PayPal was hit with a major class action lawsuit by consumers, claiming they are being uncompetitive with equivalent payment processors.
The financial tech firm, co-founded by Elon Musk, is one of the leading payment processors in the world. PayPal pioneered the concept of sending money between PayPal accounts, which could then be cashed out to a traditional bank account. Tech Crunch reports:
PayPal has been hit with a class action lawsuit by consumers represented by law firm Hagens Berman alleging that the fintech giant’s anti-steering rules stifle competition against lower-cost payment platforms such as Stripe and Shopify.
Specifically, according to an investigation conducted by the firm’s consumer rights attorneys, PayPal has subjected consumers to excess charges when purchasing from online merchants that accept PayPal or Venmo.
Paypal has expanded its services, now providing credit cards, digital wallets, and saving accounts that can virtually replace a bank account. The Washington Examiner continues:
The suit provides the example of a situation in which consumers could pay $5.83 for Kleenex if they use PayPal or less than $5.83 if a credit card is used. Or a merchant could keep the $5.83 price but allow customers to use a coupon if they used a payment option other than PayPal or Venmo. “Either way, the price differential would result in consumers paying lower all-in prices,” the lawsuit claimed.
The payment restriction rules are “draconian” and “illegally anti-competitive,” the suit argues, and comparable to practices that Visa and Mastercard used to impose before the Justice Department sued them in 2010.
Stripe in particular is a rising threat to PayPal. It currently handles all payment processing for the Republican Party through WinRed.
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