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PayPal to Settle $3.2M for Improper Account Lock Class Action

PayPal is designed to make transacting online simple and streamlined. You use your account to pay people and get paid and to make purchases from stores that accept the service.

But because PayPal does do business in a new and somewhat suspect sphere -- online banking and shopping -- it has adopted strict anti-fraud policies that anger users and lock them out of their accounts and their money. Moises Zepeda, who sued the company on behalf of a class of plaintiffs whose accounts were improperly locked for 6 months for security reasons, complained that users were not paid interest while money in their accounts was frozen. PayPal agreed to settle the suit for $3.2 million, reports Investor's Business Daily.

Settlement Pending Approval

The settlement has not yet been approved by a court. The final approval hearing will be held in July. Meanwhile, the company sounds pleased to have a resolution in place.

A company spokeswoman told IBD, "PayPal has voluntarily entered into a settlement agreement to resolve litigation regarding our handling of some disputed transactions, account holds, limitations, and reserves. We put our customers at the center of everything we do and are committed to continually improving our processes and products to deliver great experiences when our customers use PayPal."

Account Freezing Issues

The plaintiffs' client did not immediately respond to requests for comment. But given the fact that PayPal is making announcements, it is safe to assume that the class has approved the settlement at least initially and is looking forward to settling this suit. The settlement will address all accounts that were improperly locked between April 19, 2006 and November 5 2015, according to the settlement.

PayPal account lockout issues have plagued the company since it began, and has put off many potential users. There is even a book, entitled "The PayPal Wars," that describes the company's problems as a startup and documents these account freezing issues.

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