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As part of its routine monitoring program, where it examines
claims on its own initiation without a competitor challenge, NAD
initiated an inquiry into claims made by PayPal on the website for
its PayPal Prepaid Mastercard. NAD focused on three claims: no
purchase fee; no cost direct deposit; and 227 million active PayPal
accounts.
To support its "no purchase fee" claim, PayPal told
NAD that it advertises "no purchase fee" for consumers
who apply for its prepaid card online. The "free" card
that consumers receive is not loaded with funds and cannot be used
until loaded. In order to use the card, consumers are typically
charged a load fee and a monthly fee.
NAD was concerned that one reasonable takeaway from PayPal's
"no purchase fee" claim is that consumers who apply for a
card online will receive a card they can use, at least initially,
without paying a fee, that is, that the card they receive will be
usable and have value without paying a fee to "purchase"
or load funds onto the card. NAD was also concerned that the terms
and conditions explaining the applicable fees were not sufficiently
proximate and clear. Thus, NAD recommended that PayPal either
discontinue the claim or modify it to disclose clearly and
conspicuously and in close proximity to the claim the fees
associated with the initial use of the card.
To support its "no cost direct deposit" claim, PayPal
explained that its card does not charge a fee for direct deposit,
but does charge fees for transfers from a PayPal account or when
cardholders load money at NetSpend Reload Network locations.
It further explained that this is a common practice.
NAD concurred, citing guidance provided by the CFPB to
consumers that using direct deposit to load funds on a card can
save money because most prepaid cards provide that option without
charging a fee, unlike loading the card at a retail
location.
Finally, PayPal explained that its claim that it has 227 million
active PayPal accounts is literally true. Although NAD was
initially concerned that the claim may convey to consumers that 227
million people own a PayPal Prepaid Mastercard, NAD determined
that, in context, the claim was not misleading.
This alert provides general coverage of its subject area. We
provide it with the understanding that Frankfurt Kurnit Klein &
Selz is not engaged herein in rendering legal advice, and shall not
be liable for any damages resulting from any error, inaccuracy, or
omission. Our attorneys practice law only in jurisdictions in which
they are properly authorized to do so. We do not seek to represent
clients in other jurisdictions.
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