How eBay’s Lending Practices Anger Regulators
EBay Inc. (NASDAQ: EBAY) is facing a probe by the Consumer Financial Protection Bureau (or, CFPB) regarding aspects of PayPal’s Bill Me Later scheme. PayPal offers Bill Me Later as a line of credit available to approved customers who can then make purchases on eBay, or other merchants accepting PayPal.
In an SEC filing October 18, eBay disclosed how it operates the Bill Me Later program. Bill Me Later is not a bank, or other institution authorized to make loans, according to the filing. For the program to work, a financial institution forwards the money owed by the purchaser to the seller. EBay then purchases the loans, while the financial institution owns the accounts.
Bill Me Later works with Comenity Capital Bank and WebBank, both of which are chartered in Utah. The filing also details a pending lawsuit against Bill Me Later in the U.S. District Court. The suit originates in California and claims that in transactions, Bill Me Later acts as the true lender, violating several California laws.