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PayPal Agrees to Change Business Practices in Lawsuit Settlement

A class action lawsuit that has been dragging on since 2010 and that has seen its share of complications is coming to a close. Zepeda vs. PayPal deals with the unpopular practice of holds that PayPal placed on sellers’ funds. PayPal has denied all allegations of wrongdoing and liability.

In the unlikely chance you aren’t familiar with PayPal holds and why they’re controversial, take a look at this Newsflash article from 2011, one of many articles on the topic.

The parties have reached a preliminary settlement in what the judge called the “long and tortured history” of the case, which we reported in this Newsflash article from 2 years ago.

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The practice of holding sellers’ funds as part of PayPal’s fraud detection and prevention practices will continue. As part of the settlement, PayPal agreed to change some of its business practices, however, though sellers can decide whether they are meaningful changes. Here’s an example of one of the practices that PayPal agreed to in the preliminary settlement agreement: “In response to calls to customer service, PayPal will disclose the reason for a hold, reserve or limitation to the extent not inconsistent with PayPal’s security requirements, which will be determined at PayPal’s sole discretion. If PayPal is unable to inform a user of the reason for a hold, reserve or limitation due to security requirements, it will inform the user that it cannot tell the user the reason due to security requirements.”

PayPal agreed to pay no more than $4 million comprised of $3,200,000 in the Zepeda settlement fund plus up to $800,000 for alternate claims.

The court appointed Epiq Systems the settlement administrator, and it created a website with information at AccountHoldSettlement.com, where it explains that eligible class members may get between $3 – $440, “depending on the length and amount of the hold or reserve.” Named class representatives will receive more – up to $2500 – but that only applies to sellers who were active participants in the lawsuit (you’d know it if you were).

Don’t expect a quick payout – the Final Approval Hearing won’t even be held before June 14, 2016. And remember to be skeptical of any websites or emails related to the case that might be coming from fraudsters who often target PayPal users.

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Ina Steiner

Ina Steiner is co-founder and Editor of EcommerceBytes and has been reporting on ecommerce since 1999. Send news tips to ina@ecommercebytes.com.


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