Ina Steiner EcommerceBytes Blog
News and insight focusing on ecommerce.
by Ina Steiner, Editor of EcommerceBytes.com
Mon Feb 1 2016 10:44:12

PayPal Lawsuit Settlement Raises Security Concerns

By: Ina Steiner

Sponsored Link

Online sellers who have dealt with holds on their PayPal funds over the years are entitled to part of a $4 million class action lawsuit settlement. But in order to get their piece of the settlement, they have to go to a website not operated by PayPal and enter information that has the potential to put their PayPal accounts at risk.* If they do nothing, they will not receive any funds they may be entitled to.

*if the website is breached.

This morning's Newsflash has the latest details about the settlement, and as we noted, sellers have to enter their name, address, phone number, and the email address associated with their PayPal account on a form on a website set up by a claims administrator appointed by the court. (The website is registered privately - that means you can't use the WhoIs database to verify that the URL was set up by the settlement administrator.) 

Experts warn that people should not hand out such information to anyone since it can put them at risk for an account takeover - many online sellers receive phishing emails looking for that information on a daily basis. The website does not provide information about how the data is stored, who has access to it, and what will happen to the database of user account information after the settlement.

However, it does publish the following Privacy Policy:

The Claims Administrator is committed to maintaining the privacy of your personal information. With respect to the collection, use and disclosure of personal information, the Claims Administrator makes every effort to ensure compliance with applicable law, including, but not limited to, the Data Protection Act, 1998, the U.S. Privacy Act of 1974, the U.S. Paperwork Reduction Act of 1995, the US-EU Safe Harbor Privacy Principles and internal information quality guidelines. In connection with the claims administration process, you may be asked to provide certain information, including, but not limited to, name, postal address, telephone number and transactional account data. The information collected will be used solely for the purposes of the Settlement and the claims administration process, as governed by the Court.

Here's a copy of the email PayPal has been sending out to users this month:

NOTICE OF CLASS-ACTION SETTLEMENT.

THIS NOTICE MAY AFFECT YOUR RIGHTS. PLEASE READ IT CAREFULLY.

A settlement has been reached in a class action in which the plaintiffs allege, among other things, that PayPal improperly handled disputed transactions on PayPal accounts and improperly placed holds and reserves on accounts or closed or suspended accounts. Plaintiffs also allege that PayPal failed to provide annual error-resolution notices and monthly account statements under the Electronic Fund Transfer Act.

You are a member of the Settlement Class if you had an active PayPal account between April 19, 2006 and Nov. 5, 2015. Certain Settlement Class Members who had a hold or reserve placed on their account and/or who had their account closed or suspended by PayPal are eligible to receive a monetary payment upon submission of a valid claim form.

This notice summarizes the proposed settlement. For the precise terms and conditions of the settlement, please see the Settlement Agreement available at http://www.accountholdsettlement.com/ or by visiting the office of the Clerk of the Court for the United States District Court for the Northern District of California, 1301 Clay Street, Oakland, CA 94612, between 9:00 a.m. and 4:00 p.m., Monday through Friday, excluding Court holidays.

PLEASE DO NOT TELEPHONE THE COURT OR THE COURT CLERK'S OFFICE TO INQUIRE ABOUT THIS SETTLEMENT OR THE CLAIM PROCESS.

When you initiate a claim on the website, you'll be asked two questions - and if you answer yes, you'll be asked to answer additional questions:

Question 1: Between April 19, 2006 and November 5, 2015, did you have a hold or reserve placed on your PayPal account?* (Yes /  No)

Question 2: Between April 19, 2006 and November 5, 2015, was your PayPal account closed or suspended?* (Yes /  No)

Question 3: If you answered “Yes” to Question 1, do you wish to submit a Basic Claim, which, if valid, will result in a fixed payment based on the amount and length of the longest hold or reserve placed on your account or to submit an Alternate Claim based on the amount of documented damages, up to $2,000? You may select either a Basic Claim or an Alternate Claim, but not both.*

Question 4: If you selected “Alternate Claim” or answered “Yes” to Question 2 and want to submit an Alternate Claim, please describe in the space provided below the basis for your Claim and please upload any supporting documentation. Your Claim will be evaluated by a neutral third party approved by the Court, based on the information you provide and the records of PayPal. You may be contacted for further information in support of your Claim.*

You can see how much money is at stake - we published a chart showing how much members of the class are entitled to (if they submit a claim) in today's Newsflash, available on the EcommerceBytes website.

Comments (32) | Leave Comment | Permalink
Readers Comments

Perminate Link for PayPal Lawsuit Settlement Raises Security Concerns   PayPal Lawsuit Settlement Raises Security Concerns

by: Tiffee Jasso This user has validated their user name.

