Bill Me Later Faces Second Class Action

UPDATE 5/30/14: A class action lawsuit accusing eBay Inc. and Pay Pal Inc.’s Bill Me Later service of illegally charging excess fees and interest has been dismissed by a federal judge.

Bill Me Later – the popular eBay-owned payment service that allows consumers to pay online without a credit card – is facing a second class action lawsuit accusing the service of charging excessive, and illegal, interest and late fees.

Bill Me later is an online payment processor used on many websites that allows consumers to make purchases using only their birth date and last four digits of their social security number. Consumers who choose Bill Me Later undergo an instant credit check by the company, which it uses to decide whether to approve or deny the sale. If approved, Bill Me Later foots the bill for the purchase and charges the consumer like a credit card company would.

The first Bill Me Later class action lawsuit, filed by Kyle Sawyer last January, accuses the eBay subsidiary of using a middleman to skirt California consumer protection laws that prohibit exorbitant credit penalties and interest rates.

Under California law, organizations other than state-charted banks cannot charge interest rates above 10 percent per year. According to the complaint filed by Sawyer, some consumers report that Bill Me Later’s annual inertest rate charges exceed 100 percent per year. The class action claims the service has purposefully skirted this law by entering into a relationship with CIT Bank to create the appearance that the bank is extending credit terms, when, in fact, Bill Me Later controls the entire transaction. The arrangement meant that Bill Me Later was essentially “renting” CIT’s name, the class action says.

The latest Bill Me Later class action suit, filed by April Columbu, includes the same charges. The lawsuit includes many online complaints from consumers, in addition to Columbu’s complaint, saying the fees Bill Me Later imposed on online purchases were so exorbitant that they doubled the original cost of their merchandise.

Both Bill Me Later class action lawsuits are seeking refunds of unjust fees and cancellation of loans for Bill Me Later customers in California. They also seek damages for class members.

A copy of the first Bill Me Later class action lawsuit, Sawyer v. Bill Me Later, can be read here.