PayPal Decides Fining People $2,500 For 'misinformation' Wasn't A Great Idea

PayPal has backed away from fining its own customers up to $2,500 for promoting whatever it determines is "misinformation."

The punishment showed up in its updated acceptable use policy, captured by the Internet Archive's Wayback Machine on September 27, which was due to take effect on November 3. But the revision was deleted by the online payments giant around 2100 GMT on October 8. The biz's current AUP was drafted September 20 last year and remains in effect.

PayPal has reportedly repudiated its planned AUP revision and characterized the snafu as an error.

PayPal did not immediately respond to a request to explain why it had second thoughts about the draft policy change. But it appears condemnation from former executive David Marcus and Tesla tycoon Elon Musk had something to do with the decision.

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Marcus, ex-president of PayPal, spoke out about the AUP just after 1000 GMT on October 8, in rather forceful terms.

"It’s hard for me to openly criticize a company I used to love and gave so much to," he said. "But @PayPal’s new AUP goes against everything I believe in. A private company now gets to decide to take your money if you say something they disagree with. Insanity."

Musk, a short-lived CEO of PayPal in its very early days, took time out from echoing Russian and Chinese talking points to offer a supportive tweet to Marcus.

The mention of "misinformation" piqued the interest of various US Republicans who resent having provocative content moderated and have been trying to deny technology platforms moderation rights through federal and state legislation.

"Orwellian," wrote the Republican-appointed FCC commissioner Brendan Carr. "Paypal reserves the right to take your money if you post a message that Paypal decides is 'misinformation.'

"This is why it is so vital that state and federal legislatures pass laws that prohibit discrimination by tech companies and protect free speech."

Both Florida and Texas have passed such laws, which have been criticized by legal scholars for forcing the distribution of lawful but awful speech upon businesses, in violation of their free speech rights. The laws have also elicited mixed messages from federal appeals courts, ensuring the matter will head to the US Supreme Court.

A company lets the lawyers write a ‘legal’ document without realizing it’s also a marketing document, and without checking to see if the lawyers have done something silly

PayPal's retreat may calm the chattering classes for the time being but its existing policy could be construed to say the same thing. The active PayPal AUP says any violation of the policy amounts to a User Agreement violation that "may subject you to damages, including liquidated damages of $2,500.00 US dollars per violation, which may be debited directly from your PayPal account(s) as outlined in the User Agreement."

And the User Agreement says, "In connection with your use of our websites, your PayPal account, the PayPal services, or in the course of your interactions with PayPal, other PayPal customers, or third parties, you must not," among various disallowed activities, "provide false, inaccurate or misleading information."

It's likely PayPal's legalese was intended to forbid customers from lying to PayPal about their identity. But the way the agreement is worded gives the company the theoretical leeway to seek damages from someone promoting falsehoods on a website implementing PayPal.

Whether or not that would hold up in court, remains to be seen. Lawyers have a habit of including overbroad language in user agreements and terms of service documents as a matter of prudence. Every so often, someone notices and there's a rush to tidy things up.

As industry analyst Benedict Evans put it, "Seems pretty clear to me that the PayPal T&C fuss is just another in a very long series of incidents in which a company lets the lawyers write a ‘legal’ document without realizing it’s also a marketing document, and without checking to see if the lawyers have done something silly." ®