PayPal Settles State Suits

The online-payment service PayPal will simplify its user agreement and better inform users about fraud protection under an agreement announced Thursday with 28 state attorneys general.

PayPal said it already has removed links from its user agreement to make the document easier for people to read and print. During the payment process, PayPal now explains how the company protects customers against fraud -- for example, when a seller fails to deliver merchandise paid for via PayPal -- and what protections apply to their transaction.

PayPal enables individuals and businesses around the globe to send and receive money online. In 2005, users moved $27.5 billion through the money transmitter.

The New Jersey state attorney general's office said it has received 30 complaints about how PayPal remedies billing disputes.

"As our retail marketplace becomes even more technologically advanced, it is critical that consumers be able to trust those companies they rely on when doing business online," said New Jersey Attorney General Stuart Rabner in a statement. "With this agreement, PayPal will change its business practices to protect consumers."

PayPal, owned by online auctioneer eBay Inc., agreed to pay $1.7 million to the attorneys general in California, New York, New Jersey and 25 other states to cover their investigation costs.

PayPal also reached a preliminary settlement agreement in a class-action suit filed against the company in 2005 over similar customer-protection complaints. The $3.5 million agreement is pending approval from the U.S. District Court in Brooklyn, N.Y.

PayPal said neither agreement indicates any liability on its part.

Shares of eBay rose $1.20 cents, or 4.4 percent, to $28.32 in afternoon trading Thursday on the Nasdaq Stock Market.


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