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Attention, digital wallet users! PayPal is currently facing a class-action lawsuit. Initiated by a group of savvy consumers represented by Hagens Berman, the lawsuit alleges that PayPal’s anti-steering rules are stifling competition from more affordable payment platforms like Stripe and Shopify.

Key allegations include:

  • Overcharging Consumers: The lawsuit claims that PayPal has been inflating charges when consumers shop from online retailers that accept PayPal or Venmo. This means that you, as a consumer, might end up paying more than you should.
  • Opaque Merchant Agreements: Merchants are required to sign heavily worded agreements to use PayPal’s platform. These agreements allegedly lack transparency about pricing differences compared to PayPal/Venmo’s competitors.
  • Anti-Steering Rules Limiting Discounts: PayPal’s rules prohibit retailers from providing discounts or incentives for customers to use cheaper payment options. This is considered a ‘surcharge’ on PayPal transactions.
  • Lack of Information: Merchants are barred from informing customers about potentially cheaper alternative payment methods.

Additional details:

  • Obstructing Payment Options: This lawsuit, filed in the U.S. District Court for the Northern District of California, also argues that PayPal’s rules obstruct sellers from offering other payment options early in the checkout process. The attorneys argue that fair play could make your purchases, like a box of Kleenex, cost less than $5.83 if paid with a credit card instead of PayPal.
  • Revenue: It’s worth noting that PayPal raked in over $27B in revenues in 2022, largely from these fees.

PayPal has over 400 million users, including 75% of all Americans, and nearly 1 million U.S. e-commerce websites waving the PayPal flag. It processes 41 million transactions daily.

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