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PayPal recently posted a new Policy Update which includes changes to the PayPal User Agreement. The update to the User Agreement is effective November 1, 2012 and contains several changes, including changes that affect how claims you and PayPal have against each other are resolved. You will, with limited exception, be required to submit claims you have against PayPal to binding and final arbitration, unless you opt out of the Agreement to Arbitrate (Section 14.3) by December 1, 2012. Unless you opt out: (1) you will only be permitted to pursue claims against PayPal on an individual basis, not as a plaintiff or class member in any class or representative action or proceeding and (2) you will only be permitted to seek relief (including monetary, injunctive, and declaratory relief) on an individual basis.
You can view this Policy Update by logging in to your PayPal account. To log in to your account, go to https://www.paypal.com and enter your member log in information. Once you are logged in, look at the Notifications section on the top right side of the page for the latest Policy Updates. We encourage you to review the Policy Update to familiarize yourself with all of the changes that have been made.
If you need help logging in, go to our Help Center by clicking the Help link located in the upper right-hand corner of any PayPal page.
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I read it a couple of times and couldn't believe it. Was PayPal really going to require an opt out in order to preserve my right to be part of a class action lawsuit? Section 14.3 is part of disputes with PayPal and reads as follows:
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14.3 Agreement to Arbitrate. You and PayPal each agree that any and all disputes or claims that have arisen or may arise between you and PayPal shall be resolved exclusively through final and binding arbitration, rather than in court, except that you may assert claims in small claims court, if your claims qualify. The Federal Arbitration Act governs the interpretation and enforcement of this Agreement to Arbitrate.
Prohibition of Class and Representative Actions and Non-Individualized Relief.
YOU AND PAYPAL AGREE THAT EACH OF US MAY BRING CLAIMS AGAINST THE OTHER ONLY ON AN INDIVIDUAL BASIS AND NOT AS A PLAINTIFF OR CLASS MEMBER IN ANY PURPORTED CLASS OR REPRESENTATIVE ACTION OR PROCEEDING. UNLESS BOTH YOU AND PAYPAL AGREE OTHERWISE, THE ARBITRATOR MAY NOT CONSOLIDATE OR JOIN MORE THAN ONE PERSON'S OR PARTY'S CLAIMS AND MAY NOT OTHERWISE PRESIDE OVER ANY FORM OF A CONSOLIDATED, REPRESENTATIVE, OR CLASS PROCEEDING. ALSO, THE ARBITRATOR MAY AWARD RELIEF (INCLUDING MONETARY, INJUNCTIVE, AND DECLARATORY RELIEF) ONLY IN FAVOR OF THE INDIVIDUAL PARTY SEEKING RELIEF AND ONLY TO THE EXTENT NECESSARY TO PROVIDE RELIEF NECESSITATED BY THAT PARTY'S INDIVIDUAL CLAIM(S). ANY RELIEF AWARDED CANNOT AFFECT OTHER PAYPAL USERS.
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I did a quick search to see if anyone else was writing about this. This requirement seems very anti-customer, against public policy and something that I hope many state Attorney Generals are looking into. It might be something for the Consumer Financial Protection Bureau as well.
There is one article that I found which could be very helpful to people. It discusses the issues and provides a sample form letter to opt out of PayPal's arbitration agreement. Take a look here.
Maybe you don't ever want to be part of a class action action lawsuit against PayPal, but you never know. Class action settlements come up all the time. Remember the settlement for Nutella? We at least need to be aware that this is an issue and stay informed.
Disclaimer: This is not legal advice, but general information. Everyone's situation is different. If you have specific legal questions related to this issue with PayPal, please contact a licensed attorney in your jurisdiction.
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