The Consumer Financial Protection Bureau on Tuesday cited PayPal for illegally signing up consumers for online credit, the agency announced. 

PayPal allegedly advertised benefits that it failed to honor and illegally signed up consumers for its online credit product, PayPal Credit, according to the bureau. PayPal made consumers use PayPal Credit, formerly called Bill Me Later, instead of their preferred payment method.

PayPal, based in San Jose, Calif., agreed to pay $15 million in redress to consumers and a $10 million penalty.

The CFPB claims PayPal failed to honor promotional benefits that it had advertised, signed up consumers for credit without their permission, forced those consumers to use PayPal Credit instead of another preferred method and mishandled billing disputes. 

"PayPal illegally signed up consumers for its online credit product without their permission and failed to address disputes when they complained," said CFPB Director Richard Cordray in a press release. "Online shopping has become a way of life for many Americans and it's important that they are treated fairly. The CFPB's action should send a signal that consumers are protected whether they are opening their wallets or clicking online to make a purchase."

PayPal, the payments unit of eBay Inc., agreed to the consent order without admitting or denying the findings. EBay and PayPal plan to split into separate publicly traded companies sometime in the third quarter.

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