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PayPal Hides Pay-Later Plan’s Overdraft Fee Risk, Suit Says (1)

March 2, 2022, 4:03 PMUpdated: March 2, 2022, 8:21 PM

PayPal Inc. falsely touts its “Pay in 4" installment program to low-income customers as a free service, failing to disclose that they can incur large overdraft fees on their linked bank accounts, a Florida man alleges in a federal court lawsuit.

According to the PayPal website, app, and advertisements online including on social media, the service—which splits the purchase price over four payments—is completely free, with no interest or hidden fees, the would-be class suit alleges.

But there are often huge “late fees” and significant interest, albeit not assessed by PayPal, in the form of overdraft and insufficient-funds fees assessed by banks processing Pay in 4 payments, Felipe Vidaurre alleges in a suit filed Tuesday in the U.S. District Court for the Northern District of California.

Overdraft fees are a highly profitable part of the banking sector that exclusively targets the very poor, he alleges.

PayPal’s marketing targets consumers living paycheck to paycheck, the suit alleges. The company, therefore, knew or should have known that such users were at extreme risk of overdraft and NSF fees when using the pay-later service, it alleges.

Exacerbating the problem, PayPal repeatedly re-processes payments that aren’t successful on the first attempt—causing multiple fees on the same repayment, the suit alleges.

Vidaurre says he made a purchase in October 2021 using Pay in 4. In December 2021, PayPal repeatedly attempted to make the same payment deduction from his checking account, causing him to incur $87 in fees, he says.

Causes of Action: Florida Deceptive and Unfair Trade Practices Act; California Unfair Competition Law; California False Advertising Law.

Potential Class Size: Unknown number of persons in nationwide class.

Relief: Declaration that PayPal’s policies and practices as alleged constitute a violation of state consumer protection statutes; injunctive relief; damages; restitution; attorneys’ fees and costs.

Response: A PayPal spokesperson said the company is reviewing the filing.

Attorneys: Kaliel Gold PLLC and Edelsberg Law PA represent Vidaurre.

The case is Vidaurre v. PayPal, Inc., N.D. Cal., No. 5:22-cv-01283, complaint 3/1/22.

(Updated with company response in the 11th paragraph.)

To contact the reporter on this story: Julie Steinberg in Washington at

To contact the editors responsible for this story: Rob Tricchinelli at; Patrick L. Gregory at