Tue Feb 2 15:20:50 2016

Like so many others, I will not work from an email or click on links. Nor will I hand over sensitive information to an unknown organization. Anyone who actually understands security questions and the internet, would agree with me. Instead of emails, send out letters with claim forms. The whole idea of a private website that cannot be properly identified smells rotten to me. The court should not have allowed email notifications to start with. In my opinion, the notifications are not legal in of themselves. Paypal has names and addresses for those affected. However, Paypal is not to blame for this part of the litigation. The Plaintiffs have control of the funds. It is the Court who dropped the ball and perhaps some letters to that court would be more appropriate.  

Perminate Link for PayPal Lawsuit Settlement Raises Security Concerns   PayPal Lawsuit Settlement Raises Security Concerns

This user has validated their user name. by: Marie

Tue Feb 2 17:20:10 2016

@froggy & bitbybit

A company or site rarely knows they have been hacked the moment they have been hacked.  It has to be discovered and someone.  The big hack of Target a couple years ago took them a couple months before they knew they had been hacked.  Same kind of thing for Home Depot and most likely others.  With Ebay they were hacked in February 2014, but didn't discover it until late March and I think it was April when they announced it.  Or I might be confusing April 2014 with when they brought Cassini site wide.

All I'm saying is that companies don't always know right away that they have been hacked.  I don't like delays anymore than anyone else.  

Perminate Link for PayPal Lawsuit Settlement Raises Security Concerns   PayPal Lawsuit Settlement Raises Security Concerns

This user has validated their user name. by: Kitty Ninja

Tue Feb 2 22:00:11 2016

I have paperwork from my eBay sales/purchases.  At one point a Buyer used a credit card from her employer. She bought LOTS of things from me (and NUMEROUS other eBay sellers...some who were not as diligent to keep records as I did).  Her employer found out she was using a company card to buy all these things and then disputed ALL the charges. eBay THEN holds the funds in MY account as well as the others affected (which was wrong...how am I supposed to know the CC card being used is fraud??) I eventually got the "hold" off the money, and I believe Paypal had to "eat it". It was SO WRONG of Paypal to do what they did.  May is last day to file a claim in this suit. I'm planning to wait to make sure it isn't a scam site and, YES then I will file.  I can't tell you how UPSET I was about how the whole thing was handled!!  Payback is...well you know...

Perminate Link for PayPal Lawsuit Settlement Raises Security Concerns   PayPal Lawsuit Settlement Raises Security Concerns

This user has validated their user name. by: Marie

Wed Feb 3 03:02:32 2016

@kitty Ninja

Ebay did not hold your funds on a chargeback as Ebay has nothing to do with them.  That would have been PP holding your money.

When PP gets notification from a CCC that a dispute has been filed, they will then go and put a hold on your money while it is being investigated.  This is a normal thing to do for PP.  These are not the types of hold on funds covered by the law suit.  

I know it upset you, but it is business and this is how a money processor does things.  I do have to agree, the process is annoying.  I am glad you won the chargebacks and got all your money returned to you.

Perminate Link for PayPal Lawsuit Settlement Raises Security Concerns   PayPal Lawsuit Settlement Raises Security Concerns

This user has validated their user name. by: Shop and Ship

Wed Feb 3 15:00:34 2016

PayPal has now updated its Notice of Class Action Settlement to include more detail about how they allegedly but not admittedly violated the EFTA [Electronic Funds Transfer Act}, especially failure to disclosed and failure to account to its account holders.

Seriously, PayPal handles funds but doesn't disclose the transactions to the owners of the funds? And eBay and PayPal were joined at the hip during these years?

Go ahead, Marie, defend that as a cost of doing (funny) business. That may well be how eBay and PayPal "does things" but that doesn't mean that it complied with state and federal laws or that it's moral.

Well, settling multi-million dollar law suits is also "part of doing business" when class action lawyers sharpen their pencils.

Touche ... even the Cyclops has to sleep sometime.

Perminate Link for PayPal Lawsuit Settlement Raises Security Concerns   PayPal Lawsuit Settlement Raises Security Concerns

This user has validated their user name. by: Marie

Wed Feb 3 15:55:48 2016

@shop and ship

What the heck are you talking about?  I said nothing even close to that on this subject / thread.

