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The Office of Competition and Consumer Protection (UOKiK) has imposed a PLN106.6m ($27m) fine on PayPal for incorporating prohibited provisions into its user agreements.
The decision, announced this week by UOKiK president Tomasz Chróstny, highlighted several contentious clauses within the "PayPal User Agreement" that unfairly penalised users.
The investigation revealed 34 prohibited activities and a variety of severe sanctions that PayPal could impose on users for violating its terms.
Among the scrutinised provisions was a clause allowing PayPal to punish users merely for attempting to use a blocked account.
The agreement also contained ambiguous language stating users must not "violate any law, statute, ordinance, or regulation", with violations potentially resulting in unspecified sanctions.
One of the critical issues identified was PayPal's ability to enforce sanctions for infringements unrelated to the use of a PayPal account.
The regulator says that this left consumers vulnerable to penalties without being aware of any wrongdoing according to PayPal's contractual terms.
Unlimited discretion to impose penalties
The lack of clarity and specificity in the user agreement enabled PayPal to apply sanctions arbitrarily. For instance, PayPal reserved the right to block a user’s funds “at any time” and “at its discretion” for an indefinite period and to impose multiple penalties simultaneously, such as a $2,500 fine, account closure without notice and denial of future services.
"The nature of the violations is unprecedented," said Chróstny. "For a consumer, using PayPal's services under the disputed clauses is unpredictable. PayPal's clauses are generic, ambiguous, and incomprehensible.”
He continued that when reading these provisions, a consumer cannot predict which of their actions may be considered prohibited, or what sanctions may be imposed on them.
“As a result, PayPal has unlimited discretion to decide whether a user has committed a prohibited act and what punishment he or she will face for it, which could be, for example, the blocking of money in the account," said Chróstny.
According to the UOKiK ruling, these clauses should be considered null and void — as if they had never been included in the agreements — and PayPal is required to inform its consumers of the decision on its website once it becomes final.
However, the decision is not yet final and PayPal has the option to appeal the ruling in court.
Vixio has contacted a representative of PayPal for comment.
