EcommerceBytes-NewsFlash, Number 817 - July 30, 2004     1 of 3

PayPal Sends Users Notice of Class-Action Lawsuit Settlement

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PayPal sent an email to customers on Wednesday informing them they may be entitled to a payment from a class action settlement. Members of the class are users who opened a PayPal account between October 1999 and January 2004.

Last month, PayPal and plaintiffs reached a settlement in the class-action lawsuit stemming from 2002, when two PayPal users filed class action lawsuits against the online payment service owned by eBay. Some of the accusations by the plantiffs were that, as of early 2002, PayPal was understaffed, hid its customer service phone numbers to save money, had rude and unhelpful phone staff, did not answer customer service email, and "without notice or warning, erroneously and unnecessarily" limited or closed accounts and then made it difficult to restore the accounts.

The settlement requires PayPal to pay out $9.25 million into a settlement fund that must also pay for administrative costs and plaintiffs' lawyer fees.

PayPal's notice sent this week informed users that it has already implemented changes to conform with an injunction mandating various changes to PayPal's business practices. The injunction includes PayPal's agreement to comply with certain notice and error-resolution procedures of the EFTA (Electronic Fund Transfer Act), and to follow certain procedures for limiting accounts and responding to and returning funds to customers whose accounts have been limited.

Members of the class who wish to file for " Monetary Relief" are required to complete the claims procedure no later than October 23, 2004. Users who wish to exclude themselves from the settlement must submit a signed request for exclusion that must be received by Co-Lead Counsel on or before September 7, 2004. Those who do not exclude themselves will not be able to sue, continue to sue, or be part of another lawsuit against PayPal relating to the legal issues in the case.

To make a claim for payment, class participants must complete one of the claim forms (Statutory Damage Claim Form, Short Claim Form, or Long Claim Form) available on the Internet at The link redirects to a non-PayPal site hosted by the claims administrator for the settlement, Garden City Group. The Web site was inaccessible when attempts were made on Wednesday, but was working by Thursday afternoon. Late Thursday evening it was again inaccessible.

PayPal spokesperson Amanda Pires confirmed that was a legitimate Web site set up for the PayPal class-action settlement.

Users expressed confusion over which form to file and under what circumstances they could file. Phone messages left by AuctionBytes for Plaintiff's attorneys at Girard Gibbs and Wolf Popper on Wednesday and Thursday were not returned.

PayPal account holders should be wary of hoaxes that attempt to capitalize on confusion stemming from the settlement notice and subsequent publicity. Users should not click on links in an email to access any site purporting to be from PayPal or involving the lawsuit. Do not click on links in this or any other email, rather, type in the URL, The settlement forms do not require detailed account information, personal financial information or passwords.

About the author:

Ina Steiner is co-founder and Editor of EcommerceBytes and has been reporting on ecommerce since 1999. She's a widely cited authority on marketplace selling and is author of "Turn eBay Data Into Dollars" (McGraw-Hill 2006). Her blog was featured in the book, "Blogging Heroes" (Wiley 2008). Follow her on Twitter at @ecommercebytes and send news tips to

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