PayPal ‘Misinformation’ Fine Controversy

In October 2022, frenzied posts on Twitter and Reddit alluded to a new PayPal “misinformation fine” of $2,500 — with some urging others to close their PayPal accounts:

PayPal Controversy on Social Media

In the tweet above, right-wing pundit and longtime disinformation purveyor Candace Owens advised her followers to stop using PayPal; commenters asked for additional information.

Similar posts appeared on Reddit’s r/conspiracy:

An October 9 2022 post to r/Conservative appeared to include a screenshot from Telegram, referencing PayPal:

The ‘Misinformation Fine’ and the PayPal Agreement

The text in the screenshot said:

Beginning November 3rd [2022], PayPal Expanding Their Speech Restriction Rules

“Acceptable Use Policy violations of the PayPal User Agreement” …may subject you to damages, including liquidated damages of $2,500.00 U.S. dollars per violation,” as per PayPal.

The updated policy prohibits users from using PayPal for activities that:

“Involve the sending, posting, or publication of any messages, content, or materials that, in PayPal’s sole discretion, (a) are harmful, obscene, harassing, or objectionable … (e) depict, promote, or incite hatred or discrimination of protected groups or of individuals or groups based on protected characteristics (e.g. race, religion, gender or gender identity, sexual orientation, etc.) … (g) are fraudulent, promote misinformation … or (i) are otherwise unfit for publication.”

@dailyrealtimenews

marketing/ua/pdf/US/en/acceptableuse-full-110322.pdf

A search for the blue, linked text led to a more complete web address: https://www.paypalobjects.com/marketing/ua/pdf/US/en/acceptableuse-full-110322.pdf. However, as of October 11 2022, it pointed to a blank PDF page.

The Internet Archive hosted eight captures of the page, which was hosted on the subdomain paypalobjects.com. That domain is registered to PayPal, and standard terms of service pages regularly link to PDF content hosted on it.

A copy of the since-removed PDF content archived on October 8 2022 appeared to reference then-upcoming changes to the PayPal user agreement. It was indeed prefaced with information indicating that violations of PayPal’s Acceptable Use Policy could trigger a debit of “$2,500.00 U.S. dollars per violation … from your PayPal account(s) as outlined in the User Agreement”:

Last updated on November 3, 2022.

You are independently responsible for complying with all applicable laws in all of your actions related to your use of PayPal’s services, regardless of the purpose of the use. In addition, you must adhere to the terms of this Acceptable Use Policy. Violation of this Acceptable Use Policy constitutes a violation of the PayPal User Agreement and may subject you to damages, including liquidated damages of $2,500.00 U.S. dollars per violation, which may be debited directly from your PayPal account(s) as outlined in the User Agreement (see “Restricted Activities and Holds” section of the PayPal User Agreement).

A numbered list followed; its first four items were commonplace restrictions for payment processors. The first referenced generally illegal activity in an individual user’s jurisdiction, number two covered contraband (drugs, weapons, and similar transactions), number three pyramid and Ponzi schemes, and four addressed “fraudulent activity.” A sixth restriction involved unapproved transactions.

As of October 8 2022, the list’s fifth category appeared to have been partially excerpted in the screenshot. PayPal appeared to have indicated that the activities were qualified by “PayPal’s sole discretion,” and violation of the agreement enabled PayPal to debit $2,500 per violation from any account.

In full, the relevant “misinformation” section read:

[You may not use the PayPal service for activities that:] involve the sending, posting, or publication of any messages, content, or materials that, in PayPal’s sole discretion, (a) are harmful, obscene, harassing, or objectionable, (b) depict or appear to depict nudity, sexual or other intimate activities, (c) depict or promote illegal drug use, (d) depict or promote violence, criminal activity, cruelty, or self-harm (e) depict, promote, or incite hatred or discrimination of protected groups or of individuals or groups based on protected characteristics (e.g. race, religion, gender or gender identity, sexual orientation, etc.) (f) present a risk to user safety or wellbeing, (g) are fraudulent, promote misinformation, or are unlawful, (h) infringe the privacy, intellectual property rights, or other proprietary rights of any party, or (i) are otherwise unfit for publication.

Other Context Regarding the PayPal User Agreement and a $2,500 “Fine”

In that archived document, PayPal described a broader agreement between users of PayPal and the company itself.

Part of that policy was acceptance of the terms of service. PayPal’s policy already prohibited a number of activities (primarily related to unlawful activity), and the $2,500 per violation aspect applied to all listed violations.

The earliest archived copy of the page we could find [PDF] was from September 27 2022. Language in the fifth section was identical.

Further, a date-restricted search for PayPal’s practice of collecting damages of $2,500 per violation of its agreement indicated that the practice was not new. A December 2020 post on the blog of payment processor GetPayment.com was titled “How PayPal’s Acceptable Use Policy Could Kill Your Business,” and it read in part:

The Dark Side of PayPal

Why are there so many horror stories from merchants about being banned or heavily fined by PayPal?

PayPal’s Acceptable Use Policy is notoriously vague. This allows them to shut down your account or freeze your funds at their own discretion.
PayPal can fine your merchant account somewhat arbitrarily, including charging $2500 per violation of the Acceptable Use Policy.
In some cases, these issues are never resolved—or your funds are withheld for months, crippling your business.

