PayPal, Inc. and Bill Me Later, Inc.
Documents in this case
- Order · 20 p.
- Complaint · · 18 p.
- Consent order · · 18 p.
Case summary
CFPB filed a complaint and proposed consent order in federal court against PayPal, Inc. for illegally signing up consumers for its online credit product, PayPal Credit, formerly known as Bill Me Later.
Order
PDF of this document (20 pages)
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UNITED STATES DISTRICT COURT FOR THE DISTRICT OF MARYLAND Consumer Financial Protection Bureau Plaintiff, Civil Action No. 1:15-cv-01426 v.
PayPal, Inc., and Bill Me Later, Inc.
Defendants.
_
The Consumer Financial Protection Bureau (Bureau) commenced this civil action on May 19, 2015, to obtain injunctive relief, civil money penalties, and other relief from PayPal, Inc., and Bill Me Later, Inc. The Complaint alleges violations of the Consumer Financial Protection Act of 2010 (CFPA), 12 U.S.C. §§ 5531(a), 5536(a)(1), for unfair, deceptive, and abusive acts and practices in connection with Defendants’ offering, marketing, providing, and servicing of its online consumer-credit product known as PayPal Credit, formerly Bill Me Later. The Parties, by and through counsel, request that the Court enter this Stipulated Final
. Judgment and Order (Order).
FINDINGS 1. This Court has jurisdiction over the parties and the subject matter of this action. 2. Venue is proper as to all parties in this District. 3. The Parties agree to entry of this Order, without adjudication of any issue of fact or law,
to settle and resolve all matters in dispute arising from the conduct alleged in the Complaint to
the date this Order is entered.
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4. Defendants neither admit nor deny any allegations in the Complaint, except as specifically stated in this Order. For the purposes of this Order, Defendants admit the facts necessary to establish the Court’s jurisdiction over them and the subject matter of this action. 5. Defendants waive service under Rule 4(d) of the Federal Rules of Civil Procedure and waive all rights to seek judicial review or otherwise challenge or contest the validity of this Order. Defendants also waive any claim they may have under the Equal Access to Justice Act, 28 U.S.C. § 2412, concerning the prosecution of this action. Each Party will bear its own costs and expenses, including without limitation attorneys’ fees.
6. Entry of this Order is in the public interest.
DEFINITIONS
The following definitions apply to this Order:
7. “Affected Consumers” includes any consumer identified by the Bureau and Defendants who paid late fees or interest charges between January 1, 2011, and May 1, 2015, except that for item (3) in this Definition, between January 1, 2011, and March 31, 2013, as a result of (1) having opened a PayPal Credit account or been enrolled in PayPal Credit without understanding the account opening or enrollment process, or being confused by that process, (2) having a payment processed through a PayPal Credit account without understanding that he or she was using a PayPal Credit account, or being confused about the use of their PayPal Credit Account, or (3) having incurred deferred interest on an account with multiple contemporaneous deferred-interest promotions because of confusion over the amount he or she needed to pay to avoid deferred-interest charges.
8. “Board” means PayPal’s duly elected and acting Board of Directors.
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9. “Clearly and prominently” means:
A. In textual communications (e.g., printed publications or words displayed on the screen of an electronic device), the disclosure must be of a type size and location sufficiently noticeable for an ordinary consumer to read and comprehend it, in print that contrasts with the background on which it appears;
B. In communications disseminated orally or through audible means, the disclosure must be delivered in a volume and cadence sufficient for an ordinary consumer to hear and comprehend it;
C. In communications made through interactive media such as the internet and online services, the disclosure must be readily apparent and presented in a form consistent with the requirements for textual communications; and
D. In all instances, the disclosure must be presented before the consumer incurs any financial obligation, in an understandable language and syntax, and with nothing contrary to, inconsistent with, or in mitigation of the disclosures used in any communication with the consumer.
10. “Consumer financial product or service” has the same meaning set forth in the Consumer Financial Protection Act of 2010, 12 U.S.C. § 5481(5).
11. “Defendants” means PayPal, Inc., and Bill Me Later, Inc.
12. “Effective Date” means the date on which this Order is entered on the docket by the Court.
13. “Enforcement Director” means the Assistant Director of the Office of Enforcement for
the Consumer Financial Protection Bureau, or his or her delegee.
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14. “PayPal” means PayPal, Inc., and its successors and assigns. 15. “PayPal Credit” means the online open-end consumer-credit product offered by Defendants, now known as PayPal Credit, formerly Bill Me Later. 16. “Related Consumer Action” means a private action by or on behalf of one or more consumers or an enforcement action by another governmental agency brought against _ Defendants based on substantially the same facts as alleged in the Complaint.
ORDER
I e ACCOUNT ENROLLMENT
IT IS ORDERED that:
17. Inconnection with offering, marketing, or providing PayPal Credit, Defendants, their officers, agents, servants, contractors, and employees, and all other persons in active concert or participation with them who have actual notice of this Order, whether acting directly or indirectly, must take the following actions before enrolling consumers in PayPal Credit or opening a new PayPal Credit account for a consumer: A. Clearly and prominently disclose through a method, such as a pop-up box, that PayPal Credit is a line of credit and may be subject to interest and that consumers will receive their billing statements electronically at the email address designated by the consumer. The application process must require consumers to indicate consent by affirmatively electing to enroll in PayPal Credit through a means that is specifically labeled to convey such consent, such as selecting a labeled button. The disclosures must
be clear and prominent in relation to any other information provided on the page.
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B. Defendants must not set PayPal Credit as the default payment method for any consumer’s PayPal account unless that consumer affirmatively consents. To obtain affirmative consent, Defendants must clearly and prominently disclose, through a method, such as a check box, that must be affirmatively selected by the consumer, that the consumer is selecting PayPal Credit as the default payment source for future transactions and provide the consumer with an option to change the default payment source for the consumer’s account. The disclosures must be clear and prominent in relation to any other information provided on the page.
oI " ACCOUNT USE
IT IS FURTHER ORDERED that:
18. Inconnection with offering, marketing, or providing PayPal Credit, Defendants, their officers, agents, servants, contractors, and employees, and all other persons in active concert or participation with them who have actual notice of this Order, whether acting directly or indirectly, must, during the checkout process, clearly and prominently provide each consumer with the payment option that will be used for the transaction, and provide the consumer with a way to select a payment option other than PayPal Credit, if available. So long as the consumer is directed to clear and prominent disclosures at selection, this provision shall not prevent a consumer from voluntarily choosing a more streamlined checkout process for future purchases, such as one-click payment. If a consumer chooses another payment option,
Defendants must not process the consumer’s payment through PayPal Credit.
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II.
MARKETING AND PROMOTIONAL OFFERS
IT IS FURTHER ORDERED that:
19. Inconnection with offering, marketing, or providing PayPal Credit, Defendants, their officers, agents, servants, contractors, and employees, and all other persons in active concert or participation with them who have actual notice of this Order, whether acting directly or
indirectly, are enjoined and restrained from misrepresenting any material aspect of PayPal
Credit, including:
A, Any benefits that a consumer will receive from using PayPal Credit and B. The terms and conditions of any promotional offer associated with PayPal Credit,
such as deferred interest or money-back offers.
20. With respect to merchants that make promotional offers to consumers who use PayPal Credit, Defendants must ensure that consumers receive the benefit of the promotional offer by honoring the offer made through the merchant or providing other appropriate remediation such that the consumer receives at least the benefit of the promotional offer as represented by the merchant.
IV.
PAYMENT PROCESSING
IT IS FURTHER ORDERED that:
21. Defendants, their officers, agents, servants, contractors, and employees, and all other persons in active concert or participation with them who have actual notice of this Order, whether acting directly or indirectly, in connection with processing payments made by
consumers toward their PayPal Credit accounts must:
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A. Post payments to accounts with the effective date that the payment was received as follows:
i. For electronic payments and payments received over the phone, the cut-off time for the date of receipt is 11:59 p.m.:
a. Before February 1, 2019, the cut-off time must be Pacific time;
b. On or after February 1, 2019, the cut-off time may be Eastern time, provided that consumers are notified in their PayPal Credit monthly billing statement at least three months before a change is made to the time zone used to measure a payment’s date of receipt.
ii. | Conforming checks, as defined in the PayPal Credit monthly billing statement, will be credited with the date they are received if they are received by 5:00 p.m. Eastern time; otherwise, they will be credited with the next day’s date; and iii. Non-conforming checks will be credited within the time frame specified in the PayPal Credit monthly billing statement;
B. Provide a functioning electronic platform for consumers to make payments; and C. If Defendants’ system for accepting electronic payments is not functional and unavailable to consumers for a period of one hour or more, ensure that consumers with payments due on the day or days when the system is not functional and unavailable, or on any of the following five (5) days, are not required to pay late fees or interest for failure to make timely payments, and provide those consumers with an additional 3 days
to make payments, which must be processed and treated by Defendants as timely.
