PayPal Unlawfully Seizes Account Funds, Class Action Says

PayPal Account Freeze Class Action Lawsuit Overview:

• Why: PayPal allegedly unlawfully froze accounts without warning and subsequently seized their funds.
• Who: Three plaintiffs filed a class action lawsuit against PayPal.
• Where: The PayPal class action lawsuit was filed in California federal court.

PayPal Inc. unlawfully seizes account holders’ funds without informing them of the reasons behind the account freeze, according to a class action lawsuit filed last week in California federal court.

Plaintiffs Lena Evans, Roni Shemtov and Shbadan Akylbekov filed the PayPal class action lawsuit on Jan. 13. They each claim that they have used PayPal accounts for years before their accounts were frozen without warning or explanation and their funds were permanently seized after a 180-day hold period.

“This action stems from Defendant’s widespread business practice of unilaterally seizing funds from its clients’ financial accounts without cause and without any fair or due process,” the PayPal class action lawsuit states. The plaintiffs argue that PayPal’s policy amounts to theft.

Plaintiffs Allege PayPal Seized Funds Without Warning

Evans alleges she began using PayPal in 1999 when she opened her eBay account. She uses PayPal to buy and sell items. She also uses it for her nonprofit organization and to exchange money for a poker league she manages, according to the PayPal class action lawsuit.

Evans says her PayPal account was frozen without warning in November 2020 and that she learned on May 22, 2021, that PayPal seized nearly $27,000 from her account without providing a reason.

Shemtov has used PayPal to sell yoga clothing on eBay since 2014, the PayPal class action lawsuit says. In March 2017, PayPal allegedly froze her account and ultimately seized nearly $43,000.

In August 2020, Akylbekov says he learned that PayPal had seized more than $172,000 from his account. He says he did not receive an explanation about the seizure of his PayPal funds until he filed a complaint with the Better Business Bureau at which point he learned that the sale of injectable fillers that were not approved by the FDA violated PayPal’s User Agreement and Acceptable Use Policy.

The plaintiffs claim that PayPal has transferred their funds to PayPal’s own account, and that the amount seized has no causal connection to the damages PayPal actually suffered due to their alleged violation of the Acceptable Use Policy.

The plaintiffs filed the PayPal class action lawsuit on behalf of themselves and a proposed Class of other PayPal users who had funds seized by PayPal based on a purported breach of PayPal’s Acceptable Use Policy.

They are seeking compensatory damages, restitution, treble damages, punitive damages and injunctive relief that would require PayPal to stop engaging in the allegedly unlawful seizure of account funds.

Does PayPal have a right to seize customer’s funds without warning? Tell us what you think in the comments!

The plaintiffs are represented by Eric Bensamochan and Deborah C. Silver of The Bensamochan Law Firm Inc. and Eric Schreiber of Schreiber & Schreiber Inc.

The PayPal Class Action Lawsuit is Lena Evans, et al. v. PayPal Inc., Case No. 5:22-cv-00248, in the U.S. District Court for the Northern District of California.

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