PayPal Settles DOJ Probe, Drops Race-Based Eligibility

PayPal reached a settlement with the U.S. Department of Justice over its 2020 Economic Opportunity Fund. Under the agreement, PayPal will remove race and national origin as eligibility criteria, create a new Small Business Initiative and waive $30 million in processing fees across up to $1 billion in covered transactions.

The replacement program will target veteran-owned small businesses and firms in farming, manufacturing and technology. The agreement requires PayPal to appoint a director to oversee the initiative and to provide Equal Credit Opportunity Act training for employees who evaluate or administer benefits.

The DOJ’s resolution ends its investigation into whether PayPal’s fee waivers or other benefits tied to race or national origin violated the Equal Credit Opportunity Act. The department did not determine that PayPal broke the law and preserved its right to pursue future enforcement under ECOA. PayPal admitted no wrongdoing.

The settlement imposes no fines or civil penalties. PayPal will waive $30 million in processing fees across up to $1 billion in transactions covered by the initiative. The company described the direct financial effect on shareholders as minimal.

PayPal launched the Economic Opportunity Fund in June 2020 with a $530 million pledge to support minority-owned businesses following nationwide protests over racial injustice. The DOJ’s inquiry focused on whether offering fee waivers tied to race or national origin constituted prohibited credit discrimination under the 1974 Equal Credit Opportunity Act, which bars creditors from discriminating on the basis of race, color, religion, national origin, sex, marital status or age.

The settlement requires program oversight and training intended to support compliance with ECOA. PayPal will operate the Small Business Initiative under the new sector- and veteran-based criteria while the DOJ retains authority to act if it determines the law has been violated.