Let’s take a closer look at why so many merchants have issues with PayPal’s Acceptable Use Policy.

What’s Wrong with PayPal’s Acceptable Use Policy?

In order to use PayPal for commercial transactions, business owners must adhere to terms set out in PayPal’s Acceptable Use Policy. Unfortunately, using PayPal for your business also means agreeing to pay a hefty fine for any violation of their Acceptable Use Policy. There are several major risks of doing business through PayPal that all merchants need to understand.

GetPayment appeared to be a competitor to PayPal in some respects, and as such, did not appear to be a neutral source with respect to information about PayPal’s practices. However, that blog post described “vague” policies and the debiting of $2,500 from accounts as early as December 2020.

PayPal’s Reversal of the Policies

On October 9 2022, another Reddit user asked about the controversy on the subreddit r/OutOfTheLoop:

On that thread, the most upvoted comment summarized the fifth clause (albeit inaccurately, as the clause seemed to involve transactions predicated on misinformation, not social media posts without an attached transaction):

Answer: Paypal has instituted a new policy that begins as of November 3rd [2022], in their ToS. This policy allows them to fine your account in the amount of $2,500 per violation if you are found to be spreading misinformation via social media, posts, etc. A lot of people are upset as the definition of what constitutes misinformation tends to be nebulous, and as protest they are withdrawing and closing their accounts and encouraging others to do the same.

EDIT: PayPal appears to have changed course and reverted this announcement/change.

That comment also contained a link to a National Review article that had been heavily edited between October 8 and 11 2022. On October 8 2022, its headline was “New PayPal Policy Permits Company to Fine Users $2,500 for ‘Misinformation,'” and it began:

A new PayPal policy update appears to authorize the company to pull a significant sum of money from the accounts of users who spread “misinformation.”

Effective November 3 [2022], the new conditions will be added to the restricted activity section of the PayPal User agreement, the Daily Wire first reported. Changes include prohibitions on “the sending, posting, or publication of any messages, content, or materials” that “promote misinformation.” While the prior policy already forbade “hate,” “intolerance,” and discrimination, the new one now also explicitly applies to specific “protected groups” and “individuals or groups based on protected characteristics.” Identities under this umbrella include race, religion, gender or gender identity, and sexual orientation.

“The promotion of hate, violence, racial or other forms of intolerance that is discriminatory” would also be deemed a violation of the policy and possible grounds for penalty,” according to the soon-to-be-launched acceptable use policy. The financial tech firm’s current rulebook doesn’t cite these activities.

By October 11 2022, the same link’s headline was “PayPal Pulls Back, Says It Won’t Fine Customers $2,500 for ‘Misinformation’ after Backlash.” The first few paragraphs said:

PayPal has backtracked on a published policy that would have fined users $2,500 for spreading “misinformation,” claiming the update had gone out “in error.”

“An AUP notice recently went out in error that included incorrect information. PayPal is not fining people for misinformation and this language was never intended to be inserted in our policy. Our teams are working to correct our policy pages. We’re sorry for the confusion this has caused,” a spokesperson told National Review in a written statement.

The course reversal comes after the policy changes had started to attract media scrutiny as well as criticism on Twitter. Former PayPal president David Marcus even blasted the company over the implication that it could seize customers’ money for finding their views objectionable.

Tech news site Gizmodo received a similar statement (with the inclusion of “for the [United States]”), reporting:

PayPal, the company co-founded by right-wing darling Peter Thiel, was caught in a firestorm of conservative backlash over the weekend for daring to say it would not allow its services to be used to promote misinformation. Now, the company has walked everything back, and further claimed that policy was one big misunderstanding.

[…]

The company retracted the notice over the weekend [of October 8 and 9 2022], and in a statement to Gizmodo a company spokesperson said:

“An AUP notice for the U.S. recently went out in error that included incorrect information. PayPal is not fining people for misinformation and this language was never intended to be inserted in our policy. We’re sorry for the confusion this has caused.”

An October 10 2022 Reuters report included another similar statement supplied by PayPal (and myriad mentions of “reports” on “social media”):

“PayPal is not fining people for misinformation and this language was never intended to be inserted in our policy. We’re sorry for the confusion this has caused,” a spokesperson for the company said.

According to several media reports last week [ending October 9 2022], PayPal had published a policy update prohibiting customers from using its services for activities identified by it as “sending, posting, or publication of any messages, content, or materials” promoting misinformation.

The new policy, which said customers could have to pay damages of $2,500 for each violation, was supposed to go into effect on Nov. 3 [2022], the reports said.

Summary

Discourse about a PayPal “misinformation fine” of $2,500 began spreading on social media on or around October 8 2022; the controversy referenced a PayPal user agreement published no later than September 27 2022. Although the link was removed, archived copies demonstrated that PayPal’s general user agreement or terms of service were altered to included the fifth section (quoted above).

Although PayPal’s $2,500 “fine” was a large part of that controversy, it was not introduced in 2022. Context about the entirety of the since-removed policy often failed to note that illegal activity, sales of contraband, and ponzi schemes were also causes for PayPal to take adverse action against users or businesses.

Ultimately, PayPal’s “misinformation fine” did not come to pass. PayPal quickly claimed the clause or clauses was/were included in error, and that “this language was never intended to be inserted in our policy.” Nevertheless, the text did appear on PayPal’s subdomain between September 27 and October 8 2022.