PayPal today announced it’s updating its User Agreement to clarify the language it uses to communicate to customers how the company is allowed to contact them. The company had recently come under fire from consumer advocacy groups who reported PayPal’s possible violations around robocalls to the FCC following media reports of a change to PayPal’s terms. In an update to the User Agreement set to go live on July 1st, the language used seemed to indicate the company would be allowed to robocall and text users on any number it could obtain – not just the one associated with a PayPal account – and for a variety of purposes, including marketing.
According to the new agreement, customers were broadly agreeing to let the company automate the sending out of surveys, offers and promotions, without an explicit opt-out mechanism. It was also unclear if customers who said “no” to all this would have to stop using PayPal’s service.
Today, PayPal has published a blog post apologizing to consumers for the confusion. The company says it’s now modifying the disputed section (1.10) of the User Agreement to clarify that PayPal “primarily” uses autodialed or prerecorded calls and texts for the following purposes:
Help detect, investigate and protect our customers from fraud
Provide notices to our customers regarding their accounts or account activity
Collect a debt owed to us
More importantly, however, are the clarifications that PayPal is inputting that will bring its User Agreement in compliance with FCC guidelines around the use of robocalls and texts. For instance, PayPal now says that it will not market to customers using automated calls and texts without explicit written consent; customers can revoke that consent at any time by contacting support; and customers will be able to use PayPal’s service even if they don’t agree to receiving autodialed calls and texts.
Previously, the way the User Agreement was worded, PayPal appeared to be in violation of in violation of the Telephone Consumer Protection Act. The FCC was alerted to the problem by way of media reports and groups like the National Consumer Law Center, a nonprofit consumer advocacy organization which has been working to protect consumers from robocalls for some time. The FCC then sent a letter addressed to PayPal on June 11, responding to these concerns and advising PayPal how it could be in violation of the law. That letter noted that PayPal, its affiliates, and its service providers could see penalties of up to $16,000 per call or text message.
The problem was that, if a customer wanted to say “no” to robocalls – that is, they didn’t want to opt-in to receiving auto-dialed calls or texts as the agreement stated – it wasn’t clear if they still had the right to continue to use PayPal’s service, due to the way the agreement was written. In fact, some customers who said they wanted to opt out were instead provided with instructions on how to close their PayPal account.
PayPal was also not collecting written consent with regard to its marketing-related robocalls, and its procedures for opting out were murky, even after it said this would be possible. Many customers reported they tried calling PayPal to opt out and were told it wasn’t an option.
PayPal today says it’s clarifying the agreement’s terms, which should satisfy the FCC. The company added it worked with regulators on the new language, so it’s not likely there will be further issues.
The National Consumer Law Center also tells us it’s happy with the changes, so it seems PayPal has taken the right steps.
In addition to making the changes, the company will send its customers an email notice regarding the new agreement. The email will “clarify that our focus is on our customers, on consumer protection and on doing the right thing,” states Louise Pentland, SVP, General Counsel and Company Secretary at PayPal.
“We appreciate the feedback our customers have provided to us on this issue and apologize for any confusion we may have caused,” she says.
Due to the changes, the date the User Agreement goes into effect may have changed. Asked about this, a PayPal spokesperson said, “We will be sending a notification to our customers shortly with details about the new amendments, including when they will become effective.”
Update, 6/29/15, 2:45 PM ET: FCC Enforcement Bureau Chief Travis LeBlanc issued the following statement. Also, below is PayPal’s letter to the FCC.
“I commend PayPal for taking steps to honor consumer choices to be free from unwanted calls and texts. The changes to PayPal’s user agreement recognize that its customers are not required to consent to unwanted robocalls or robotexts. It clarifies, rightly, that its customers must provide prior express written consent before the company can call or text them with marketing, and that these customers have a right to revoke their consent to receive robocalls or robotexts at any time. These changes, along with PayPal’s commitments to improve its disclosures and make it easier for consumers to express their calling preferences, are significant and welcome improvements.”