PayPal Says Plan to Fine Customers for Exercising Free Speech Was an ‘Error’

A business has to spend a lot of money on lawyers in order to draft extensive new terms for its agreement with customers, publish those new terms, suffer an immediate backlash, then get lawyers to proofread a new press statement that says they never meant to impose new terms after all. We can substitute the word ‘liars’ for ‘lawyers’ in the previous sentence and the meaning will be unchanged. That PayPal is run by a group of idiot liars is the only reasonable conclusion after they astounded customers by announcing the company would give itself the right to impose a USD2,500 fine on any customer that PayPal deems guilty of promoting misinformation. Given that PayPal withdrew the new terms whilst making the laughable excuse that “this language was never intended to be inserted in our policy”, they should perhaps fine themselves and give every PayPal customer USD2,500 as compensation.

PayPal’s new Acceptable Use Policy (AUP), which was due to go into effect on November 3, listed a series of “prohibited activities” which could result in the company taking “liquidated damages” of USD2,500 from a customer’s PayPal account. Such prohibited activities include the “ending, posting, or publication of messages, content, or materials that meet certain criteria”. Users were told they “may not” use PayPal to promote misinformation. But what does this even mean? PayPal is a payments service, not a publishing service. People communicate information using words, not money.

A contractual agreement that gives PayPal the power to take money as punishment for a sin as vague as promoting misinformation would give them free rein to profit from the abuse of countless customers. Could I be found guilty of promoting misinformation if I wrote that PayPal is run by stuck-up, conceited, overpromoted and culturally insecure morons, even though that is my honest belief? The biggest joke is that PayPal claimed to need to fine customers as compensation for damage to their corporate reputation, when this fiasco shows their management team is perfectly capable of destroying the reputation of their business without any help from anyone else.

The announcement of the new policy led to an immediate backlash. David Marcus, a former President of PayPal, described the policy as ‘insanity’.

Elon Musk, an early stakeholder in PayPal, responded by saying he agreed with Marcus’ tweet.

Although PayPal soon removed the policy notification from their website and broke every other web link to related announcements, their current management has effectively communicated their intention to drive away customers through heavy-handed interference in matters that do not concern them. Just a few weeks ago PayPal arbitrarily closed the PayPal account of the UK’s Free Speech Union (FSU), an association of mostly right-of-center critics of cancel culture. According to the FSU, about one-third of their 9,500 members pay their fees via PayPal, so the sudden loss of service would have caused tremendous disruption to the association. However, FSU founder Toby Young deftly turned the naked display of PayPal’s power into an opportunity to launch a media barrage that also marketed the FSU and its mission.

Young’s pointed criticism highlighted that PayPal refused to specify what the FSU had done wrong, leaving them unable to argue with the decision or make changes that would appease PayPal. Young also noted that PayPal closed the FSU account at the same time as they closed Young’s personal account and an account used by a publishing business he owns, begging serious questions about how PayPal determined that these three separate entities were all in violation of PayPal rules at the same time. The public outcry doubtless helped to persuade PayPal of the need to reverse their decision. PayPal reinstated the accounts of the FSU, Young and his publishing business a few days later, but not before PayPal had sent a clear signal to British customers that PayPal’s lopsided terms would be used to inflict arbitrary punishment on any customer they dislike. Though PayPal cannot yet impose fines, existing punishments include the right to withhold the customer’s money for 180 days before they return it.

If you ever see me in person and want a boring story about PayPal’s arrogance, we can spend a couple of hours discussing my own experience of this Californian business overriding the laws that govern the democracy where I live, the United Kingdom. I say this story is boring because it involves the Electoral Commission, the regulator of democratic elections and political finance in the UK, being forced to produce pieces of paper that have no meaning in British law just because PayPal expects those laws to be more like US laws. Accommodations like these are small, but they represent the thin end of a wedge for a domineering business that expects the world to be reshaped to suit its prejudices. PayPal’s management should instead aspire to be flexible enough to cope with inevitable differences between individuals, cultures, and countries.

Whilst I dearly love the American readers of Commsrisk, it is accurate to observe that experiences like these also encourage hostility to the USA in general, and especially to US domination of internet-based services. The world is not an open playground where big US corporations should be free to bully anyone who says something they dislike. I side with those Americans who find PayPal’s hubris to be intolerable. Some of us live in democratic countries where the law sets the parameters for acceptable discourse. If Americans want to continue living in a country like that, they need to impose limits on PayPal’s behavior before PayPal imposes yet more limits upon its users.

Eric Priezkalns
Eric Priezkalns
Eric is the Editor of Commsrisk. Look here for more about the history of Commsrisk and the role played by Eric.

Eric is also the Chief Executive of the Risk & Assurance Group (RAG), a global association of professionals working in risk management and business assurance for communications providers.

Previously Eric was Director of Risk Management for Qatar Telecom and he has worked with Cable & Wireless, T‑Mobile, Sky, Worldcom and other telcos. He was lead author of Revenue Assurance: Expert Opinions for Communications Providers, published by CRC Press. He is a qualified chartered accountant, with degrees in information systems, and in mathematics and philosophy.