Chances are that if you buy merchandise online, you have probably made a PayPal account to streamline the process. Whether you just use it to pay for your iTunes purchases or to feed your late night Amazon habit, it can make your online shopping a little easier to handle.

PayPal is an online platform that allows users to connect their credit card or bank account information so that they don’t need to have their credit cards handy for purchases. Many online retailers allow users to sign in through PayPal. The online service also has its own credit card, which is at the center of a current controversy. Read on to learn about the controversy, what laws PayPal may have broken, and what’s next for the financial giant.

The Controversy

The Consumer Financial Protection Bureau recently filed a $25 million lawsuit in a Maryland district court against PayPal for deceptive practices; in particular, deceptive practices relating to the PayPal credit card. This agency’s main purpose is to “make markets for consumer financial products and services work for Americans–whether they are applying for a mortgage, choosing among credit cards, or using any number of other consumer financial products.”

What PayPal Did

Complaints against the company aren’t exactly new. In fact, there are multiple websites, such as aboutpaypal.org and paypalsucks.com, that detail many of the problems that people have with the company; however, many of those complaints have to do with customer service issues or confusion. The complaints at hand are a little more serious: as detailed in the CFPB suit, the complaint includes the following six counts:

1. PayPal enrolled customers in its credit card without their consent or authorization;
2. Customers who used account funds were billed through that credit card instead of having it taken out of their connected card or bank account;
3. PayPal did not accept, process, or post payments made to the PayPal card, resulting in late charges and changes in credit scores;
4. Paypal lied to customers about what they were receiving when they signed up for the card;
5. Paypal did not provide adequate information about the balances posted (deferred interest) and the information about promotional content–even for customers who did sign up for the credit card willingly;
6. Paypal employed unfair billing dispute practices.

You may not even be safe if you only used PayPal to pay for things online or have some funds in there from online payments. According to CBS Money Watch, PayPal actually signed up many users for credit cards without letting them know or sending them a physical card–meaning that many people didn’t even know that they were actually charging to a credit card, because they didn’t know they had one.

The result was an abundance of charges for users, particularly charges that were sometimes just taken out of the funds they had loaded into the website. Some consumers were also hit with overage fines and interest charges.

Why it Was Wrong

While all of the counts are bad enough to warrant a dispute, number five is particularly abhorrent. In fact, the CFPB described the conduct as “abusive” in its report. However there was some debate over that–the National Law Journal reports on the difficulty:

In its complaint, the agency listed six charges against PayPal, including one that details the conduct the CFPB said was ‘abusive.’ The agency has declined to define abusive conduct—a standard that’s apart from long-established consumer protection terms ‘unfair’ and ‘deceptive’—through any regulation.

Instead, the CFPB is laying out what it means one enforcement action at a time. For lawyers and their clients, and even members of Congress, understanding the parameters of abusive practices has been unsettling.

‘How can companies comply with this law?’ Rep. Sean Duffy, R-Wisconsin, asked at a 2012 oversight hearing, calling it ‘a subjective standard with no bright line.’

What happened to customers really depended on when they signed up–or were signed up–for a credit card. A customer with a PayPal card could have two balances: one for the card that was free from interest and another that had an interest-accruing balance. Customers were told they could decide what payments went where, but that was not true. They were also lied to about the minimum payment due–and attempts to talk to customer service often resulted in the age old “we are experiencing an unusually large call volume” message.

What Rules Do Credit Card Companies Have to Follow?

There are several laws in place that help protect consumers from being taken advantage of with their credit cards. These laws are part of the reason that the Consumer Financial Protection Bureau even found the problem with PayPal. In 2010, President Obama signed something called the Credit CARD Act, also referred to as the Credit Cardholders Bill of Rights. According to the CFPB, the law has two key purposes:

Fairness – Prohibit certain practices that are unfair or abusive such as hiking up the rate on an existing balance or allowing a consumer to go overlimit and then imposing an overlimit fee.

Transparency – Make the rates and fees on credit cards more transparent so consumers can understand how much they are paying for their credit card and can compare different cards.

That is the law that this particular case focused on, but there are a few other laws that credit card companies have to follow that illustrate the issues with PayPal’s deception.