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Vz.
BILLING DISPUTES
IT IS FURTHER ORDERED that:
Defendants, their officers, agents, servants, contractors, and employees, and all other
persons in active concert or participation with them who have actual notice of this Order,
whether acting directly or indirectly, in connection with consumer billing disputes related to
PayPal Credit accounts must:
A. Accept billing disputes from consumers in writing and through telephonic or electronic means;
B. Resolve billing disputes within 2 billing cycles, but no longer than 90 days from receiving a dispute from the consumer;
C. Issue refunds, credits, and chargebacks, where appropriate, within 2 billing cycles, but no longer than 90 days of receiving a dispute ;
D. Not impose fees or interest on a disputed balance, or send an account to
collection as a result of a consumer’s failure to pay a disputed balance, while a dispute is
pending;
E. Provide written notification to consumers when billing disputes are resolved; F. Maintain and implement standardized procedures for tracking all billing
disputes; and G. Maintain adequate staff and sufficient systems to effect and sustain full and
complete compliance with the provisions of this section.
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VI.
REDRESS
IT IS FURTHER ORDERED that:
23. ~ Within 10 days of the Effective Date, Defendants must reserve or deposit into a segregated deposit account.$15 million, for the purpose of providing redress to Affected Consumers.
24. Within 60 days of the Effective Date, Defendants must submit to the Enforcement Director for review and non-objection a comprehensive written plan for providing redress consistent with this Order (Redress Plan). The Redress Plan must identify Affected Consumers by category, the number of consumers in each category, the total redress to be paid to consumers in the category, and the procedures for paying redress to Affected Consumers. The Enforcement Director will have the discretion to make a determination of non-objection to the Redress Plan or direct Defendants to revise it. If the Enforcement Director directs the Defendants to revise the Redress Plan, the Defendants must make the revisions and resubmit the Redress Plan to the Enforcement Director within 15 days. After receiving notification that the Enforcement Director has made‘a determination of non-objection to the Redress Plan, the Defendants must implement and adhere to the steps, recommendations, deadlines, and timeframes outlined in the Redress Plan.
25. Within 90 days from completion of the Redress Plan, Defendants must submit a Redress Plan Report to the Enforcement Director. The Redress Plan Report must include an audit and assessment of Defendants’ compliance with the terms of the Redress Plan. 26. After completing the Redress Plan, if the amount of redress provided to Affected
Consumers is less than $15 million, within 30 days of the completion of the Redress Plan,
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Defendants must pay to the Bureau, by wire transfer to the Bureau or to the Bureau’s agent, and according to the Bureau’s wiring instructions, the difference between the amount of redress provided to Affected Consumers and $15 million. |
>. If the Bureau determines, in its sole discretion, that additional redress to Affected Consumers is wholly or partially impracticable or otherwise inappropriate, or if funds remain after additional redress is completed, the Bureau may apply any remaining funds for such other equitable relief, including consumer information remedies, as determined to be reasonably related to the violations described in the Complaint. Any funds not used for such equitable relief will be deposited in the U.S. Treasury. Defendants will have no right to challenge any actions that the Bureau or its representatives may take under this paragraph. 28. Defendants may not condition the payment of any redress to any Affected Consumer under this Order on that Affected Consumer waiving any right.
VII.
CIVIL MONEY PENALTIES
IT IS FURTHER ORDERED that:
29. Defendants, jointly and severally, must pay a civil money penalty of $10 million to the Bureau.
30. Within 14 days of the Effective Date, Defendants must pay the civil money penalty by wire transfer to the Bureau or to the Bureau’s agent in compliance with the Bureau’s wiring instructions. .
31. The civil money penalty paid under this Order will be deposited in the Civil Penalty
Fund of the Bureau as required by Section 1017(d) of the CFPA, 12 U.S.C. § 5497(d).
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32. Defendants must treat the civil money penalty paid under this Order as a penalty paid to the government for all purposes. Regardless of how the Bureau ultimately uses those funds, Defendants may not:
A. Claim, assert, or apply for a tax deduction, tax credit, or any other tax benefit for any civil money penalty paid under this Order; or B. Seek or accept, directly or indirectly, reimbursement or indemnification from any source, including but not limited to payment made under any insurance policy, with regard to any civil money penalty paid under this Order. 33. To preserve the deterrent effect of the civil money penalty in any Related Consumer Action, Defendants may not argue that they are entitled to, nor may Defendants benefit by, any offset or reduction of any compensatory monetary remedies imposed in the Related Consumer Action because of the civil money penalty paid in this action (Penalty Offset). If the court in any Related Consumer Action grants such a Penalty Offset, Defendants must, within 30 days after entry of a final order granting the Penalty Offset, notify the Bureau, and pay the amount of the Penalty Offset to the U.S. Treasury. Such a payment will not be considered an additional civil , money penalty and will not change the amount of the civil money penalty imposed in this action.
34. The civil penalty imposed by the Order represents a civil penalty owed to the United States Government, is not compensation for actual pecuniary loss, and, thus, it is not subject to
discharge under the Bankruptcy Code under 11 U.S.C. § 523(a)(7).
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VIII.
ADDITIONAL MONETARY PROVISIONS
ITIS FURTHER ORDERED that:
35. Inthe event of any default on Defendants’ obligations to make payment under this Order, interest, computed under 28 U.S.C. § 1961, as amended, will accrue on any outstanding amounts not paid from the date of default to the date of payment, and will immediately become due and payable.
36. Defendants must relinquish all dominion, control, and title to the funds paid to the fullest extent permitted by law and no part of the funds may be returned to the Defendants. 37. Under 31 U.S.C. § 7701, Defendants, unless they have already done so, must furnish to the Bureau their taxpayer identifying numbers, which may be used for purposes of collecting and reporting on any delinquent amount arising out of this Order. 38. Within 30 days of the entry of a final judgment, consent order, or settlement in a Related Consumer Action, Defendants must notify the Enforcement Director of the final judgment, consent order, or settlement in writing. That notification must indicate the amount. of redress, if any, that Defendants paid or are required to pay to consumers and describe the consumers or classes of consumers to whom that redress has been or will be paid.
IX.
ROLE OF THE BOARD
IT IS FURTHER ORDERED that:
39. The Board must review all submissions (including plans, reports, programs, policies,
and procedures required by this Order) prior to submission to the Bureau.
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40. Although this Order requires the Defendants to submit certain documents for the review or non-objection by the Enforcement Director, the Board will have the ultimate responsibility for proper and sound management of Defendants and for ensuring that Defendants comply with Federal consumer financial law and this Order.
41. Ineach instance that this Order requires the Board to ensure adherence to, or perform
certain obligation of Defendants, the Board must:
A, Authorize whatever actions are necessary for Defendants to fully comply with the Order;
B. Require timely reporting by management to the Board on the status of
compliance obligations; and C. Require timely and appropriate corrective action to remedy any material noncompliance with any failures to comply with Board directives related to this Section.
X.
COMPLIANCE PLAN
IT IS FURTHER ORDERED that:
42. Within 60 days of the Effective Date, Defendants must submit to the Enforcement Director for review and determination of non-objection a comprehensive compliance plan (Compliance Plan) designed to ensure that Defendants’ offering, marketing, and providing of PayPal Credit complies with the terms of this Order. 43. The Compliance Plan must include, at a minimum:
A. Detailed steps for addressing each action required by this Order, including
specifically:
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B.
i. For account enrollment, the timeframes by which Defendants will clearly and prominently disclose through a method, such as a pop-up box, that PayPal Credit is a line of credit and may be subject to interest and that consumers will receive their billing statement electronically at the email address designated by the consumer;
ii. For promotional offers, a written description of procedures to ensure that consumers receive promotions advertised, including promotions advertised through merchants;
iii. | For payment processing, a written description of Defendants’ internal controls and business resiliency plans to mitigate system failures;
iv. For billing disputes, a written description of procedures to track billing disputes, provide written notification of resolved billing disputes to consumers, and ensure adequate personnel and systems to handle billing disputes;
v. For payment cut-off times, a written description of (1) the notice provided to consumers about the change in time zone, including an exemplar of each unique notice and (2) the way that any charges associated with and consumer complaints related to late payments will be handled after the change in time zone used to measure a payment’s date of receipt; and
vi. Specific timeframes and deadlines for implementation of the steps.
