PayPal Users Seek Approval of $3.2M Class Action Settlement over Held Funds

Yesterday, plaintiffs asked a federal judge to approve a revised class action settlement that would resolve allegations PayPal Inc. improperly placed holds on funds held in PayPal accounts in violation of the Electronic Fund Transfer Act.

According to the motion seeking approval of the PayPal class action settlement, the release was narrowed without reducing any benefits to the Class Members, addressing the concerns brought up by the judge who rejected the first version of the deal earlier this year. If approved, the PayPal settlement would resolve a class action lawsuit filed against PayPal and eBay in 2010 over the fund holding policy.

In March, U.S. District Judge Saundra Brown Armstrong rejected an earlier version of the PayPal class action settlement, which the plaintiffs had filed in August 2014. In her order rejecting the settlement, Judge Armstrong questioned the court’s jurisdiction over the class action lawsuit due to a prior settlement in another action known as In re: PayPal Litigation (Comb). In addition, she had questions about releases for claims against PayPal dating back to 2006, when the conduct in dispute started in 2008.

“After arms-length negotiations, the settlement in this action has been amended to exclude the claim concerning the Comb settlement from the proposed Third Amended Complaint, and to exclude the Comb settlement from the scope of the release to be given to PayPal,” the plaintiffs wrote in their motion seeking preliminary approval of the PayPal class action settlement. “All of this has been done without reducing the class benefit by a single penny.”

According to the PayPal settlement documents, the revised deal would provide benefits to more than 100 million PayPal account holders. The proposed settlement will require PayPal to make changes to its business practices and enhance the disclosures on its website to provide more information about holds, reserves and limitations.

Under the terms of the proposed class action settlement, PayPal will pay at least $1.8 million to Class Members who had holds or reserves placed on their accounts. Approximately 10.5 million PayPal users may be eligible for payment from the PayPal settlement. PayPal will also pay up to $800,000 to Class Members who have documentation of actual damages.

“The Settlement, which makes the class nearly whole for lost interest as a consequence of PayPal holds, including holds that went back all the way to 2006, is more than within the bounds of fairness, reasonableness and adequacy, and should be approved,” the plaintiffs urged the judge.

The plaintiffs are represented by Jeffrey A. Leon of Quantum Legal LLC, Mark N. Todzo of Lexington Law Group, Steven R. Jaffe of Farmer Jaffe Weissing Edwards Fistos & Leherman PL, and Jonathan Shub of Kohn Swift & Graf PC.

The PayPal Class Action Lawsuit is Moises Zepeda v. PayPal Inc., Case No. 4:10-cv-02500, in the U.S. District Court for the Northern District of California.

UPDATE: Claim filing instructions for the PayPal account hold class action settlement are now available! Click here or visit www.AccountHoldSettlement.com for details.

UPDATE 2: On Nov. 14, 2016, PayPal users urged a California federal judge to grant final approval of a near $4 million settlement over claims the company placed inappropriate holds or reserves on sellers’ funds.

UPDATE 3:  On Oct. 26, 2017, Top Class Actions viewers who filed a claim for the PayPal Account Hold class action settlement started receiving checks worth as much as $23.15. Congratulations to everyone who got PAID!