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Class Action Lawsuit May Bring Greater Transparency to PayPal

PayPal may soon bring to an end an ongoing class action lawsuit that it has been fighting since 2010. Parties to the case, known as Zepeda vs. PayPal, have reached a tentative settlement agreement over allegations that the online payment company utilizes an unlawful freeze on accounts.

PayPal%20Corp-001.jpgMoises Zepeda and other members of the class are frequent sellers on eBay, the online auction website. They typically received payment via PayPal, which touted itself as being more secure and convenient than other payment methods. However, Zepeda and others noticed that the funds they received from buyers in their PayPal accounts were often subject to a hold of up to 180 days. PayPal claimed that the holds or account freezes were necessary to combat fraud. Plaintiffs didn’t believe that the account freezes served any useful purpose. In addition, having their PayPal account frozen for an extended period of time made it difficult to do business.

The class filed the lawsuit in 2010, and it has required five years to even reach a tentative settlement agreement. While presiding over the possible agreement, the judge noted the “long and tortured history” that the parties to the case have endured. The proposed, approximately four million dollar settlement seems to be a step in the right direction, but only time will tell if it brings about any real changes. Thus far, PayPal has admitted to no wrongdoing, and they don’t appear to be willing to make sweeping changes to their account freeze policies.

However, PayPal seems ready to agree to provide users with more information when a hold is placed on their account. Customer service callers can ask why a hold is in place, and now PayPal staffers must tell them the reasoning behind the hold if it does not violate security measures.

Time will tell if sellers are satisfied with these results. Considering how hotly contested the case has been up to this point, it will be a minor miracle if the settlement agreement is even finalized. Consumers may benefit from new disclosure standards that PayPal will have to comply with, allowing for greater transparency.

Sylvester, Oppenheim & Linde represents businesses and their owners in most types of litigation. If your business has a legal problem, contact Richard Oppenheim directly for a prompt, no charge initial consultation. You may use the contact form in the left column or call 818-461-8500.