October 11, 2022

With Friends Like PayPal…

The online payment company got caught trying to bilk its customers for spreading what it called “misinformation.”

With friends like PayPal, who needs enemies?

Late last week, we learned that the online payment company put out a proposed change to its policy that would allow the service to help itself to up to $2,500 in “damages” if a customer promoted “misinformation” or “hate, violence, racial or other forms of intolerance that is discriminatory.” Caught red-handed, PayPal tried to walk back its license to steal, calling it an “error that included incorrect information.”

It’s always some sort of error, isn’t it? In this case, PayPal would have us believe that it was peddling misinformation about misinformation. Regardless, the damage had been done.

UCLA law professor Eugene Volokh does a wonderful job of breaking this down:

So if PayPal “in [its] sole discretion” concludes that you’re using PayPal “for activities that … relate to transactions involving … promotion of” “discriminatory” “intolerance” — presumably including distributing publications, or for that matter buying publications (since that’s an activity related to transactions involving the promotion of certain views) — it can just take $2,500 straight from your account.

Might you, for instance, be sharply criticizing a religion? Or saying things that sharply condemn, say, government officials (police, FBI, etc.) in ways that some might say involve “promotion of hate”? Or praising people who have acted violently (e.g., in what you think is justifiable self-defense, or defense of others, or even war or revolution)? If PayPal thinks it’s bad, it’ll just take your money.

PayPal is the most well known of the alternative payment services, which were founded as part of the explosion of e-commerce at the turn of the century. Rather than work through banks, PayPal allowed entrepreneurs to accept and transfer payments, meaning millions of people opened accounts with PayPal for a variety of purposes. But perhaps those folks ought to take the advice of venture capitalist David Sacks, who warned in a tweet, “Get your money out of paypal right now.” Sacks, by the way, was the founding COO of PayPal.

The problem lies in the fact that most people don’t have $2,500 in their PayPal accounts if they run afoul of its content referees, but many have tied their PayPal accounts with their bank and credit card accounts, and it’s unclear if the monetary “liquidated damages” could come from other accounts linked in with PayPal. That would open up a big ol’ can of worms, and for many it may not be worth the risk. (Ironically, PayPal founder Peter Thiel is considered right-leaning, but he sold the company to eBay back in 2002, and eBay spun it off in 2015.)

There’s always the possibility, though, that this policy change was simply intended as a trial balloon to see what reaction would come from it. Certainly some will close out their PayPal accounts, and that realization led to a $6 billion decline in PayPal’s valuation yesterday.

But while the blue-checked denizens of Twitter might say PayPal users have nothing to worry about if they do nothing wrong, our experience tells us that the list and scope of prohibited items will expand once those leftist camels get their noses under the proverbial tent. It’s a situation similar to the outcry over gun store merchant codes, which were believed to be a backdoor method to build a gun registry.

That decision by the financial services industry drew immediate fire from Republican state attorneys general, and it’s our hope that our vigilance means PayPal’s idea of financial penalties for otherwise protected speech doesn’t again see the light of day.

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