PayPal shareholders continue checks amid new investigations
- Shareholder accuses fintech giant of hidden compliance breaches
- Lawsuit comes after PayPal leaked new CFPB and SEC probes
(Reuters) – A PayPal Holdings Inc shareholder sued in federal court on Friday, saying the fintech juggernaut covered up poor compliance efforts that sparked government investigations.
Proposal class action filed in San Francisco seeking damages for a 6% drop in PayPal’s share price on July 29 after the company revealed in a quarterly filing that it was cooperating with investigations into its credit card business and PayPal debit.
The company also posted a outlook for the rest of the year that was lower than analysts’ expectations, due to the ongoing migration of the eBay Inc e-commerce platform to another payment processor.
A PayPal spokesperson said Monday the company believes the claims have no merit and will vigorously oppose them.
The lawsuit of PayPal shareholder Huei-Ting Kang said the company had misled investors since 2017 in annual statements, saying it was closely monitoring regulatory developments “to design compliant solutions for our clients”.
Kang alleges that these statements were revealed to be misleading when PayPal said the Consumer Financial Protection Bureau was investigating how the company markets PayPal credit through merchants who provide educational services.
PayPal also revealed that the Securities and Exchange Commission is investigating whether the bank that issues its branded debit cards complies with regulations governing interchange fees and how PayPal reports the marketing fees it collects from the company.
Bancorp Bank, which issues PayPal debit cards, also disclosed subpoenas to the SEC for information about its debit card issuance practices.
Interchange fees, which can represent 2% or more of each transaction and be paid to financial institutions that initiate transactions, are a sensitive issue for merchants and have been subject to regulatory review.
The US Department of Justice opened an investigation into Visa Inc’s debit practices earlier this year.
The case is Kang v. PayPal Holdings Inc, US District Court, Northern District of California, No. 21-06468.
For Kang: Jennifer Pafiti from Pomerantz
(NOTE: This story was updated with feedback from PayPal.)
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