PayPal backtracks on $2,500 fine for 'misinformation'

PayPal found out over the weekend that mixing politics and business could be bad for business.

The financial tech payment platform said a policy that it would deduct $2,500 from accounts of users who spread "misinformation" was released "in error" and would not go into effect. The company faced a torrent of social media criticism after the policy was published Friday.

Many on Twitter posted that they had closed or would close their accounts and would switch services. PayPal also owns digital wallet service Venmo.

Then late Saturday, PayPal Holdings Inc, based in San Jose, California, said in a statement: "An AUP (acceptable use policy) notice recently went out in error that included incorrect information. PayPal is not fining people for misinformation and this language was never intended to be inserted in our policy."

PayPal was to expand its "existing list of prohibited activities" on Nov 3, according to dailywire.com, which first reported the story. Among the changes were bans on "the sending, posting, or publication of any messages, content, or materials" that "promote misinformation" or "present a risk to user safety or wellbeing".

Users would be barred from "the promotion of hate, violence, racial or other forms of intolerance that is discriminatory".

The company had originally warned that violating the rule against misinformation and hate speech "may subject you to damages, including liquidated damages of $2,500.00 US dollars per violation, which may be debited directly from your PayPal account".

At least two of the company's former leaders — including Elon Musk — weighed in on Twitter.

"It's hard for me to openly criticize a company I used to love and gave so much to," tweeted former company president David Marcus. "PayPal's new AUP goes against everything I believe in. A private company now gets to decide to take your money if you say something they disagree with. Insanity."

"Agreed," Musk replied to the post.

In 1999, Musk, the billionaire CEO of Tesla and SpaceX, co-founded online bank X.com, which merged with Confinity in the year 2000 to form PayPal. Online auction platform eBay acquired PayPal for $1.5 billion in 2002. It was spun off by eBay in 2015.

Musk, who has restarted talks to buy Twitter for $44 billion, also has expressed a desire to build a super app called X.com, like China's WeChat, that will be available to all globally.

The PayPal controversy drew an animated response on Twitter.

"As a former @PayPal exec, I often prefer to let other voices take the lead when being critical of their policies. This, however, crosses all kinds of lines. Much like @davidmarcus, I can't be quiet," tweeted Sanja Kon, now CEO of multichain payments technology company Utrust.

"PayPal wants us to believe its 'misinformation' AUP was just a 'mistake,'" tweeted Todd Zywicki, a George Mason University law professor. "Don't forget that just 2 weeks ago PayPal froze a bunch of accounts in the UK which it later claimed also was a 'mistake.' But seemed to target dissent. Looks more like a trial run than another 'mistake.'"

On Sept 15, PayPal kicked off two right-leaning groups in the UK from its platform. They were The Daily Sceptic, a news site, and The Free Speech Union, a campaign group. The accounts were later restored after an outcry that made it to Parliament.

PayPal recently banned Gays Against Groomers, a group of LGBT individuals opposed to the sexualization and gender transitioning of minors.

Dinesh D'Souza, a conservative author and filmmaker, wrote to his 2.4 million followers on Twitter: "Shouldn't the DOJ (Department of Justice) open an investigation into @PayPal? Is it legal for a bank to make a plan to steal from and defraud its own customers? If Wells Fargo and Citibank can't take your money for having the 'wrong' opinion, why should PayPal?"

Former radio host John Cardillo tweeted: "Now @PayPal is backpedaling. Don't buy it. Armies of lawyers and policy and standards people review TOS (terms of service) language before it's published."

Podcast host Patrick Bet-David wrote: "The people have responded and they scared the crap out of PayPal. Power to the people. Capitalism works."

One user, Rachel, took a contrary position. "Conservatives are real angry about PayPal…did they forget Elon Musk founded the company?" she wrote.

PayPal's stock closed at $90.17 on Friday on the Nasdaq, down $4.25, or 4.5 percent. Shares are considerably off their 52-week high of $273.51.