The Enforcement Director will have the discretion to make a determination of
non-objection to the Compliance Plan or direct Defendants to revise it. If the
Enforcement Director directs Defendants to revise the Compliance Plan, Defendants
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must make the revisions and resubmit the Compliance Plan to the Enforcement Director within 15 days.
44. After receiving notification that the Enforcement Director has made a determination of non-objection to the Compliance Plan, Defendants must implement and adhere to the steps, recommendations, deadlines, and timeframes outlined in the Compliance Plan. 45. | Any material proposed changes to or deviations from the Compliance Plan must be submitted in writing to the Enforcement Director to make a determination of non-objection.
| XI.
REPORTING REQUIREMENTS
IT IS FURTHER ORDERED that:
46. Defendants must notify the Bureau of any development that may affect compliance obligations arising under this Order, including but not limited to a dissolution, assignment, sale, merger, or other action that would result in the emergence of a successor company; the creation or dissolution of a subsidiary, parent, or affiliate that engages in any acts or practices subject to this Order; the filing of any bankruptcy or insolvency proceeding by or against any Defendant; or a change in any Defendant’s name or address. Each Defendant must provide this notice at least 30 days before the development or as soon as practicable after learning about the development, whichever is sooner.
47. Defendants must report any change in the information required to be submitted under this Section at least 30 days before the change or as soon as practicable after learning about the change, whichever is sooner.
48. Within 90 days of the Bureau’s non-objection to Defendants’ Compliance Plan,
Defendants must submit to the Enforcement Director an accurate written compliance progress
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report (Compliance Report), and again one year after the date of the initial Compliance Report, which, at a minimum:
A. Describes in detail the manner and form in which Defendants have complied with this Order and B. Attaches a copy of each Order Acknowledgment obtained under Section XII, unless previously submitted to the Bureau.
49. After the one-year period, Defendants must submit to the Enforcement Director additional Compliance Reports within 14 days of receiving a written request from the Bureau.
XII.
ORDER DISTRIBUTION AND ACKNOWLEDGMENT
IT IS FURTHER ORDERED that:
"50. Within 60 days of the Effective Date, each Defendant, for any business for which the Defendant is the majority owner or directly or indirectly controls, must deliver a copy of this Order to each of its board members and executive officers, as well as to any managers, employees, service providers, or other agents and representatives who have responsibilities related to the subject matter of this Order.
51. For 5 years from the Effective Date, Defendants, for any business for which the Defendant is a majority owner or directly or indirectly controls, must deliver a copy of this Order to any business entity resulting from any change in structure referred to in Section XI, and any future board members and executive officers, as well as to any managers, employees, service providers, or other agents and representatives who will have responsibilities related to
the subject matter of the Order before they assume their responsibilities.
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52. Defendants must secure a signed and dated statement acknowledging receipt of a copy of this Order, ensuring that any electronic signatures comply with the requirements of the E- Sign Act, 15 U.S.C. § 7001 et seq., within 60 days of delivery, from all persons receiving a copy of this Order under this Section.
XIII.
RECORDKEEPING
IT IS FURTHER ORDERED that:
53- Defendants must create, for at least 5 years from the Effective Date, all documents and records necessary to demonstrate full compliance with each provision of this Order, as well as all submissions to the Bureau.
54. Defendants must retain the documents identified in this Section for at least 5 years. 55. Defendants must make the documents identifiéd in this Section available to the Bureau upon the Bureau’s request.
XIV.
NOTICES
IT IS FURTHER ORDERED that:
56. Unless otherwise directed in writing by the Bureau, Defendants must provide all submissions, requests, communications, or other documents relating to this Order in writing,
with the subject line, “In re PayPal, Inc., No. 2013-0551-02,” and send them either:
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by overnight courier (not the U.S. Postal Service) and contemporaneously by email, as follows:
Assistant Director for Enforcement Consumer Financial Protection Bureau ATTENTION: Office of Enforcement 1625 I Street, NW
Washington, DC 20006 [email protected]; or by first class mail to the below address and contemporaneously by email to: Assistant Director for Enforcement Consumer Financial Protection Bureau ATIN: Office of Enforcement
1700 G Street, NW
Washington, DC 20552 [email protected].
_ XV.
COOPERATION WITH THE BUREAU
IT IS FURTHER ORDERED that:
57- Defendants must cooperate fully to help the Bureau determine the identity and location of, and the amount of injury sustained by, each Affected Consumer. Defendants must provide such information in its or its agents’ possession or control within 14 days of receiving a written request from the Bureau.
58. Defendants must cooperate fully with the Bureau in this matter and in any investigation related to or associated with the conduct described in the Complaint. Defendants must provide truthful and complete information, evidence, and testimony. Defendants must cause its officers, employees, representatives, or agents to appear for interviews, discovery, hearings,
trials, and any other proceedings that the Bureau may reasonably request upon 5 days written
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notice, or other reasonable notice, at such places and times as the Bureau may designate,
without the service of compulsory process.
XVI.
COMPLIANCE MONITORING
It IS FURTHER ORDERED that:
59. Within 14 days of receipt of a written request from the Bureau, Defendants must submit additional compliance reports or other requested information, which must be made under penalty of perjury, provide sworn testimony, or produce documents. 60. Defendants must permit Bureau representatives to interview any employee or other person affiliated with Defendants who has agreed to such an interview. The person interviewed may have counsel present.
61. _ Nothing in this Order will limit the Bureau’s lawful use of civil investigative demands under 12 C.F.R. § 1080.6 and other compulsory process.
XVII.
RETENTION OF JURISDICTION
62. The Court will retain jurisdiction of this matter for purposes of construction,
modification, and enforcement of this Order.
XVIII.
RELEASE
63. The Bureau releases and discharges Defendants from all potential liability for law violations that the Bureau has or might have asserted based on the practices alleged in the Complaint, to the extent such practices occurred before the Effective Date and the Bureau knows about them as of the Effective Date. Notwithstanding this release, the Bureau may use
the practices alleged in the Complaint in future enforcement actions against Defendants or
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their affiliates to establish a pattern or practice of violations, or the continuation of a pattern or practice of violations, or to calculate the amount of any penalty. This release does not preclude or affect any right of the Bureau to determine and ensure compliance with this Order or to seek
penalties for any violations of this Order. IT IS SO ORDERED.
DATED this /0_ day of_DAwvasy _, 2010.
United States District Court
Complaint ()
PDF of this document (18 pages)
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UNITED STATES DISTRICT COURT FOR THE DISTRICT OF MARYLAND
Consumer Financial Protection Bureau 1700 G Street NW Washington, DC 20552 Plaintiff, v.
PayPal, Inc.
2211 North First Street San Jose, California 95131 and Bill Me Later, Inc.
9690 Deereco Road Suite 705 Timonium, MD 21093 Baltimore County Defendants.
Civil Action No. 1:15-cv-01426
COMPLAINT
The Consumer Financial Protection Bureau (Bureau) brings this action against PayPal, Inc. (PayPal) and Bill Me Later, Inc. (BML). The Bureau brings this action under the Consumer Financial Protection Act of 2010 (CFPA), 12 U.S.C. §§ 5531, 5536(a), 5564, 5565, and alleges as follows.
Introduction 1.
Defendants offer a product known as PayPal Credit that allows consumers to pay for purchases online and in certain stores. PayPal Credit operates like other forms of credit in that consumers make purchases using it as a form of payment and then repay the debt over time. As with credit cards and other forms of credit, consumers using PayPal Credit may incur Case 1:15-cv-01426-RDB Document 1 Filed 05/19/15 Page 1 of 18
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interest, late fees, or other charges. Consumers often enroll in PayPal Credit while purchasing a good or service online or while creating a PayPal account. 2.
In many instances, however, Defendants have enrolled consumers in PayPal Credit without their knowledge or consent, caused consumers to pay for purchases with PayPal Credit even where the consumers have expressly indicated that they wish to use a different payment method, failed to process consumers’ payments promptly or at all, failed to honor and apply promotional offers they have advertised, and engaged in other violations of consumerfinancial laws related to billing and deferred interest. 3.