Truth in Lending Act

When you go to get a credit card or a loan from your bank, you are immediately on an uneven playfield. The Truth in Lending Act is supposed to shield you from unfair lending practices. This means that a bank or credit card company has to tell you orally and in plain written language the terms, interest rate, and any other hidden fees.

Fair Credit Billing Act

This law kicks in once you have a credit card and protects you against inaccurate billing. If you meet predetermined guidelines, this act limits your financial responsibility for unauthorized charges up to $50. It also assures that you don’t have to pay for merchandise you ordered but never received, goods and services you didn’t accept, and double charges.

Fair Credit Reporting Act

Credit companies, lenders, and banks report your credit activity to the credit bureaus. The Fair Credit Reporting Act, most recently changed in 2003, ensures that your information is correct. It gives you the right to dispute inaccuracies and to access your credit score and file. This law also protects who can see your credit file. The only people who have access are those with need: a creditor, a landlord, an insurer, or a prospective employer.

What Can Those Affected Do Now?

For its part, PayPal (and parent company EBay) now seems to be remorseful over the situation, and in an email to Bloomberg, a spokesperson for the company seemed hopeful that it would take care of everything and make it right:

Amanda Miller, a spokeswoman for PayPal, said the company ‘takes consumer protection very seriously.’

‘We continually improve our products and enhance our communications to ensure a superior customer experience,’ Miller said in an e-mail. ‘Our focus is on ease of use, clarity and providing high-quality products that are useful to consumers and are in compliance with applicable laws.’

As for those who have been affected, $15 million will go right back into their pockets. PayPal is said to be sending out emails in the coming weeks to customers who qualify for reimbursement. There is also going to be a $10 million fine against the company.

Conclusion

At the end of the day, we have all signed up for things and haven’t read the fine print. However, it is a lot more difficult to read something when you don’t even know it applies to you. PayPal received a pretty hefty slap on the wrist, and the hope is that other credit card companies and money lenders see this and change some of their shady business practices.

Resources

Primary

Consumer Financial Protection Bureau: The Credit CARD Act

Federal Trade Commission: Fair Credit Reporting Act

U.S. Department of the Treasury: Truth in Lending Act

Additional

Credit Cards: Obama Signs Credit Card Reforms Into Law

National Law Journal: Why the CFPB Found PayPal’s Conduct ‘Abusive’

Bloomberg Business: PayPal Will Pay $25 Million to Resolve CFPB Bill Me Later Claims

CBS Money Watch: Feds Say PayPal Illegally Signed Consumers up For Credit

USA Today: PayPal to Pay $25M in Refunds and Penalties

SlashGear: PayPal Ordered to Pay $25 Million over Deceptive Practices

Wall Street Journal: PayPal Says it May Face U.S. Lawsuit by June

Wall Street Journal: PayPal to Pay $25 Million to Settle Online Credit Claims

Noel Diem

Law Street contributor Noel Diem is an editor and aspiring author based in Reading, Pennsylvania. She is an alum of Albright College where she studied English and Secondary Education. In her spare time she enjoys traveling, theater, fashion, and literature. Contact Noel at staff@LawStreetMedia.com.

The post Use PayPal’s Bill Me Later? You Might Get a Refund Due to Shady Practices appeared first on Law Street.

It’s still the holiday season, and during this time of the year it’s easy to forget to check the news. Luckily, Law Street has you covered with this week’s edition of “In Case You Missed It.” Our top story last week covered the ongoing legal battle between Colorado, Nebraska, and Oklahoma over Colorado’s legalization of recreational marijuana, written by Anneliese Mahoney. Our number two post, by Lexine DeLuc,a should help any Serial fans out there with their withdrawals–it’s a great collection of parodies inspired by the hit podcast. Finally, rounding out the list was a story from blogger Katherine Fabian on how to spot fake handbags during your holiday gift shopping. ICYMI: Check out what you missed on Law Street last week.

#1 Nebraska and Oklahoma Sue Colorado Over Marijuana Legalization

Colorado voted to legalize recreational marijuana in 2012, and officially started selling it in the beginning of this year. Now, almost a year later, Colorado is experiencing some backlash for its choice to legalize. Two of Colorado’s neighbors–Nebraska and Oklahoma–are suing the state because of the impact of legal marijuana within their borders. Read the full article here.

