PayPal Makes Settlement Deal With 28 States

EBay Inc.'s (Nasdaq:EBAY - news) online payments unit, PayPal, has signed an agreement with attorneys general from 28 U.S. states to clarify how it notifies consumers of the measures it takes to protect their financial data, the company said on Thursday.

Under the deal, PayPal will pay $1.7 million to the states.

PayPal said it will, among other things, shorten and streamline its user agreement and communicate more information relating to its protection programs. The company said it has already complied with many of the voluntary deal's terms.

PayPal also said it reached a settlement in a proposed class action lawsuit by PayPal customers in U.S. District Court in Brooklyn. The company agreed to set up a settlement fund of $3.5 million, less court and attorneys fees.

Under the terms of the settlement deals, PayPal is not admitting any liability for any of the allegations in the two cases, PayPal said.

The state attorneys general involved in the deal represent Alabama, Arizona, California, Delaware, Florida, Georgia, Hawaii, Illinois, Indiana, Iowa, Louisiana, Maryland, Minnesota, Mississippi, Nebraska, Nevada, New Jersey, New York, North Carolina, Ohio, Oklahoma, Oregon, South Dakota, Tennessee, Texas, Vermont, Washington and West Virginia.

The federal lawsuit was filed in 2005 on behalf of a class alleging that PayPal did not clearly communicate information about its consumer protection programs related to specific types of transactions.

The legal settlement will be presented for preliminary approval to the U.S. District Court in the coming months.

Copyright 2006 Reuters Limited.

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