Hall of Shame: PayPal’s New User Agreement

November 01, 2012

Changes have come to PayPal’s user agreement, and of course, the changes are not for the benefit PayPal’s customers. The company recently added a section to its user agreement which takes away a user’s right to sue in court. PayPal has fallen the way of many other large companies recently by instituting a mandatory binding arbitration agreement.

Pursuant to PayPal’s new terms, effective today, users will be required to submit claims through binding and final arbitration and cannot pursue claims against the company in court as part of a class action lawsuit, even though class action lawsuits might be the best way for some of PayPal’s  117 million active registered users to bring a claim.

PayPal customers made 589 million transactions in the third quarter of 2012, or 6.4 million payments per day. That calculates to $4,423 total payment volume for every second of that quarter. With all that money exchanging hands, consumers are likely to have issues on occasion with the company or the way it conducts business. And PayPal, which made $4.4 billion in revenue last year, certainly would have the upper hand against any individual consumer with a complaint. Unless consumers opt out of the agreement, however, that is just want they will have to do – take on PayPal as an individual regardless of the nature of their complaint.

The only way around this arbitration clause is by opting out of PayPal’s Agreement to Arbitrate. Existing customers have until Dec. 1, 2012 to opt out. New customers will have 30 days from the date they register with PayPal. To opt out, fill out this letter and mail it to: PayPal, Inc., Attn: Litigation Department, 2211 North First Street, San Jose, CA 95131.

We’ve talked about mandatory arbitration agreements and the harm they do to consumers many times on this blog, so it’s no surprise to see PayPal make these changes. Still it’s disappointing nonetheless and a move definitely worthy of our hall of shame.


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