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Complex and imprecise terms in PayPal’s contracts may breach law, says the Polish consumer regulator, arguing that they leave consumers guessing about what is prohibited and what the sanctions are.

PayPal’s user contract, particularly the parts concerning prohibited actions, sanctions and a ban on using blocked and suspended accounts, may be in violation of the country’s consumer law, the Polish Office of Competition and Consumer Protection (UOKiK) in a press release on Friday (November 25).

These sections in the user agreement are described imprecisely, they lack specific examples and use unclear and complex terms, which gives PayPal the sole discretion to interpret the rules, according to the agency.

Having read the contract, the consumer will also be unable to determine which of their actions may be considered prohibited by PayPal or what sanctions the company may impose.

The agency said the content of the user agreement “may be contrary to best practices” and lead to “a gross disproportion of rights and obligations” between the consumer and the company.

Specifically, one of the contested provisions states that PayPal may “at any time and at its discretion take a number of actions to protect the company” if the consumer commits any of the prohibited actions.

The catalogue of sanctions, however, is open, meaning that PayPal may apply penalties that are not named in the agreement.

The contract terms also enable PayPal to apply a sanction without explaining the infringement it found or providing a justification for the action.

Once PayPal determines a user engaged in a prohibited action, the company can block user funds “in the amount and for as long as necessary” and oblige the consumer to pay the equivalent of $2,500. It may also close the account without notice and refuse to provide services in the future.

The provisions concerning what happens when a PayPal account is suspended or closed also remain unclear, according to UOKiK.

The contract indicates that even an attempt to use such an account may be penalised.

At the same time, the provision lacks an explanation of whether this applies to login attempts or other types of actions, or what penalties are provided for doing so, the agency says.

“Contracts, and especially those parts of them that define the negative consequences of prohibited actions, must be phrased in a simple and understandable, but at the same time precise language and be based on clearly defined criteria,” said Tomasz Chróstny, president of the UOKiK.

“Consumers should be able to anticipate the consequences of their actions while feeling assurance regarding the safety and ability to use their financial resources.

“Accordingly, it is inadmissible for the company to indemnify itself from any liability while freely imposing such severe sanctions as, for example, blocking funds or closing the account,” he added.

The investigation comes after consumers the agency of unilateral changes to PayPal contracts and the introduction of a new PLN45 ($10) fee charged for account inactivity over 12 months.

UOKiK the launch of an investigation last December, looking at a number of issues, including these contractual changes and the use of unclear language in contracts.

The agency has sent its preliminary findings to PayPal, which may face a fine of up to 10 percent of its turnover.

PayPal operates in Europe under a banking licence in Luxembourg.

It is currently under investigation in Australia regarding incorrect filings related to international funds transfer instructions.

In the United States, the Consumer Financial Protection Bureau (CFPB) is investigating PayPal about scam payments on its P2P app Venmo and separately about the marketing and use of its consumer credit product called PayPal Credit.

Also in the US, the Securities and Exchange Commission (SEC) is investigating whether the swipe fees paid to the banks that issue PayPal's debit cards are consistent with federal debit card interchange fee and routing regulations.