PayPal Failure To Mention It Was Under Investigation Cost Investors, Says Class Action Announcement

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PayPal Class Action Lawsuit Overview: 

• Who: Plaintiffs filed a class action lawsuit against PayPal Holdings, Inc. 
• Why: Plaintiffs claim PayPal misled investors by not disclosing it was under investigation by the SEC and CFPB for allegedly unlawful PayPal Credit and debit card practices. 
• Where: The class action lawsuit was filed in a California federal court. 

According to a new class action lawsuit, PayPal misled investors by failing to reveal in a timely manner that it was under investigation for its disclosure controls and procedures related to the company’s PayPal Credit and debit cards.

On Aug. 26, the law firm Gainey McKenna & Egleston announced in a press release that the class action lawsuit had been filed against PayPal Holdings, Inc. This marks the second class action suit against the company filed this month.

A similar class action lawsuit, referencing the same alleged PayPal misconduct, was filed by a plaintiff in California earlier this month. In that suit, lead plaintiff Huei-Ting Kang alleged the company inflated its stock price by withholding “damaging information” from its quarterly reports. 

PayPal only disclosed it was being investigated by the U.S. Securities and Exchange Commission (SEC) and the Consumer Financial Protection Bureau (CFPB) in its second quarter report to the SEC on July 29, according to the class action lawsuit.

The plaintiffs, who were not identified in the announcement of the class action lawsuit, claim PayPal’s alleged conduct makes it at an increased risk of regulatory investigation and enforcement, making its debit card and PayPal Credit revenues unsustainable. They want to represent a nationwide Class of consumers who purchased or otherwise acquired PayPal publicly traded securities between the period of Feb. 9, 2017 and July 28, 2021.

The plaintiffs say PayPal disclosed in its second quarter report that the CFPB filed a Civil Investigative Demand with the company to see how it was marketing its PayPal Credit feature with merchants in the education sector. PayPal also revealed it had been subpoenaed by the SEC so it could determine if the interchange rates the company paid to banks that issued PayPal-licensed debit cards was in compliance with Regulation II of the Board of Governors of the Federal Reserve System, according to the class action lawsuit.  

The SEC also inquired about PayPal’s reporting of marketing fees that it had earned from its branded card program. Plaintiffs claim the company’s stock dropped 6.23 percent the same day news of PayPal’s second quarter report came to light, according to the class action lawsuit. 

Are you a PayPal stockholder who feels the company withheld important information? Let us know in the comments! 

The plaintiffs are represented by Thomas J. McKenna, Esq. and Gregory M. Egleston, Esq. of Gainey McKenna & Egleston.

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