PayPal is facing a lawsuit from federal regulators, according to the Wall Street Journal. The Consumer Financial Protection Board (CFPB) had initiated a probe info Bill Me Later, now known as PayPal Credit, in 2013.
PayPal acquired the company in 2008 for close to a billion dollars and integrated it into the eBay Marketplace, as well as making it available to other ecommerce websites. PayPal Credit lets shoppers make a purchase with no money down, offering them a temporary window with no monthly payment obligations, and then charging retroactive interest if the balance is not paid in full during the grace period – a practice consumer advocates have criticized.
In October 2013, eBay spokesperson Amanda Miller told EcommerceBytes that the CFPB, a creation of the Dodd-Frank Wall Street reform act, had served administrative subpoenas on eBay, PayPal and Bill Me Later that related specifically to the deferred payments service.
The CFPB again requested documents and information about the service in January 2014. Despite the probe, PayPal expanded PayPal Credit to the UK and Germany in the summer of 2014.
In its recent SEC filing, PayPal disclosed that the CFPB could file a lawsuit against it as early as this quarter, which ends June 30th and provided PayPal with a Notice and Opportunity to Respond and Advise. PayPal said it is engaging in settlement discussions.
“Resolution of these inquiries could require us to make monetary payments to certain customers, pay fines and/or change the manner in which we operate the PayPal Credit products, which could adversely affect our business,” PayPal wrote.