The Bureau brings this suit to secure relief for injured consumers, to stop Defendants’ unlawful conduct, and to obtain a penalty against them. Jurisdiction and Venue 4.
This Court has subject-matter jurisdiction over this action because it is brought under “Federal consumer financial law,” 12 U.S.C. § 5565(a)(1), presents a federal question, 28 U.S.C. § 1331, and is brought by an agency of the United States, 28 U.S.C. § 1345. 5.
Venue is proper because Defendants reside and transact business in this district. 28 U.S.C. § 1391(b), (c); 12 U.S.C. § 5564(f).
Parties 6.
The Bureau is an independent agency of the United States charged with regulating the offering and provision of consumer-financial products and services under “Federal consumer financial laws,” including the CFPA. See 12 U.S.C. §§ 5491(a); see also id. § 5481(14). The Bureau is authorized to initiate civil actions in federal district court, by its own Case 1:15-cv-01426-RDB Document 1 Filed 05/19/15 Page 2 of 18
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attorneys, to address violations of “Federal consumer financial law.” See 12 U.S.C. § 5564(a)- (b).
7.
PayPal is a Delaware corporation that is headquartered in San Jose, California; it is a wholly-owned subsidiary of eBay, Inc. (eBay). In January 2015, eBay incorporated PayPal Holdings, Inc. (PayPal Holdings), which will ultimately become a separate publicly traded company and the parent of PayPal, Inc. At all times material to this Complaint, PayPal, through its wholly-owned subsidiary BML, transacted business in this District and nationwide, and engaged in extending consumer credit and servicing loans. PayPal is therefore a “covered person” under the CFPA. 12 U.S.C. § 5481(6), (15)(A)(i). 8.
BML is a Delaware corporation that is headquartered in Timonium, Maryland; it is a wholly-owned subsidiary of PayPal. At all times material to this Complaint, BML transacted business in this District and nationwide, and engaged in extending consumer credit and servicing loans. BML is therefore a “covered person” under the CFPA. 12 U.S.C. § 5481(6), (15)(A)(i).
Factual Background 9.
PayPal provides an online-payments system that enables consumers to make digital payments and money transfers through a PayPal Wallet with linked bank, credit-card, and PayPal-held funds.
10.
From 2008 and through the present, Defendants have marketed a line of credit once called Bill Me Later, and now called PayPal Credit, that is offered to consumers making purchases from eBay and thousands of online merchants. Defendants handle consumer interactions with PayPal Credit, operate its electronic platform, and receive payments Case 1:15-cv-01426-RDB Document 1 Filed 05/19/15 Page 3 of 18
Page 25
associated with the consumers’ lines of credit. Bill Me Later and PayPal Credit are referred to collectively as PayPal Credit in this Complaint. Consumer Enrollment in PayPal Credit 11.
Typically, Defendants offer PayPal Credit both through advertisements on eBay and online retailers’ websites as well as during the checkout process for ecommerce and mobile transactions.
12.
Defendants introduce consumers to PayPal Credit through advertisement banners that often include promotional offers like the following:
13.
Consumers who click on the “Shop Now” or “Apply Now” buttons are directed to a landing page or an application page.
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14.
During the checkout process on eBay and other online retailers, Defendants again offer consumers the option to pay for purchases through PayPal Credit and advertise the product with promotional banners like the following:
15.
On the application page, Defendants ask consumers to submit their date of birth and the last four digits of their Social Security number, as well as to confirm their email address, billing address, and phone number.
16.
Until recently, the application page included the following statement, or one materially similar: “Thanks for choosing Bill Me Later©, a PayPal Service. You’re just a few clicks away from $5 back on this purchase and more time to pay! We’ll need a little more information for verification purposes.”
17.
As of September 2014, the application page made the following statement: “Apply for PayPal Credit. You’re applying for a line of credit you can use to pay for future purchases when you shop with PayPal. Subject to credit approval.” 18.
To proceed with the transaction, consumers who open a PayPal Credit account through PayPal’s website, eBay, or select merchants must check a box in the middle of the Case 1:15-cv-01426-RDB Document 1 Filed 05/19/15 Page 5 of 18
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application page stating that they “agree to have the terms and conditions presented electronically.”
19.
Defendants disclose the “Terms and Conditions” via hyperlinks and a text box on the application page that is located at the bottom of the screen and requires consumers to scroll through multiple pages to review information about the pricing of the product, Defendants’ privacy policy, an Agreement to Arbitrate, and an E-Sign Consent. 20.
Consumers then have the option to cancel the transaction, or to continue with it by clicking on a button that until recently read “Agree and Continue” and as of September 2014 reads “Agree and Apply.” Clicking this button also constitutes a consumer’s agreement to Defendants’ terms and conditions.
21.
Defendants process applications by checking the consumer’s credit report and taking steps to verify the consumer’s identity.
22.
If the application is approved, a confirmation screen notifies the consumer that (1) an email will be sent when the PayPal Credit statement is ready and (2) PayPal Credit will be added to the consumer’s PayPal account for future purchases. 23.
The consumer has the option to click a box that states “I want PayPal Credit to be my preferred payment method when it’s available for a purchase. (You can edit this preference on paypal.com at any time.).”
24.
The consumer must then click a “Continue” button to finalize the purchase. Defendants Enroll Consumers Without Consent 25.
Defendants often enroll consumers in PayPal Credit without their consent. For example, Defendants automatically enrolled certain consumers in PayPal Credit when the Case 1:15-cv-01426-RDB Document 1 Filed 05/19/15 Page 6 of 18
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consumers signed up for a regular PayPal account. Other consumers were enrolled in PayPal Credit despite canceling the application process or closing out of the application window before completing the enrollment process. Many consumers were enrolled in PayPal Credit without knowing how or why they were enrolled and discovered their accounts only after finding a credit-report inquiry or receiving welcome emails, billing statements, or debt-collection calls for amounts past due, including late fees and interest. 26.
Consumers enrolled in PayPal Credit without their knowledge or consent often incurred late fees and interest charges because they did not make payments on the accounts that they did not know existed, often believing that the debts incurred were paid through another payment method available in their PayPal Wallets. Many of these consumers learned of their PayPal Credit accounts for the first time when they received billing statements with accrued late fees and interest charges, or when they received debt-collection calls. Defendants Cause Consumers to Use PayPal Credit Without Consent 27.
After a consumer opens a PayPal Credit account, the consumer has the option to use it to make payments through PayPal and with merchants that accept PayPal Credit. 28.
In many instances, Defendants automatically set or preselect the default payment method for all purchases made through a consumer’s PayPal Wallet to PayPal Credit, causing consumers to use PayPal Credit even when intending to use another method of payment such as a linked credit card or checking account.
29.
In other instances, consumers were not able to select another payment method. For example, some consumers affirmatively selected another payment method after realizing Case 1:15-cv-01426-RDB Document 1 Filed 05/19/15 Page 7 of 18
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that PayPal Credit was set as the payment method for a transaction, only to have the payment method switched back to PayPal Credit during the checkout process. 30.
Often consumers do not discover that PayPal Credit was used as the method of payment until late fees and interest have accrued and the consumer receives debt-collection calls. This is in part because many consumers do not realize that PayPal Credit automatically enrolls consumers in electronic billing at the time of their enrollment and, in many cases, electronic billing statement notices go into spam email folders. Because many consumers do not know they are enrolled in electronic billing, they do not know to look for electronic statements.
31.
Consumers whose payments were processed through PayPal Credit without their consent often incurred late fees and interest charges because they did not know that payments were owed to PayPal Credit.
Defendants Failed to Honor Promotional Offers 32.
To entice consumers to use PayPal Credit, Defendants and merchants often advertised promotional offers such as $5 or $10 back on a purchase or no interest for six or twelve months.
33.
In many instances, Defendants did not honor these promotional offers after consumers completed transactions through PayPal Credit. Defendants Deferred-Interest Practices 34.
Where consumers used PayPal Credit for multiple transactions, they frequently received deferred-interest offers applicable to those transactions. The deferred-interest periods for the transactions would expire on different dates, depending on the date of the initial Case 1:15-cv-01426-RDB Document 1 Filed 05/19/15 Page 8 of 18
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transaction. Consumers thus could have multiple deferred-interest balances as well as a balance for standard purchases for the same account.
35.
