Paypal heavily penalised for 'deceptive' practices

The online payment service Paypal has agreed to pay $25m of compensation and fines in the US after being accused of decieving its customers.

A government watchdog denounced the company for adding new members to a A credit based scheme without actually making them aware of the fact they were doing so.

Further to this, it is said that Paypal has mishandled bill disputes, among other offences.

The eBay-owned company has offered to settle the case, without admitting wrong doing.

The Paypal credit is a delayed payment scheme, which gives users the ability to spread out bills over several months of course paying a monthly interest for the privilege. Members face hefty addditional fees if any of their payments are overdue.

Paypal is accused of making this a default option for new sign-ups without clarifying that it was doing so. In addition, the company is accused of failing to provide up to $10 worth of credit towards purchases, as promised in its adverts.

There is a proposed settlement which states that the company will set up a $15m fund to compensate affected customers and pay a further $10m fine to the bureau.