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eBay Accused of Fraud in Class Action Lawsuit
In March 2005, eleven dissatisfied customers filed a class-action suit against eBay, PayPal and the Essex Technology Group. The plaintiffs claim that PayPal customers forfeited charge-back rights contrary to the promises in PayPal's user agreement. Customers using bank accounts claim they sacrificed even more rights in that when products purchased by these customers were not delivered or were defective, the customers found they were unable to obtain refunds. The suit alleges breach of contract, fraudulent inducement and violations of the Racketeer Influenced and Corrupt Organizations Act.
Essex is an electronics liquidator popular with eBay buyers looking for cut-rate prices on electronic equipment. The suit alleges that decisions about charge-back disputes were generally at PayPal's discretion and frequently in Essex's favour. The lawyer representing the plaintiffs said their suit was based on, among other things, the findings of the New York Attorney General made in an investigation over a year ago which found that PayPal's user agreement misrepresented certain terms and conditions. That case was settled with eBay agreeing to pay $150,000 in penalties and costs.
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