Defendants did not provide consumers with adequate information to allow them to understand how Defendants applied payments to various balances and how much consumers needed to pay to avoid deferred interest. Many consumers with multiple deferredinterest promotional balances did not understand how the Defendants allocated payments. Numerous consumers believed they made a payment large enough to pay off purchases with expiring promotions, but the Defendants allocated payments in a way that resulted in the consumer incurring deferred interest.
36.
Before early 2013, Defendants’ practice was to apply payments in excess of the minimum payment proportionally to all deferred-interest promotional balances with the same rate, most of which were 19.99%, regardless of expiration date, unless a promotion was expiring within two billing cycles, in which case excess payments would be applied to that promotion.
37.
Defendants represented that consumers could contact Defendants’ customerservice representatives if they wanted more information about the product, including payment allocation and how much they would need to pay to avoid interest. 38.
Additionally, Defendants represented that consumers could contact Defendants’ customer-service representatives to request that payments be allocated to specific balances in a way different than Defendants’ default method for allocating payments. Notwithstanding this representation, many consumers could not reach a customer-service agent at all, or Defendants Case 1:15-cv-01426-RDB Document 1 Filed 05/19/15 Page 9 of 18
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ignored such re-allocation requests, or allocated payments differently than consumers requested.
39.
In the first quarter of 2013, Defendants implemented a new payment-allocation hierarchy and began applying payments in excess of the minimum amount due to deferredinterest promotions in order of expiration date. Also, if a consumer had a balance on any deferred-interest promotions expiring in the following two billing cycles, Defendants began allocating even minimum payments to promotional balances before revolving balances. Defendants updated their billing statements to include the payment amount needed to avoid interest charges in a Payment Summary box located at the top of the billing statement. Defendants’ Payment-Processing and Billing Dispute Practices 40.
Defendants do not always process or timely process payments, causing consumers to incur late fees and interest charges. For example, numerous consumers have reported that Defendants have lost payment checks or taken more than a week to process checks.
41.
Although Defendants provide and promote an online platform for consumers to make payments toward their PayPal Credit accounts, in numerous instances, consumers have been unable to make payments online due to system errors. Even when Defendants’ systems do not allow consumers to make payments, Defendants often charge late fees and interest. 42.
Defendants often mishandle billing disputes, including disputes about not receiving refunds from merchants, double billing for purchases, billing errors, honoring advertised promotions, unauthorized charges, and identity theft. For example, in many Case 1:15-cv-01426-RDB Document 1 Filed 05/19/15 Page 10 of 18
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instances, Defendants fail to acknowledge consumers’ complaints about billing errors and fail to provide consumers with explanations for rejecting consumers’ complaints about errors. 43.
Defendants often charge late fees and assess interest on balances with disputes pending even when the disputes concern Defendants’ own practices, including failing to reverse a charge associated with double billing through PayPal Credit or failing to process a refund requested by a merchant for returned merchandise. 44.
Defendants often fail to notify consumers about the outcome of disputes. Count I (Unfair Acts or Practices related to the Enrollment of Consumers in PayPal Credit)
45.
The Bureau realleges and incorporates by reference paragraphs 1-44. 46.
An act or practice is unfair if it causes or is likely to cause substantial injury to consumers that is not reasonably avoidable by consumers and is not outweighed by countervailing benefits to consumers or to competition. 12 U.S.C. § 5531(c)(1). 47.
In numerous instances, Defendants enrolled consumers in PayPal Credit without the consumers’ consent or authorization.
48.
Enrolling consumers in a line of credit without their consent or authorization causes and is likely to cause substantial injury because (a) as part of the enrollment process Defendants place an inquiry with at least one credit-reporting agency, and such an inquiry affects consumers’ credit scores and creditworthiness, and (b) consumers are likely to fail to make payments on a credit account that they do not know exists, and therefore are likely to incur late fees and interest.
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49.
This injury is not reasonably avoidable by consumers because these consumers do not choose or intend to enroll in PayPal Credit. 50.
This injury is not outweighed by countervailing benefits to consumers or to competition because unauthorized and unwanted lines of consumer credit do not benefit consumers or competition.
51.
Therefore, Defendants engaged in unfair acts or practices in violation of the CFPA, 12 U.S.C. § 5536(a)(1)(B).
Count II (Unfair Acts or Practices related to Defendants’ Use of PayPal Credit as a Payment Method)
52.
The Bureau realleges and incorporates by reference paragraphs 1-44. 53.
An act or practice is unfair if it causes or is likely to cause substantial injury to consumers that is not reasonably avoidable by consumers and is not outweighed by countervailing benefits to consumers or to competition. 12 U.S.C. § 5531(c)(1). 54.
In numerous instances, Defendants processed payments through PayPal Credit without consumers’ consent or authorization. For example, in many instances, consumers who attempted to select a different payment method for a transaction nevertheless had their PayPal Credit accounts billed for the transaction.
55.
Processing payments through a line of credit without consumers’ consent or authorization causes and is likely to cause substantial injury because consumers who do not know that a debt was incurred on a credit account are likely to fail to make payments to the account, and are therefore likely to incur late fees and interest. Further, consumers who do not realize that they have been enrolled in electronic billing and do not view their billing Case 1:15-cv-01426-RDB Document 1 Filed 05/19/15 Page 12 of 18
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statements often do not realize that a payment is owed to PayPal Credit until late fees and interest have accrued.
56.
This injury is not reasonably avoidable by consumers because these consumers do not choose to use PayPal Credit.
57.
This injury is not outweighed by countervailing benefits to consumers or to competition because neither consumers nor competition benefit from charges processed through a line of credit, or associated fees and interest incurred, without consumer consent or authorization.
58.
Therefore, Defendants engaged in unfair acts or practices in violation of the CFPA, 12 U.S.C. § 5536(a)(1)(B).
Count III (Unfair Acts or Practices Related to Payments)
59.
The Bureau realleges and incorporates by reference paragraphs 1-44. 60.
An act or practice is unfair if it causes or is likely to cause substantial injury to consumers that is not reasonably avoidable by consumers and is not outweighed by countervailing benefits to consumers or to competition. 12 U.S.C. § 5531(c)(1). 61.
In numerous instances, Defendants failed to accept, process, or timely post consumers’ payments made toward their PayPal Credit accounts, including by: a. failing to take reasonable steps necessary to maintain the online platform it provided for consumers to make payments; and b. failing to take steps necessary to assure that they could process and post, or timely process and post, consumers’ payments.
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62.
These acts and practices caused substantial injury to consumers because Defendants treated consumers’ payments as late, or as not having been made, and assessed late fees and finance charges.
63.
This injury was not avoidable by consumers because consumers could not control whether Defendants’ online platform functioned or whether Defendants processed or timely processed payments.
64.
The injury is not outweighed by countervailing benefits to consumers or to competition.
65.
Therefore, Defendants engaged in unfair acts or practices in violation of the CFPA, 12 U.S.C. § 5536(a)(1)(B).
Count IV (Deceptive Advertising)
66.
The Bureau realleges and incorporates by reference paragraphs 1-44. 67.
In numerous instances, Defendants represented, directly or indirectly, expressly or by implication, that consumers would receive the benefit of promotional offers such as $5 or $10 back on a purchase, or no interest for six or twelve months. 68.
In fact, in numerous instances, Defendants did not provide consumers with the benefits promised in the promotional offers. These representations were false or misleading. 69.
Therefore, Defendants engaged in deceptive acts or practices in violation of the CFPA, 12 U.S.C. § 5536(a)(1)(B).
Count V (Abusive Deferred-Interest Acts or Practices)
70.
The Bureau realleges and incorporates by reference paragraphs 1-44. Case 1:15-cv-01426-RDB Document 1 Filed 05/19/15 Page 14 of 18
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71.
An act or practice is abusive under the CFPA if it “takes unreasonable advantage of . . . the inability of the consumer to protect the interests of the consumer in selecting or using a consumer financial product or service.” 12 U.S.C. § 5531(d)(2)(B). 72.
Before 2013, Defendants provided little information to consumers about how it allocated payments to and among standard and multiple deferred-interest balances. Nor did Defendants explain that PayPal Credit’s practice was to apply amounts in excess of the minimum payment proportionally to most, or all, promotional balances. 73.
