Example: [Collected on the Internet, 2004]
Origins: In 2002, lawsuits were filed against PayPal, alleging (among other issues) that PayPal illegitimately restricted customers' access to their money:
PayPal frequently locks customers' accounts if it suspects that fraud played a part in a transaction, even if the amount in doubt is a fraction of the total amount in an account, said Gail Koff, an attorney and founding partner of Jacoby & Meyers, which filed the lawsuit.
The result is that customers can't accept any more payments via PayPal, pay anyone through the service, or withdraw any of their money until PayPal clears the transaction. That can often take days or even weeks, customers charge.
"Under the guise of needing to protect consumers from fraud, they themselves are guilty of fraudulent abuse of their customers," Koff said PayPal
The company said it will pay a total of $9.25 million to settle the federal class-action suit, $3.4 million of which will pay lawyers' fees and costs.
PayPal admitted no wrongdoing in settling the claims, which were filed in 2002 as part of two federal class-action suits that also alleged other customer service deficiencies.
Those two cases were merged, and a third case, pending in California state court, will be dismissed if the settlement agreement is approved.
"In this agreement, PayPal does not acknowledge that any of the allegations in the case are true," PayPal said in an e-mail to customers. The unit "entered into the settlement agreement to avoid further costs of litigation and to devote resources to more productive areas of our business."
PayPal customers who used the service between
Last updated: 28 July 2004
Wolverton, Troy. "PayPal Hit by Class-Action Suit." CNET News.com. 21 February 2002. Festa, Paul. "PayPal Settles Customer Suit." CNET News.com. 14 June 2004.