A lawsuit between the state and PayPal has been settled to the tune of $6 million.
The Hawai‘i Department of Commerce and Consumer Affairs’ Office of Consumer Protection sued PayPal Inc. and PayPal Holdings Inc. in December 2022, accusing the companies of misleading customers about fraud protection policies and the accessibility of their funds.
On Monday, the DCCA announced that the suit has been settled out of court, with PayPal to pay $6 million to the state.
“Hawai‘i customers depend on PayPal and Venmo for critical daily tasks like paying rent, receiving wages and compensating child care providers,” said Office of Consumer Protection Executive Director Mana Moriarty in a statement Monday. “We share the same goal as the state of Hawai‘i to empower and protect consumers and are pleased to have reached an agreement on this matter.”
The suit cited complaints from Hawai‘i users of PayPal and PayPal’s mobile service app Venmo that alleged that, despite PayPal promising fast access to their money at all times, they found their Venmo accounts frozen without notice, leaving their funds inaccessible for as long as six months with no clear appeals process.
The suit called the freezes “draconian” and claimed they were carried out without any human review towards any account that was determined to have violated Venmo’s user agreement. The suit went on to call that user agreement “bloated,” with pertinent language about the freezes buried deep in the 20,000-word document.
The freezes weren’t the only complaint about PayPal’s service. The suit also accused PayPal of deceptive practices concerning its fraud protection services.
For example, PayPal offered a purchase protection service wherein, for an additional fee, users could have a transaction refunded in the event of a scam. However, this service had strings attached: it did not apply to many different types of purchases — “payments for goods that the buyer collects in person” were excluded from the service — it only entitled users to apply for a refund, and users would still be charged the fee even if the service couldn’t be applied to a given transaction.
Other concerns included Venmo’s policy of setting users’ profiles to be publicly viewable by default. According to the suit, one Hawai‘i user found a stranger’s account using his own five-year-old child’s face as a profile picture; another ended up paying $300 to a scammer posing as the user’s daughter, using information accessible through publicly viewable friends lists.
For all this and more, the suit called for $10,000 in damages for every recorded violation of the state’s unfair and deceptive practice laws; based on this, the $6 million is equivalent to 600 such violations.
PayPal denied the suit’s claims throughout the process.
The company said in a statement Monday: “PayPal takes our responsibility to our customers very seriously, and we continually enhance our products and communications to improve the customer experience. We share the same goal as the state of Hawaiʻi to empower and protect consumers, and are pleased to have reached an agreement on this matter.”
Aloha State Daily reached out to DCCA for further comment.
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