Defendants purported to allow consumers to control the allocation of payments by requesting that their payments be allocated to specific balances, but consumers seeking to make such requests often could not reach a customer-service representative. When consumers contacted Defendants’ customer-service department for more information about the Defendants’ payment-allocation methods or the amount they needed to pay to avoid interest, consumers were often given misinformation. When consumers made specific allocation requests, Defendants often ignored such requests or allocated payments differently than consumers requested.
74.
As a result, consumers could not clearly understand how payments were applied to deferred-interest promotions and Defendants allocated payments in a way that consumers would not have chosen. Thus, consumers could not protect their interests in selecting and using Defendants’ product.
75.
Therefore, Defendants engaged in abusive acts or practices in violation of the CFPA, 12 U.S.C. § 5531(d)(2)(B).
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Count VI (Unfair Billing Dispute Practices)
76.
The Bureau realleges and incorporates by reference paragraphs 1-44. 77.
An act or practice is unfair if it causes or is likely to cause substantial injury to consumers that is not reasonably avoidable by consumers and is not outweighed by countervailing benefits to consumers or to competition. 12 U.S.C. § 5531(c)(1). 78.
In numerous instances, Defendants failed to adequately address billing disputes, including disputes about crediting payments, processing refunds, honoring advertised promotions, unauthorized charges, and double billing. 79.
Defendants did not address or timely address billing disputes because they did not have adequate personnel or systems to handle the volume of disputes based on the number of transactions processed through PayPal Credit.
80.
As a result of Defendants’ failure to adequately address billing disputes, consumers often incurred late fees and interest charges. Defendants also failed to notify consumers when disputes were resolved and, if applicable, when payments would be due, causing consumers to miss unexpected payments and incur late fees and interest charges. 81.
These acts and practices caused substantial injury to consumers who paid money as a result of billing errors that were not resolved and late fees and interest charged while disputes were pending.
82.
This injury was not avoidable by consumers because consumers could not control whether or how Defendants handled billing disputes, including charging fees and interest while disputes were pending.
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83.
The injury is not outweighed by countervailing benefits to consumers or to competition because neither consumers nor competition benefit from failing to address billing disputes and charging additional fees and interest on potential billing errors 84.
Therefore, Defendants engaged in unfair acts or practices in violation of the CFPA, 12 U.S.C. § 5536(a)(1)(B).
PRAYER FOR RELIEF Wherefore, the Bureau requests that the Court:
1. permanently enjoin Defendants from committing future violations of the CFPA or any provision of “Federal consumer financial law,” as defined by 12 U.S.C. § 5481(14); 2. award damages or other monetary relief against Defendants; 3. order Defendants to pay restitution to consumers harmed by their unlawful conduct; 4. order disgorgement of ill-gotten revenues against Defendants; 5. impose civil money penalties against Defendants; 6. order Defendants to pay the Bureau’s costs and fees incurred in connection with prosecuting this action; and 7. award additional relief as the Court may determine to be just and proper.
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Dated: May 19, 2015
Respectfully submitted, Anthony Alexis (DC Bar #384545) Enforcement Director
Jeffrey Paul Ehrlich (FL Bar #51561) Deputy Enforcement Director
John C. Wells (DC Bar # 491292) Assistant Litigation Deputy
/s/ ___________________________ KRISTINA D. BETTS (AZ Bar # 024859) Enforcement Attorney 1700 G Street NW Washington, DC 20552 Telephone: (312) 610-8962 Facsimile: (202) 435-7329 E-mail: [email protected] /s/ ___________________________ CARMEN L. CHRISTOPHER (CA Bar # 231508) (signed by Kristina D. Betts with permission of Carmen Christopher)
Enforcement Attorney 1700 G Street NW Washington, DC 20552 Telephone: (312) 610-8961 Facsimile: (202) 435-7329 E-mail: [email protected]
Attorneys for Plaintiff Consumer Financial Protection Bureau
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Consent order ()
PDF of this document (18 pages)
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UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF MARYLAND
Consumer Financial Protection Bureau Plaintiff, Civil Action No. 1:15-cv-01426
Vv.
PayPal, Inc., and Bill Me Later, Inc.
Defendants.
STIPULATED FINAL JUDGMENT AND ORDER
The Consumer Financial Protection Bureau (Bureau) commenced this civil action on May 19, 2015, to obtain injunctive relief, civil money penalties, and other relief from PayPal, Inc., and Bill Me Later, Inc. The Complaint alleges violations of the Consumer Financial Protection Act of 2010 (CF PA), 12 U.S.C. §§ 5531(a), 5536(a)(1), for unfair, deceptive, and abusive acts and practices in connection with Defendants’ offering, marketing, providing, and servicing of its online consumer-credit product known as PayPal Credit, formerly Bill Me Later. The Parties, by and through counsel, request that the Court enter this Stipulated Final
Judgment and Order (Order).
FINDINGS 1. This Court has jurisdiction over the parties and the subject matter of this action. 2. Venue is proper as to all parties in this District. 3. The Parties agree to entry of this Order, without adjudication of any issue of fact or law,
to settle and resolve all matters in dispute arising from the conduct alleged in the Complaint to
the date this Order is entered.
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4. Defendants neither admit nor deny any allegations in the Complaint, except as . specifically stated in this Order. For the purposes of this Order, Defendants admit the facts necessary to establish the Court’s jurisdiction over them and the subject matter of this action. 5. Defendants waive service under Rule 4(d) of the Federal Rules of Civil Procedure and waive all rights to seek judicial review or otherwise challenge or contest the validity of this Order. Defendants also waive any claim they may have under the Equal Access to Justice Act,. 28 U.S.C. § 2412, concerning the prosecution of this action. Each Party will bear its own costs and expenses, including without limitation attorneys’ fees.
6. Entry of this Order is in the public interest...
DEFINITIONS —
The following definitions apply to this Order:
7. “Affected Consumers” includes any consumer identified by the Bureau and Defendants who paid late fees or interest charges between January 1, 2011, and May 1, 2015, except that for
item (3) in this Definition, between January 1, 2011, and March 31, 2013, as a result of (1)
_ having opened a PayPal Credit account or been enrolled in PayPal Credit without
understanding the account opening or enrollment process, or being confused by that process, (2) having a payment processed through a PayPal Credit account without understanding that he or she was using a PayPal Credit account, or being confused about the use of their PayPal Credit Account, or (3) having incurred deferred interest on an account with multiple contemporaneous deferred-interest promotions because of confusion over the amount he or she needed to pay to avoid deferred-interest charges.
8. “Board” means PayPal’s duly elected and acting Board of Directors.
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14. “PayPal” means PayPal, Inc., and its successors and assigns. 15. “PayPal Credit” means the online open-end consumer-credit product offered by Defendants, now known as PayPal Credit, formerly Bill Me Later. 16. “Related Consumer Action” means a private action by or on behalf of one or more consumers or an enforcement action by another governmental agency brought against Defendants based on substantially the same facts as alleged in the Complaint.
ORDER
I.
ACCOUNT ENROLLMENT
IT IS ORDERED that:
17. In connection with offering, marketing, or providing PayPal Credit, Defendants, their officers, agents, servants, contractors, and employees, and all other persons in active concert or participation with them who have actual notice of this Order, whether acting directly or indirectly, must take the following actions before enrolling consumers in PayPal Credit or opening a new PayPal Credit account for a consumer: A, Clearly and prominently disclose through a method, such as a pop-up box, that PayPal Credit is a line of credit and may be subject to interest and that consumers will receive their billing statements electronically at the email address designated by the consumer. The application process must require consumers to indicate consent by affirmatively electing to enroll in PayPal Credit through a means that is specifically labeled to convey such consent, such as selecting a labeled button. The disclosures must
be clear and prominent in relation to any other information provided on the page.
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B. Defendants must not set PayPal Credit as the default payment method for any consumer’s PayPal account unless that consumer affirmatively consents. To obtain affirmative consent, Defendants must clearly and prominently disclose, through a method, such as a check box, that must be affirmatively selected by the consumer, that the consumer is selecting PayPal Credit as the default payment source for future transactions and provide the consumer with an option to change the default payment source for the consumer’s account. The disclosures must be clear and prominent in relation to any other information provided on the page.
II.
ACCOUNT USE
IT IS FURTHER ORDERED that:
18. Inconnection with offering, marketing, or providing PayPal Credit, Defendants, their officers, agents, servants, contractors, and employees, and all other persons in active concert or participation with them who have actual notice of this Order, whether acting directly or indirectly, must, during the checkout process, clearly and prominently provide each consumer with the payment option that will be used for the transaction, and provide the consumer with a way to select a payment option other than PayPal Credit, if available. So long as the consumer is directed to clear and prominent disclosures at selection, this provision shall not prevent a consumer from voluntarily choosing a more streamlined checkout process for future purchases, such as one-click payment. If a consumer chooses another payment option,
Defendants must not process the consumer’s payment through PayPal Credit.
