The Consumer Financial Protection Bureau is investigating eBay Inc. over a loan program that allegedly mirrors a structure used by high-interest lenders. The probe is reviewing the practices of PayPal's Bill Me Later short term loan unit. EBay is PayPal's parent company.
EBay disclosed the CFPB probe, saying it had received requests for information related to Bill Me Laters "products and services, advertising, loan origination, customer acquisition, servicing, debt collection, and complaints handling practices."
Bill Me Later is a financial product that relies on Salt Lake City, Utah-based Comenity Capital Bank to make loans that are then purchased and managed by eBay, according to regulatory filings. The service is used by many large online retailers, including Apple Inc., The Walt Disney Co. and Walmart.
Specifically, Bill Me Later allows consumers to open a revolving credit account for purchases. If balances are not paid within a six-month promotional period, a 19.99% APR begins.
Banks can lend in any state without being licensed there, or complying with local interest rate caps, according to federal law.
The CFPB said in an Oct. 1 report that such deferred interest products can end up being more expensive for consumers than using a normal credit card.
EBay purchased loans worth $3.2 billion in 2012, according to regulatory filings. Its total revenue that year was $14.1 billion.