Pomerantz Appointed Co-Lead Counsel in PayPal Securities Litigation
On November 2, 2021, U.S. District Judge Charles R. Breyer of the Northern District of California appointed Pomerantz LLP as Co-Lead Counsel on behalf of Huei-Ting Kang, Co-Lead Plaintiff in Kang v. Paypal Holdings, Inc., 21-cv-6468 (N.D. Cal.), a securities action brought on behalf of a class of defrauded investors concerning allegations that PayPal Holdings, Inc. (“PayPal” or the “Company”) failed to disclose deficiencies in its PayPal Credit debit and credit card services and the resulting non-compliance of these programs with applicable laws and regulations.
PayPal operates as a technology platform and digital payments company that enables digital and mobile payments on behalf of consumers and merchants worldwide. The Company’s services include, among others, PayPal Credit and certain debit card services. PayPal Credit is an open end (revolving) credit card account that provides a reusable credit line built into a consumer’s account with PayPal.
Allegations against PayPal include that: (i) the Company had deficient disclosure controls and procedures; (ii) as a result, PayPal’s business practices with respect to PayPal Credit remained non-compliant with applicable laws and regulations; (iii) the Company’s practices regarding payment of interchange rates related to its debit cards were likewise non-compliant with applicable laws and/or regulations; (iv) accordingly, PayPal’s revenues derived from its PayPal Credit and debit card practices were in part the subject of improper conduct and thus unsustainable; and (v) all the foregoing subjected the Company to an increased risk of regulatory investigation and enforcement.
In 2015, PayPal settled regulatory claims with the Consumer Financial Protection Bureau (“CFPB”) arising from certain of its business practices related to PayPal Credit between 2011 and 2015. Following this incident, the Company repeatedly asserted that it was remediating issues with its PayPal Credit business practices in accordance with its 2015 settlement with the CFPB.
On July 29, 2021, PayPal announced its second quarter 2021 financial results in which it revealed that it was the subject of investigations by the Securities and Exchange Commission (“SEC”) and the CFPB. Specifically, PayPal disclosed receipt of a Civil Investigative Demand (“CID”) from the CFPB related “to the marketing and use of PayPal Credit in connection with certain merchants that provide educational services”; and that the Company had “responded to subpoenas and requests for information received from the [SEC] relating to whether the interchange rates paid to the bank that issues debit cards bearing [its] licensed brands were consistent with Regulation II of the Board of Governors of the Federal Reserve System, and to the reporting of marketing fees earned from the Company’s branded card program.”
On this news, PayPal’s share price fell $18.81 per share, or 6.2%, to close at $283.17 per share on July 29, 2021.