#2 Five Parodies to Get You Through Serial Withdrawal

Serial‘s first season has ended and if you’re feeling a little separation anxiety, here are the top five parodies to help fill that void. The list includes selections from Saturday Night Live, Funny or Die, SubmissionsOnlyTV, and even a few parodies with multiple episodes. Read the full article here.

#3 Holiday Gift Guide: How to Authenticate a Designer Handbag

It’s almost 2015 and there is now a plethora of consignment sites to get your second-hand designer goods. But as great as sites like Ebay, Amazon, and the new Alibaba are, sometimes sellers aren’t always honest when they claim their items are authentic. So to make sure that you don’t get duped (like my poor brother did when he ordered those fake Nikes from China) I’ve put together a handy guide on how to spot a fake. Read the full article here.

Anneliese Mahoney

Anneliese Mahoney is Managing Editor at Law Street and a Connecticut transplant to Washington D.C. She has a Bachelor’s degree in International Affairs from the George Washington University, and a passion for law, politics, and social issues. Contact Anneliese at amahoney@LawStreetMedia.com.

The post ICYMI: Best of the Week appeared first on Law Street.

Another day, another frenzy-inducing H&M designer collaboration. Last week, the long anticipated Alexander Wang x H&M collection hit stores and online. Shoppers lined up nearly 24 hours beforehand, merchandise was immediately posted on Ebay–you know, the usual.

But amid all the excitement for the coveted sportswear with the word “Wang” emblazoned across the chest, a controversial video was released, as well. German website Dandy Diary created what it called a “promotional video” in which they went to India to see how the collection was made. In the video, child laborers are sewing Alexander Wang x H&M logos onto apparel. Even though the video is meant to be an “art piece” it still raises a lot of questions considering the fact that both Wang and H&M have been accused of using sweatshop labor in the past.

Back in 2012, Wang settled a lawsuit filed by 30 workers who claimed they were forced to work in poor conditions for 16 hours at a time without breaks. Never mind the countless child labor accusations that Swedish fast fashion retailer H&M has received over the years.

H&M has since responded claiming that the collection was not made in Indian factories but rather in China, Turkey, and Italy, and that the company does not support child labor; however, we still don’t know whether or not this is exactly true. Just because this video is supposed to be an “art piece” doesn’t mean that we should laugh it off and move on. Despite the fact that thousands of people died last year alone when the Rana Plaza factory collapsed, Bangladeshi factories still continue to breed poor working conditions. Obviously major retailers such as H&M are not pulling through on making sure that such a tragedy never happens again. While it may be difficult for both the companies and any U.S. law enforcement to keep track of what’s happening overseas, these retailers need to start taking responsibility for any third-party labor that they employ. Perhaps they could send corporate employees to serve as a liaison between the two.

It’s also worth noting the hype surrounding these coveted limited edition collaborations. Twenty-four hours after the collection was released, only some of the items were sold out online (though whether a full size range was available, I’m not sure). Even the items posted on Ebay were not extraordinarily marked up. If anything, it’s more about being the first one to get your hands on the collections first; kind of like when people wait in line for the new iPhone when they could just as easily get it shipped to their house that day.

What better way to further feed into the hype than to release a controversial video shining a spotlight on something that’s been speculated about in the past? Such a video serves as a way to get both Wang’s and H&M’s names in people’s mouths, ensuring sales not only for this current capsule collection, but for any of either label’s future business as well.

Political correctness be damned, apparently.

Ed. Note: The original version of this article included an embed of Dandy Diary’s blog, which has since been removed by the creator. Read a Dandy Diary’s comment on the video’s removal here.

Katherine Fabian

Katherine Fabian is a recent graduate of Fordham University’s College at Lincoln Center. She is a freelance writer and yoga teacher who hopes to one day practice fashion law and defend the intellectual property rights of designers. Contact Katherine at staff@LawStreetMedia.com.

The post Don’t Ignore the Alexander Wang x H&M Child Labor Video appeared first on Law Street.

A little over a year ago, my parents were driving me into the city one night because I didn’t feel like taking the train to meet some friends. My then 12-year-old brother said he would come on one condition: that we stop at a shoe store at 812 Broadway. As someone who lived in the city for two years, the address alone meant nothing to me until I looked up the cross streets. The store turned out to be just south of Union Square about a block from the Strand bookstore. I wondered why I never noticed it during my frequent trips to the area.

