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PayPal fined $25m for tricking users into credit program

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A few months ago, I noticed that PayPal put a “pay later” button where the usual payment button would be. It’s a tricky way to snooker users into the credit/debt treadmill, and PayPal has been fined for this fraudulent behavior, writes Josh Lowensohn.

The organization says PayPal signed people up to the service without their permission, deceptively advertised its benefits (which never materialized in some cases), forced users to use PayPal Credit instead of other payment methods, and “mishandled” billing in a way that raked up late fees and extra interest charges. All in all, very bad things for people trying to spend money on the internet.

“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,” the complaint says.

Paypal must reimburse them, writes Bloomberg News.

In particular, CFPB said, PayPal used deferred-interest promotions, which push off payments to a later date, to rope in customers. The company then made it difficult to avoid the deferred fees, which customers can typically do by paying off a loan before a specified date, the agency said. Amanda Miller, a spokeswoman for PayPal, said the company “takes consumer protection very seriously.”

I hadn’t even known I had used this checkout option myself until a payment I expected to be deducted never materialized. They really do present it in the most cunning way possible. Once you know what they’re up to, you’d spot it a mile off. But the psychological blinders used seem as self-consciously deceptive as the usual phishing techniques, and have the huge advantage of being the verifiably proper payment venue.

I can’t remember exactly how it appeared, but the manipulation depended on my familiarity with the usual payment UI and my expectation that a particular button in a particular place would do a particular thing.

I also recall these sleazy-looking “statement alert” emails I’d get now and again, which seemed crafted to look like spam or otherwise be ignored, instead of a formal monthly invoice for the minimum payment required to avoid interest and fees. They’re not sent even from the same domain!

The tiny little $25m fine won’t bother it much. PayPal seems to have few serious incentives to be honest and forthright in its dealings with customers.

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