Online payment firm PayPal has agreed to pay $15m in consumer redress and a $10m penalty for using deceptive advertising for its PayPal Credit program, previously known as Bill Me Later.
In a federal lawsuit, the Consumer Financial Protection Bureau (CFPB) alleged that PayPal signed up customers to the service without their permission, used misleading advertising, forced users to use PayPal Credit instead of other payment methods, and mishandled billing disputes and made billing errors.
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In its complaint, the CFPB said that the company also failed to remove late fees and interest charges from consumers’ bills, failed to post payments properly, lost payment checks and abusively charged consumers deferred interest.
As part of the proposed settlement, PayPal also agreed improve its consumer disclosure policies for PayPal Credit.
The consent order needs approval from a Maryland federal court judge.
CFPB director Richard Cordray said: "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."
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