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PayPal slammed with $25 million fine for lying to customers about buying on credit

The Consumer Financial Protection Bureau ordered PayPal to shell out $25 million in refunds to its customers, after an investigation into a PayPal credit program. The regulator accused PayPal of illegally signing up its customers for a line of credit without telling them.

According to a report by Reuters, PayPal’s electronic payments division supposedly “signed customers up for its PayPal Credit product instead of the user’s preferred payment method, engaged in deceptive advertising, and mishandled billing problems.”

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The PayPal credit option that consumers were being signed up for is a feature where PayPal users can purchase things using their accounts online, and then pay for their purchases at a later date. These balances would then accrue interest and fees.

“PayPal illegally signed up consumers for its online credit product without their permission and failed to address disputes when they complained,” said CFPB Director Richard Cordray in a statement from the Bureau. “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.”

The settlement that’s proposed calls for PayPal to pay $15 million in refunds to its customers and another $10 million in fees to the federal government. A PayPal spokesperson responded to the investigation in a statement, but did not address the veracity of the claims.

“PayPal Credit takes consumer protection very seriously,” the person said. “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.”