PayPal updated its user agreement, and sent an email to business account customers, explaining that effective November 3 customers would be subject to $2,500 fines per instance of ‘promoting misinformation’ or “sending, posting, or publication of any messages, content, or materials that, in PayPal’s sole discretion, (a) are harmful, obscene, harassing, or objectionable.”

If they deemed you to promote messages they objected to 10 times, or to have spread misinformation (in their sole discretion) 10 times, they could take $25,000 from your account. It isn’t clear whether – if your PayPal balance was $0 – they could withdraw funds from your linked accounts, but other areas of its terms would suggest this possibility. After an online backlash they’ve pulled the language from their update.

Here’s the relevant update that they posted, promoted, and then removed:

You may not use the PayPal service for activities that…involve the sending, posting, or publication of any messages, content, or materials that, in PayPal’s sole discretion, (a) are harmful, obscene, harassing, or objectionable, (b) depict or appear to depict nudity, sexual or other intimate activities, (c) depict or promote illegal drug use, (d) depict or promote violence,  criminal activity, cruelty, or self-harm (e) depict, promote, or incite hatred or discrimination of protected groups or of individuals or groups based on protected characteristics (e.g. race, religion, gender or gender identity, sexual orientation, etc.) (f) present a risk to user safety or wellbeing, (g) are fraudulent, promote misinformation, or are unlawful, (h) infringe the privacy, intellectual property rights, or other proprietary rights of any party, or (i) are otherwise unfit for publication.

Violation of this Acceptable Use Policy constitutes a violation of the PayPal User Agreement and may subject you to damages, including liquidated damages of $2,500.00 U.S. dollars per violation, which may be debited directly from your PayPal account(s) as outlined in the User Agreement…

This policy was roundly criticized online, including by a former President of PayPal and by Elon Musk who himself is formerly CEO of PayPal.

Agreed

— Elon Musk (@elonmusk) October 8, 2022

PayPal has already backed off, claiming the update to its terms and conditions was a mistake.

We’re sorry for the confusion this has caused.”

— Lily Hay Newman (@lilyhnewman) October 8, 2022

Ironically PayPal says that their own terms and conditions update was misinformation! It would have gone through rounds of lawyers and layers of approvals. The mistake seems to be not having realized that people would have paid attention to fine print, or that there would have been a backlash.

PayPal isn’t a service that many who have paid attention have trusted in a long, long time. Fundamentally however it’s not that PayPal has ‘gone woke’ as much that they (1) want terms and conditions which give them broad flexibility to respond to the woke mob, and (2) more importantly to regulators [which often are one and the same].

Regulators push financial institutions to adhere to their own policy objectives, without legislation or even explicit regulation. They simply deem certain activities to be ‘risky’ or suggest that compliance with those objectives will make life easier or harder for the institution. That manifests itself in whom a lender might approve for a mortgage to where a bank places its branches. Regulators tell companies this is how they protect their reputation which is important for risk. But this has real costs to society.

Just as new merchant codes are a tool for tracking gun purchases, don’t be surprised to see some Red States push for a merchant code to track abortion services. Did you know that financial regulators want to impose climate change policy by considering it a risk to banks?

Already, anti-money laundering rules cost $7 million per conviction and that cost falls on financial intermediaries like banks and PayPal. That manifests itself in costs on accountholders, like minimum balance requirements, that keeps people out of the banking system according to the FDIC (and pushes them into using alternatives like costly check cashing stores).

Financial institutions aren’t actually seeking to fine their customers for ideas that the company objects to. They’re acting to protect their reputation, which is to say they’re acting to appease regulators who hold the key to an institution’s profitability and ability to conduct business.