Paypal has been hit with a lawsuit after it was accused of holding funds from accounts without reason or due process.

The Chicago, Illinois federal court lawsuit was filed on Monday, February 14, claiming the company has breached the Illinois Consumer Fraud and Deceptive Business Practices Act.

The complaint also asserts multiple claims under the Racketeer Influenced and Corrupt Organizations (RICO) Act, alleging that PayPal operates illegally as an unlicensed bank.

The plaintiff, proceeding pro se, says PayPal has an extensive practice of freezing then seizing client account funds when it mistrusts a violation of its acceptable use policy.


The lawsuit has been launched by an Illinois man who alleges he was a victim of PayPal’s conduct, which involved the firm transferring the plaintiff’s amount to its own account and forcing him to go through a lengthy process to release the funds.

The complaint says PayPal’s terms of service include a liquidated damages clause that amounts to an illegal contract of adhesion and that transferring payments to PayPal’s own account is considered a conversion.

It further claims PayPal invests the funds and makes interest in them, denying people like the plaintiff access to much-needed liquidity.

The complainant isn’t the first PayPal consumer to express dissatisfaction with the company’s money-laundering practices. 

A class-action lawsuit was launched by many users in January, and another lawsuit brought by a college tutor was referred to arbitration around the same time.

In terms of the plaintiff’s RICO suit, the man also claims that PayPal accepts and transmits funds as an unregistered and so unlawful bank.

Its “pattern of racketeering activity” reportedly comprises unlicensed money transmittal and money laundering for illegitimate purposes, including deliberately depriving the plaintiff of his account funds.

The lawsuit names Daniel H. Schulman, the president and CEO of PayPal and PayPal Holdings, as a defendant and alleges two RICO charges against him.

The case also asserts the third claim for claimed violations of the state’s consumer protection legislation, seeking damages and injunctive action to stop the company’s allegedly illegal behavior.

Source: Lawstreet

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