We get to the storefront, which completely lacked any signage and had two large black-tinted glass doors. An associate stood outside like he was a bouncer guarding a hot new club. Inside, the store was crowded with suburban tween boys and their parents. Rows and rows of sneakers (many of them still wrapped in plastic) lined the two exposed-brick walls. If you want to try on a sneaker you have to go up to a counter to order them and then wait until they call your name.

My brother is a self-professed “Sneakerhead.” I suppose it’s similar to how I lust for designer shoes, but as much as I try to understand his fixation, I can’t really get past the idea of people paying hundreds (sometimes thousands) of dollars for such ugly shoes. At Flight Club, which initially started as a consignment store, there is a special display case featuring special “vintage” sneakers inspired by Back to the Future and Space Jam. On average, these obnoxious shoes go for well over $1,000. Luckily my brother chose a practical pair of white Air Jordan “Fire Red” 5’s. My parents paid $160 for those that night, now according to sneaker appraisal site Campless, those shoes can be sold at a 28 percent markup.

Meta pictures of my brother taking a picture of his sneaker collection #idontgetit #iwouldiftheywerePrada

A photo posted by Katherine F (@kafernn) on Dec 12, 2013 at 12:56pm PST

From that trip spawned an obsession. My brother simply had to have the latest and greatest sneaker. My mother, however, was not very open to the idea of buying (potentially used) sneakers on Ebay, despite his insistence that they were no longer available anywhere else. “How can that be when the shoe was just released today?” my mother and I would wonder. I decided to do some further investigating.

It turns out that when it comes to Nikes limited edition sneakers — Air Jordans and Lebrons — the black market is the main market. Basically, getting your hands on a pair of these sneakers is like trying to get tickets to a Taylor Swift concert; they sell out the second they become available, so you have to buy them from a third party at a 200 percent markup. Unlike designer apparel or even luxury cars, Nikes can increase in value after you buy them at retail price. Apparently there are “Sneakerheads” who buy up all of the inventory upon initial release and resell them for a living, some of which even include Footlocker employees. Last year, Nike resellers collectively made about $230 million in profits. That’s $230 million that Nike is missing out on. So wouldn’t it be a smarter business strategy to mass-produce them?

When I asked my brother why he thinks this is the case he simply shrugged and said, “It’s ’cause it’s all hype” and to a certain extent he’s right. We all know the power of celebrity collaborations. There have been riots over the coveted shoes since the late eighties. High schools even had to ban the shoes from their dress codes because students were attacking each other in an attempt to steal their shoes.

About ten years ago you could walk into the store a couple of weeks after the latest pair of Jordans were released and buy them off the shelf. It wasn’t until the onset of sites like Ebay, Craiglist, Amazon, and now social media like Instagram and Twitter, that a whole new market was born. Unfortunately, not only do third party sites cheat Nike out of profits but they can also cheat consumers. Young kids, including my brother and his friends, order these sneakers from as far as Hong Kong only to be sent cheap knockoffs instead (there’s even a whole other market for good replicas). One time my brother ordered a pair of Foamposite One Weathermans on the up-and-coming site Alibaba and was sent shoes that were so fake that no human foot could ever fit inside of them, much less walk in them.

The more offending members of his collection, which thank God he never wears. Some of these are older than he is. Courtesy of Katherine Fabian.

Another reason Air Jordans sell better at certain times than others is that sales are often governed by the trajectory of Michael Jordan’s career. For example, now that he’s retired, kids like my brother (who weren’t even born yet when he originally played for the Chicago Bulls) want to get their hands on shoes with the name of a now legendary basketball player. Now that I think about it, Jordan has “retired” so many times over the years that I think he was doing it on purpose to steer sales of his shoes. I mean, why would he bother playing all those consecutive years when he had all that shoe money to sit on?

Nike also further feeds the hype over its Air Jordans by re-releasing certain versions over the years. However, they also ultimately have the power to stop the black market from dominating the industry. If Apple limits the amount of new iPhones one can buy upon its release, why can’t Nike do the same? I have a feeling that the company enjoys all the controversy, including the riots, that come along with selling its sneakers in “limited” quantities. Interestingly enough, Ebay CEO John Donahue just joined Nike’s board last June. When it comes down to it, that $230 million hardly makes a difference in light of the $27.8 billion Nike’s made within the last year. Ultimately, only about four percent of Air Jordan’s are resold in the first place.

