NEWARK - PayPal, Inc. has agreed to clearly disclose all contractual terms and financial obligations to consumers before they become members and whenever they make payments to others using PayPal’s system, under a multi-state settlement to resolve consumers complaints, Attorney General Stuart Rabner and Acting Consumer Affairs Director Stephen B. Nolan announced.

“As our retail marketplace becomes even more technologically advanced, it is critical that consumers be able to trust those companies they rely on when doing business on-line,” said Attorney General Stuart Rabner. “With this agreement, PayPal will change its business practices to protect consumers.”

PayPal represents a relatively new type of web-based alternative payment system. This system provides online services with which members can transfer money to other people or businesses. PayPal is used predominantly for on-line auctions or other business purchases, but can be used to transfer money between individuals.

To date, the Division of Consumer Affairs received 30 complaints about PayPal. The complaints allege that PayPal would freeze money held in the consumer’s PayPal accounts during (billing/payment) disputes and charge credit cards directly without consumer permission.

“The bottom line is this: consumers should not be forced to jump through hoops - or multiple hyperlinks - to get the information they need to make an informed decision regarding an on-line purchase or money transfer,” said Acting Director Nolan.

Under the terms of the settlement, PayPal has agreed to:

detail important terms and conditions before a consumer becomes a PayPal member and each time a member initiates a transaction;

make information more accessible to users by changing the way PayPal uses hyperlinks and multi-page documents; present the consumer with a clear choice regarding what form of payment to use, such as credit card, debit card or electronic funds transfer from a bank account, each time a PayPal member gets ready to make a purchase; provide clear access to web pages containing important differences between its in-house PayPal dispute resolution programs and charge back rights granted by federal law to consumers who use electronic banking, debit cards and credit cards to make payments and purchases.

New Jersey joined with the Illinois Attorney General’s office and 26 other states to enter into this settlement with PayPal, which has denied any wrongdoing.

Deputy Attorney General Geoffrey R. Gersten represented New Jersey in this matter.

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