bill Me Later, which is a financial product that operates like other forms of credit. Consumers make purchases using it as a form of payment and then repay the debt over time. As with credit cards and similar products, consumers using PayPal Credit may incur interest, late fees, and other charges.
From the first encounter a consumer may have had with PayPal Credit, there were problems. Tens of thousands of consumers who were attempting to enroll in a regular PayPal account, or make an online purchase, were signed up for the credit product without realizing it. The company enrolled other consumers while they tried to cancel or close out of the application process. Many people ended up enrolled without knowing how or why, only to discover unexpectedly that they actually had an account when they learned of a credit-report inquiry, or when they received emails welcoming them to PayPal Credit, billing statements, or debt-collection calls.
One reason so many consumers ended up having this product, unbeknownst to them, was that PayPal set the default payment method for all purchases to PayPal Credit. Other consumers were simply not able to select another payment method when they tried to pay.
Then, for those who did willingly sign up for the product, PayPal in many instances failed to honor advertised promotions, such as the promise of a $5 or $10 credit toward consumer purchases. This was deceptive advertising.
Finally, once enrolled, consumers encountered headache after headache. PayPal failed to post payments properly, lost payment checks, and mishandled billing disputes that consumers had with merchants or the company itself. Numerous consumers reported that the company took more than a week to process payment checks. And even when customers were unable to pay because of website failures, they still got charged late fees.
Also at The Register.
(Score: 3, Interesting) by frojack on Thursday May 21 2015, @05:41PM
I believe the Paypal credit card is a standard credit card, transactions are handled by credit card clearing companies.
Its just billed through to your paypal account first, then against what ever credit card you use to back your paypal account.
They claim they aren't actually a bank, simply a transfer agent.
But, offering credit changes all that, as you say.
I suspect they might live on the float offered by credit card processing to a certain extent. But mostly I suspect they fund this by using the money of people who carry positive paypal balances. So that is pretty much exactly like a bank, who will loan you money, backed in part by other depositors balances.
Branching into this area, IMHO, was a mistake for Paypal, they have wandered into a regulatory quagmire. Its double dipping on a grand scale.
The feds looked the other way when Paypal was owned by Ebay, because the feds needed Ebay's good will as long as they held skype and the feds wanted free access to that. But now that Ebay doesn't own skype, and is spinning off Paypal, the Feds are tightening the screws. Which is as it should be.
No, you are mistaken. I've always had this sig.
(Score: 1) by Pax on Thursday May 21 2015, @09:00PM
... actually they are registered as a bank in Europe... Luxembourg to be precise
http://www.telegraph.co.uk/finance/markets/2808982/PayPal-becomes-a-bank-to-fight-off-Google.html [telegraph.co.uk]
http://www.bloomberg.com/bw/stories/2007-06-15/the-bank-of-paypalbusinessweek-business-news-stock-market-and-financial-advice [bloomberg.com]