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; iI.
MARKETING AND PROMOTIONAL OFFERS
IT IS FURTHER ORDERED that:
19. Inconnection with offering, marketing, or providing PayPal Credit, Defendants, their officers, agents, servants, contractors, and employees, and all other persons in active concert or participation with them who have actual notice of this Order, whether acting directly or indirectly, are enjoined and restrained from misrepresenting any material aspect of PayPal Credit, including:
A. Any benefits that a consumer will receive from using PayPal Credit and
B. | The terms and conditions of any promotional offer associated with PayPal Credit,
such as deferred interest or money-back offers.
20. With respect to merchants that make promotional offers to consumers who use PayPal Credit, Defendants must ensure that consumers receive the benefit of the promotional offer by honoring the offer made through the merchant or providing other appropriate remediation such that the consumer receives at least the benefit of the promotional offer as represented by
the merchant.
IV.
PAYMENT PROCESSING
IT IS FURTHER ORDERED that:
21. Defendants, their officers, agents, servants, contractors, and employees, and all other persons in active concert or participation with them who have actual notice of this Order, whether acting directly or indirectly, in connection with processing payments made by
consumers toward their PayPal Credit accounts must:
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A. Post payments to accounts with the effective date that the payment was received as follows:
i. Electronic payments, and payments received over the phone, by 11:59 p.m. Pacific time;
ii. | Conforming checks, as defined in the PayPal Credit monthly billing statement, will be credited with the date they are received if they are received by 5:00 p.m. Eastern time, otherwise they will be credited with the next day’s date; and | iii. | Non-conforming checks will be credited within the time frame specified in the PayPal Credit monthly billing statement; , B. Provide a functioning electronic platform for consumers to make payments; and C. If Defendants’ system for accepting electronic payments is not functional and unavailable to consumers for a period of one hour or more, ensure that consumers with payments due on the day or days when the system is not functional and unavailable, or on any of the following five (5) days, are not required to pay late fees or interest for failure to make timely payments, and provide those consumers with an additional 3 days to make payments, which must be processed and treated by Defendants as timely.
Vv.
BILLING DISPUTES
IT IS FURTHER ORDERED that:
22. Defendants, their officers, agents, servants, contractors, and employees, and all other
persons in active concert or participation with them who have actual notice of this Order,
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whether acting directly or indirectly, in connection with consumer billing disputes related to
PayPal Credit accounts must:
23.
A Accept billing disputes from consumers in writing and through telephonic or electronic means;
B. , Resolve billing disputes within 2 billing cycles, but no longer than 90 days from receiving a dispute from the consumer;
C. Issue refunds, credits, and chargebacks, where appropriate, within 2 billing cycles, but no longer than go days of receiving a dispute;
D. Not impose fees or interest on a disputed balance, or send an account to
collection as a result of a consumer’s failure to pay a disputed balance, while a dispute is
pending;
E. — Provide written notification to consumers when billing disputes are resolved; F, Maintain and implement standardized procedures for tracking all billing
disputes; and
_G. Maintain adequate staff and sufficient systems to effect and sustain full and
complete compliance with the provisions of this section.
VI.
REDRESS
IT IS FURTHER ORDERED that:
Within 10 days of the Effective Date, Defendants must reserve or deposit into a
segregated deposit account $15 million, for the purpose of providing redress to Affected
Consumers.
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24. Within 60 days of the Effective Date, Defendants must submit to the Enforcement Director for review and non-objection a comprehensive written plan for providing redress consistent with this Order (Redress Plan). The Redress Plan must identify Affected Consumers by category, the number of consumers in each category, the total redress to be paid to consumers in the category, and the procedures for paying redress to Affected Consumers. The Enforcement Director will have the discretion to make a determination of non-objection to the Redress Plan or direct Defendants to revise it. If the Enforcement Director directs the Defendants to revise the Redress Plan, the Defendants must make the revisions and resubmit the Redress Plan to the Enforcement Director within 15 days. After receiving notification that the Enforcement Director has made a determination of non-objection to the Redress Plan, the Defendants must implement and adhere to the steps, recommendations, deadlines, and timeframes outlined in the Redress Plan.
25. Within 90 days from completion of the Redress Plan, Defendants must submit a Redress Plan Report to the Enforcement Director. The Redress Plan Report must include an audit and assessment of Defendants’ compliance with the terms of the Redress Plan.
26. After completing the Redress Plan, if the amount of redress provided to Affected Consumers is less than $15 million, within 30 days of the completion of the Redress Plan, Defendants must pay to the Bureau, by wire transfer to the Bureau or to the Bureau’s agent, and according to the Bureau’s wiring instructions, the difference between the amount of redress provided to Affected Consumers and $15 million.
27. Ifthe Bureau determines, in its sole discretion, that additional redress to Affected
Consumers is wholly or partially impracticable or otherwise inappropriate, or if funds remain
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after additional redress is completed, the Bureau may apply any remaining funds for such other equitable relief, including consumer information remedies, as determined to be reasonably related to the violations described in the Complaint. Any funds not used for such equitable relief will be deposited in the U.S. Treasury. Defendants will have no right to challenge any actions that the Bureau or its representatives may take under this paragraph. 28. Defendants may not condition the payment of any redress to any Affected Consumer under this Order on that Affected Consumer waiving any right.
VII.
CIVIL MONEY PENALTIES
IT IS FURTHER ORDERED that:
29. Defendants, jointly and severally, must pay a civil money penalty of $10 million to the Bureau. | 30. Within 14 days of the Effective Date, Defendants must pay the civil money penalty by - wire transfer to the Bureau or to the Bureau’s agent in compliance with the Bureau’s wiring instructions.
31. The civil money penalty paid under this Order will be deposited in the Civil Penalty Fund of the Bureau as required by Section 1017(d) of the CFPA, 12 U.S.C. § 5497(d). 32. Defendants must treat the civil money penalty paid under this Order as a penalty paid to the government for all purposes. Regardless of how the Bureau ultimately uses those funds,
Defendants may not:
A, Claim, assert, or apply for a tax deduction, tax credit, or any other tax benefit for
any civil money penalty paid under this Order; or
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B. Seek or accept, directly or indirectly, reimbursement or indemnification from any
source, including but not limited to payment made under any insurance policy, with
regard to any civil money penalty paid under this Order. 33. To preserve the deterrent effect of the civil money penalty in any Related Consumer Action, Defendants may not argue that they are entitled to, nor may Defendants benefit by, any offset or reduction of any compensatory monetary remedies imposed in the Related Consumer Action because of the civil money penalty paid in this action (Penalty Offset). If the court in any Related Consumer Action grants such a Penalty Offset, Defendants must, within 30 days after entry of a final order granting the Penalty Offset, notify the Bureau, and pay the amount of the Penalty Offset to the U.S. Treasury. Such a payment will not be considered an additional civil money penalty and will not change the amount of the civil money penalty imposed in this action.
34. The civil penalty imposed by the Order represents a civil penalty owed to the United States Government, is not compensation for actual pecuniary loss, and, thus, it is not subject to
discharge under the Bankruptcy Code under 11 U.S.C. § 523(a)(7).
Vil.
ADDITIONAL MONETARY PROVISIONS
IT IS FURTHER ORDERED that:
35. Inthe event of any default on Defendants’ obligations to make payment under this Order, interest, computed under 28 U.S.C. § 1961, as amended, will accrue on any outstanding amounts not paid from the date of default to the date of payment, and will immediately become
due and payable.
1]
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36. Defendants must relinquish all dominion, control, and title to the funds paid to the fullest extent permitted by law and no part of the funds may be returned to the Defendants. 37. Under 31U.S.C. § 7701, Defendants, unless they have already done so, must furnish to the Bureau their taxpayer identifying numbers, which may be used for purposes of collecting and reporting on any delinquent amount arising out of this Order.
38. Within 30 days of the entry of a final judgment, consent order, or settlement in a Related Consumer Action, Defendants must notify the Enforcement Director of the final judgment, consent order, or settlement in writing. That notification must indicate the amount of redress, if any, that Defendants paid or are required to pay to consumers and describe the consumers or classes of consumers to whom that redress has been or will be paid.
