Why is PayPal being fined $25m?

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The Consumer Financial Protection Bureau (CFPB) has filed a complaint and a proposed consent order against PayPal for illegally signing up customers to its credit service.

PayPal Credit, formerly known as Bill Me Later, is a credit service which is built into existing PayPal accounts. Purchases can be made via PayPal Credit without using a credit card. There are many American merchants who associate with the service, including Walmart, Home Depot and Best Buy.

The CFPB yesterday released a statement revealing why they have incurred PayPal with a $25m dollar fine.

‘‘The Bureau alleges that PayPal lured in consumers to this product with deceptive advertising, signed up people without them knowing it, and then mishandled billing disputes when they arose,’’ stated Richard Cordray, director of CFPB.

‘‘This kind of conduct has no place in the consumer financial marketplace. Under our proposed order, PayPal would return the $15 million that it illegally took from consumers and it would pay a $10 million penalty for its wrongful actions,’’ continued Cordray.

It has been a turbulent time for Paypal, especially during the last 12 months. Late last year, PaymentEye reported that parent company EBay and PayPal are to split, due to PayPal overtaking the online auction house in sales and growth.

PayPal have agreed to pay the fine and refund unknowing customers who were duped into signing up for the service. A spokeswoman for the payment giants commented on the situation.

‘‘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,’’ said Amanda Miller, a PayPal representative.

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