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PayPal Settles Over Protection Programs

By: David Utter

The payment processing division of eBay will pay $5.2 million to settle investigations by 28 states into PayPal's customer protection programs.

PayPal Settles Over Protection ProgramsPayPal did not admit liability for the accusations made by the states, or in a related case in US District Court in Brooklyn where the company reached a preliminary settlement with a proposed class of customers over their pending action.

The company announced the settlement will pay $1.7 million to compensate Attorney Generals for the cost of investigating the programs. A further settlement fund for plaintiffs will receive $3.5 million, less administrative costs and amounts awarded to plaintiff lawyers by the court.

PayPal agreed to streamline its user agreement, and to improve how it communicates information about protection programs to PayPal customers.

The Seattle P-I recounted some of the issues consumers faced that ended up prompting action by Attorney General offices throughout the US:

Consumers alleged that while engaged in a dispute with PayPal, the company would freeze access to money in their PayPal accounts. Customers who expected to fund a payment through use of credit cards found instead that their bank accounts had been charged directly.

Consumers also complained that though PayPal contracts provide members some protection when using their credit cards, the safeguards were no different than those already available to any credit card user.

In eBay's second quarter financial report, they noted PayPal had 114 million total payments accounts at the end of the quarter. PayPal's dollar volume of payments handled for the quarter were around $9 billion.


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