Perminate Link for PayPal Lawsuit Settlement Raises Security Concerns   PayPal Lawsuit Settlement Raises Security Concerns

This user has validated their user name. by: Kitty Ninja

Thu Feb 4 03:19:48 2016

@Marie

Shop and Ship is correct!! eBay and Paypal were "joined at the hip" when this happened. So eBay AND Paypal held the money as they were one in the same. If Paypal had done their "due diligence" they would have verified the use of the credit card that was used. I have NO WAY to verify the validity of any credit card as all information is handled via PayPal. Why am I as a Seller liable for THEIR error?? The ONLY way I knew anything about this situation is because I was contacted by police verifying her purchases from me. @shop and ship is SPOT ON! and correct in their comments.

Perminate Link for PayPal Lawsuit Settlement Raises Security Concerns   PayPal Lawsuit Settlement Raises Security Concerns

This user has validated their user name. by: toolguy

Thu Feb 4 11:19:43 2016

Question 1: Between April 19, 2006 and November 5, 2015, did you have a hold or reserve placed on your PayPal account?* (No)

Question 2: Between April 19, 2006 and November 5, 2015, was your PayPal account closed or suspended?* (No)


I'll get No money!

Perminate Link for PayPal Lawsuit Settlement Raises Security Concerns   PayPal Lawsuit Settlement Raises Security Concerns

This user has validated their user name. by: Marie

Thu Feb 4 12:51:45 2016

@kitty ninja

Shop and ship made a specific comment to me, which is what I was responding to.  The rest of what they said and you said, was not my point nor did it have anything to do with what I posted.  

Perminate Link for PayPal Lawsuit Settlement Raises Security Concerns   PayPal Lawsuit Settlement Raises Security Concerns

by: Mongoose This user has validated their user name.

Sun Feb 7 12:33:51 2016

As someone who used to work for a giant bank, I can tell in the case of the employee who used her company credit card to buy things on ebay, that neither the merchant, ebay, paypal, or the credit card company are responsible.  It would be a civil matter between the employer and employee.  If I give you my credit card and tell you only to use it for company purposes, the credit card company has no knowledge of that and if the employee uses the card elsewhere, and inputs the CVV 3 digit code, it is not a fraudulent transaction.  

A CC must be reported stolen, then the CCC would not hold the payee liable, but this is not the case here.  It really comes down to laziness and unfair business practices by the CCC.  When notified that an employee bought something they were not supposed to, the CCC should reply to the customer that they should handle those charges internally or take the employee to court and sue for damages.  But, not wanting to upset the customer and possible have them close the account, its easier to try to steal the money back from the merchant.

Can you imagine calling your CCC and stating, hey, I didn't authorize my wife buying those shoes last week, I shouldn't have to pay the bill.  

Perminate Link for PayPal Lawsuit Settlement Raises Security Concerns   PayPal Lawsuit Settlement Raises Security Concerns

by: cayenna This user has validated their user name.

Mon Feb 8 14:39:36 2016

I was abused but just left it go because it was like all the abuses; I either chose to keep being abused or went somewhere else. I no longer had the energy to deal with it all. Now I am supposed to remember that far back; that's impossible because there were numerous times...I agree with another comment; they know who the victims are why can't they just credit our accts...

Perminate Link for PayPal Lawsuit Settlement Raises Security Concerns   PayPal Lawsuit Settlement Raises Security Concerns

by: halloweenskeletons This user has validated their user name.

Fri Feb 19 12:18:46 2016

How much would the settlement really be?  They've certainly jerked me around over the years including placing limitations on how much I could spend in a day(I was dropshipping). however more relevant to this claim is last year at about this time they held my funds for 21 days exactly by order of ebay. All mumbo jumbo about holding the funds till I establish myself. I was unfairly placed in below standard purgatory. It wasn't until I got a paypal exec to release the funds did I eat again. I was shipping my customer's items without eating. I ran preorders to get funds to ship my customer's orders. I starved really bad for a couple weeks some days no food at all and on the days there was say $1 or $3 left after shipping my orders(dropshipping for the most part)I'd buy a bag of chips($1)and or those little bags of peanuts. In total desperation I started manufacturing items so I would at least be fronted the shipping money. $3?  That's all i get?   I should add all this happened during the worst winter in the history of SE MA and I had frost nip and was snowed in and couldn't afford any medication even if I was able to get to the hospital with 140 inches of snow falling that year. $3?

Click to view more comments
1 2 


Login is required to post comments.
To sign in to leave a comment, fill in the form below. If you have not yet signed up for AB Verify, or if you'd like more information, go to the Registration Page
.

Login for AB Verify
Be sure and use your email address and password to log in.

 
Email:
Password:
 
 Forgot Your Password?
 Even though you are signed in with the AuctionBytes Blog, you will have to sign in to the EcommerceBytes blog. But you can sign in with your existing AB Verify info.