When are a company’s actions not just unfair and deceptive, but also abusive? A new case against PayPal Inc., which will pay $25 million to settle charges that the company illegally signed up consumers for unwanted credit, sheds light on a murky legal standard created by the Dodd-Frank Act.

The Consumer Financial Protection Bureau on Tuesday filed a lawsuit and proposed consent decree against PayPal in Maryland federal district court. The agency alleged the online payment processor deceptively advertised a product known as PayPal Credit, signed up consumers without their permission, made them use PayPal Credit for purchases rather than their preferred method of payment and mishandled billing disputes.

Ballard Spahr partners Robert Scott and Christopher Willis represented PayPal.

“PayPal Credit takes consumer protection very seriously,” PayPal spokeswoman Amanda Miller said in a written statement. “We continually improve our products and enhance our communications to ensure a superior customer experience. Our focus is on ease of use, clarity and providing high-quality products that are useful to consumers and are in compliance with applicable laws.”

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Consumer Financial Services