Frankly, I wish they wouldn’t sell some of those shoes at all because they’re so damn ugly. The eighties called, they want their sneakers back.

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Katherine Fabian (@kafernn) is a recent graduate of Fordham University’s College at Lincoln Center and is currently applying to law schools, freelance writing, and teaching yoga. She hopes to one day practice fashion law and defend the intellectual property rights of designers.

Featured image courtesy of [Joseph Quicho via Flickr]

Katherine Fabian

Katherine Fabian is a recent graduate of Fordham University’s College at Lincoln Center. She is a freelance writer and yoga teacher who hopes to one day practice fashion law and defend the intellectual property rights of designers. Contact Katherine at staff@LawStreetMedia.com.

The post How Air Jordans and “Sneakerheads” Shifted the Market for Nike appeared first on Law Street.

The popular picture-sharing social network Instagram has definitely cornered the market on sharing brunch memories and beach photos. But now there’s a new, surprising, industry developing from the network that originally made a name for itself with teenage and college-aged girls. Instagram has now become a forum to sell guns.

Gun regulations vary state by state, but many states do not have laws in place governing online sales. While companies and official sellers have laws that they must follow, individual private sellers are not necessarily held to the same constraints. For the most part, the ATF does not get involved in occasional private sales. They encourage sellers to go to a licensed dealer and get a background check for the people to whom they are selling; however, it’s not really enforced. This market, which is at least superficially anonymous, is almost completely unregulated. On Instagram, you can find everything from small handguns to assault rifles.

Sam Hoover from the Law Center to Prevent Gun Violence, in a statement to the Daily Beast stated, “private sales to in-state buyers are almost completely unregulated by federal law. No background check and no record of sale are required unless state law fills this gap.” That is the venue through which most of these sales are made. Essentially, private sellers are selling firearms almost completely anonymously to people within their state who have no need to pass a background check or anything of the sort.

Online sites that are created for the purpose of sales—for example Craigslist or Ebay—have rules that prohibit the casual selling of firearms. But a site like Instagram, which has no innate sales function, does not have any rules of those sorts.

The issue isn’t that these types of sales are by any means illegal—the issue is that the vast majority of them are. Technology allows a forum for sales that laws never thought to outlaw. Before the Internet, if someone wanted to buy a gun privately, they would have to hear about the sale from a friend, or possibly go to some sort of semi-black marketplace. Laws weren’t created to prevent these kinds of sales, because they were relatively sparse. Now, with the Internet, these sales are incredibly easy to complete. Just searching Instagram for the keywords, or tags, that indicate sales, yields the ability to purchase firearms.

The actual magnitude of this marketplace is unknown—the Daily Beast reported as though there were many sales happening each week, while a Slate article disagreed and estimated that only a few sales happened in a given week. Regardless of who’s right, these sales do appear to happen. And if they happen on Instagram, a site that is a social network and by no means created for sales, there’s every possibility that they could be happening on other forums.

There have been a few select cases of legal action being pursued against sellers on Instagram. A few months ago, a rapper and DJ in Brooklyn, NY, talked about selling guns on Instagram and Youtube. Authorities went forward with a gun bust that resulted in a net raid of 254 guns. Because these were not simply occasional sales made between individuals, charges could be pressed. Unfortunately, that will not be the case with most of these gun sales.

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Anneliese Mahoney (@AMahoney8672) is Lead Editor at Law Street and a Connecticut transplant to Washington D.C. She has a Bachelor’s degree in International Affairs from the George Washington University, and a passion for law, politics, and social issues. Contact Anneliese at amahoney@LawStreetMedia.com.

Featured image courtesy of [Brent Danley via Flickr]

Anneliese Mahoney

Anneliese Mahoney is Managing Editor at Law Street and a Connecticut transplant to Washington D.C. She has a Bachelor’s degree in International Affairs from the George Washington University, and a passion for law, politics, and social issues. Contact Anneliese at amahoney@LawStreetMedia.com.

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