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New PayPal User Agreement – July 1, 2015

Do you use PayPal either as a consumer or a merchant? If so, PayPal has announced modifications to the PayPal User Agreement effective July 1, 2015 that all users must agree to as a condition to using PayPal’s services. If you don’t agree, you cannot use PayPal.

Advance word on the planned modifications has created quite a stir among not only account holders but also the Federal Communications Commission (FCC) who in a June 11, 2015 letter to PayPal expressed serious concerns that “these amendments may violate federal laws governing the use of autodialed, prerecorded, and artificial voice calls, including text messages.” For details: https://s3.amazonaws.com/ftc-materials/FCC+Ltr+To+PayPal+6-11-15.pdf

There are two controversial provisions in the proposed PayPal amendments found at  https://www.paypalobjects.com/webstatic/ua/pdf/US/ints/ua.pdf

The first is a very aggressive policy with respect to users consenting to ROBO calls and text messaging – “You consent to receive autodialed or prerecorded calls and text messages from PayPal at any telephone number that you have provided us or that we have otherwise obtained…(and allow us to) contact you with offers and promotions.” Currently there is no opt-out mechanism.

The FCC noted that: “If PayPal plans to make autodialed, prerecorded, or artificial voice calls or text messages to its customers, please be aware that federal law places strict limits on such communications. For more than two decades, federal lawmakers have sought to protect consumers from harassing, intrusive, and unwanted calls and text messages. The FCC recognizes that “automated or prerecorded telephone calls [are] a greater nuisance and invasion of privacy than live solicitation calls,” and that “such calls can be costly and inconvenient” for consumers. FCC regulations therefore require that before a company may make any prerecorded or artificial voice telemarketing calls to residential phones or autodialed, prerecorded or artificial voice calls or texts to wireless phones, the company must obtain the prior express written consent of the recipients.”

The FCC concluded that “PayPal ‘s amended User Agreement does not give consumers notice of their right to refuse consent to calls that require consumer consent from PayPal, its affiliates, and its service providers. If PayPal fails to include this required notice and/or fails to allow its users to refuse such consent, we are concerned that consent is in fact a condition of purchase of PayPal’s service and thus violates the Telephone Consumer Protection Act and could subject PayPal, its affiliates, and its service providers to penalties of up to $16,000 per call or text message.”

In light of these serious concerns of the FCC, it is possible that the proposed amendments to the User Agreement will be modified with respect to the ROBO call provisions. Users will want to carefully read the July 1 amendments to see if the FCC concerns have been addressed.

Another controversial provision in the proposed amendment covers Intellectual Property rights. Although the essence of this provision has been in existence for a long time, most users will be reading it for the first time and may be surprised with the over-broad language. For example: “When providing us with content or posting content in each case for publication, whether on-or off-line using the Services, you grant the PayPal Group a non-exclusive, worldwide, perpetual, irrevocable, royalty-free, sublicensable (through multiple tiers) right to exercise any and all copyright, publicity, trademarks, database rights and intellectual property rights and intellectual property rights you have in the content…in any media known now or in the future.”

Although broad in scope, the provision is not much different from what is found in many social media forums. At the present time, it is hard to envision what type of content that users provide that can be monetized (such as in the form of derivative products). However, in the age of big data, and the fact that PayPal may be in a growth mode now that it has transitioned into a separate company from its original parent eBay, Inc, PayPal could be laying the groundwork for future uses.

Time will tell what the long term effect will be with the new mandatory amendments to the PayPal User Agreement. One thing for sure, PayPal has taken a big hit in the Public Relations arena.

 

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