, IX.
ROLE OF THE BOARD
IT IS FURTHER ORDERED that:
39. The Board must review all submissions (including plans, reports, programs, policies, and procedures required by this Order) prior to submission to the Bureau. 40. Although this Order requires the Defendants to submit certain documents for the review or non-objection by the Enforcement Director, the Board will have the ultimate responsibility for proper and sound management of Defendants and for ensuring that Defendants comply with Federal consumer financial law and this Order.
41. _Ineach instance that this Order requires the Board to ensure adherence to, or perform certain obligation of Defendants, the Board must:
A. Authorize whatever actions are necessary for Defendants to fully comply with the
Order;
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B. Require timely reporting by management to the Board on the status of compliance obligations; and
C. Require timely and appropriate corrective action to remedy any material noncompliance with any failures to comply with Board directives related to this Section.
xX.
~ COMPLIANCE PLAN
IT IS FURTHER ORDERED that:
42. Within 60 days of the Effective Date, Defendants must submit to the Enforcement Director for review and determination of non-objection a comprehensive compliance plan (Compliance Plan) designed to ensure that Defendants’ offering, marketing, and providing of PayPal Credit complies with the terms of this Order. 43. |The Compliance Plan must include, at a minimum: A. Detailed steps for addressing each action required by this Order, including specifically:
i. For account enrollment, the timeframes by which Defendants will clearly and prominently disclose through a method, such as a pop-up box, that PayPal Credit is a line of credit and may be subject to interest and that consumers will receive their billing statement electronically at the email address designated by the consumer;
ii. For promotional offers, a written description of procedures to ensure that consumers receive promotions advertised, including promotions advertised
through merchants;
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iii. | For payment processing, a written description of Defendants’ internal controls and business resiliency plans to mitigate system failures; iv. For billing disputes, a written description of procedures to track billing disputes, provide written notification of resolved billing disputes to consumers, and ensure adequate personnel and systems to handle billing disputes; and Vv. Specific timeframes and deadlines for implementation of the steps. B, The Enforcement Director will have the discretion to make a determination of non-objection to the Compliance Plan or direct Defendants to revise it. If the Enforcement Director directs Defendants to revise the Compliance Plan, Defendants must make the revisions and resubmit the Compliance Plan to the Enforcement Director within 15 days.
44. After receiving notification that the Enforcement Director has made a determination of non-objection to the Compliance Plan, Defendants must implement and adhere to the steps, recommendations, deadlines, and timeframes outlined in the Compliance Plan. 45. Any material proposed changes to or deviations from the Compliance Plan must be submitted in writing to the Enforcement Director to make a determination of non-objection.
XI.
REPORTING REQUIREMENTS
IT IS FURTHER ORDERED that:
46. Defendants must notify the Bureau of any development that may affect compliance obligations arising under this Order, including but not limited to a dissolution, assignment, sale, merger, or other action that would result in the emergence of a successor company; the
creation or dissolution of a subsidiary, parent, or affiliate that engages in any acts or practices
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subject to this Order; the filing of any bankruptcy or insolvency proceeding by or against any Defendant; or a change in any Defendant’s name or address. Each Defendant must provide this notice at least 30 days before the development or as soon as practicable after learning about the development, whichever is sooner.
47. Defendants must report any change in the information required to be submitted under this Section at least 30 days before the change or as soon as practicable after learning about the change, whichever is sooner.
48. Within 90 days of the Bureau’s non-objection to Defendants’ Compliance Plan, Defendants must submit to the Enforcement Director an accurate written compliance progress report (Compliance Report), and again one year after the date of the initial Compliance Report, which, at a minimum:
A. Describes in detail the manner and form in which Defendants have complied with this Order and B. Attaches a copy of each Order Acknowledgment obtained under Section XII, unless previously submitted to the Bureau.
49. After the one-year period, Defendants must submit to the Enforcement Director additional Compliance Reports within 14 days of receiving a written request from the Bureau.
XII.
ORDER DISTRIBUTION AND ACKNOWLEDGMENT
IT IS FURTHER ORDERED that:
50. Within 60 days of the Effective Date, each Defendant, for any business for which the Defendant is the majority owner or directly or indirectly controls, must deliver a copy of this
Order to each of its board members and executive officers, as well as to any managers,
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employees, service providers, or other agents and representatives who have responsibilities related to the subject matter of this Order.
51. ‘For 5 years from the Effective Date, Defendants, for any business for which the Defendant is a majority owner or directly or indirectly controls, must deliver a copy of this Order to any business entity resulting from any change in structure referred to in Section XI, and any future board members and executive officers, as well as to any managers, employees, service providers, or other agents and representatives who will have responsibilities related to the subject matter of the Order before they assume their responsibilities.
52. Defendants must secure a signed and dated statement acknowledging receipt of a copy of this Order, ensuring that any electronic signatures comply with the requirements of the E- Sign Act, 15 U.S.C. § 7001 et seq., within 60 days of delivery, from all persons receiving a copy of this Order under this Section.
XIII.
RECORDKEEPING _
IT IS FURTHER ORDERED that:
53. | Defendants must create, for at least 5 years from the Effective Date, all documents and records necessary to demonstrate full compliance with each provision of this Order, as well as
all submissions to the Bureau.
54. Defendants must retain the documents identified in this Section for at least 5 years.
55. Defendants must make the documents identified in this Section available to the Bureau
upon the Bureau’s request.
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XIV.
NOTICES
IT IS FURTHER ORDERED that:
Unless otherwise directed in writing by the Bureau, Defendants must provide all
submissions, requests, communications, or other documents relating to this Order in writing,
with the subject line, “In re PayPal, Inc., No. 2013-0551-02,” and send them either:
57-
by overnight courier (not the U.S. Postal Service) and contemporaneously by email, as follows:
Assistant Director for Enforcement
Consumer Financial Protection Bureau ATTENTION: Office of Enforcement
1625 I Street, NW
Washington, DC 20006 [email protected]; or ‘
by first class mail to the below address and contemporaneously by email to:
Assistant Director for Enforcement
Consumer Financial Protection Bureau
ATTN: Office of Enforcement
1700 G Street, NW
Washington, DC 20552 [email protected].
XV.
COOPERATION WITH THE BUREAU
IT IS FURTHER ORDERED that:
Defendants must cooperate fully to help the Bureau determine the identity and location
of, and the amount of injury sustained by, each Affected Consumer. Defendants must provide
such information in its or its agents’ possession or control within 14 days of receiving a written
request from the Bureau.
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58. Defendants must cooperate fully with the Bureau in this matter and in any investigation related to or associated with the conduct described in the Complaint. Defendants must provide truthful and complete information, evidence, and testimony. Defendants must cause its officers, employees, representatives, or agents to appear for interviews, discovery, hearings, trials, and any other proceedings that the Bureau may reasonably request upon 5 days written notice, or other reasonable notice, at such places and times as the Bureau may designate,
without the service of compulsory process.
XVI.
COMPLIANCE MONITORING
IT IS FURTHER ORDERED that:
59. Within 14 days of receipt of a written request from the Bureau, Defendants must submit additional compliance reports or other requested information, which must be made under penalty of perjury, provide sworn testimony, or produce documents. 60. Defendants must permit Bureau representatives to interview any employee or other person affiliated with Defendants who has agreed to such an interview. The person interviewed
may have counsel present.
61. Nothing in this Order will limit the Bureau’s lawful use of civil investigative demands
under 12 C.F.R. § 1080.6 and other compulsory process.
XVII.
RETENTION OF JURISDICTION
62. The Court will retain jurisdiction of this matter for purposes of construction,
modification, and enforcement of this Order.
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XVIII.
RELEASE
63. The Bureau releases and discharges Defendants-from all potential liability for law violations that the Bureau has or might have asserted based on the practices alleged in the Complaint, to the extent such practices occurred before the Effective Date and the Bureau knows about them as of the Effective Date. Notwithstanding this release, the Bureau may use the practices alleged in the Complaint in future enforcement actions against Defendants or their affiliates to establish a pattern or practice of violations, or the continuation of a pattern or practice of violations, or to calculate the amount of any penalty. This release does not preclude or affect any right of the Bureau to determine and ensure compliance with this Order or to seek
penalties for any violations of this Order.
IT IS SO ORDERED.
DATED this QM Gay of MAY ___, 2015.
LL DE om B
United States District Court