The U.S. Federal Communications Commission has cautioned PayPal that provisions in its new user agreement for contacting customers with autodialed or prerecorded calls and text messages could violate federal laws.
In order to comply with the rules, PayPal would have to get "prior express written consent" from customers before making so-called robocalls and robotexts for telemarketing purposes, Travis LeBlanc, chief of the FCC's Enforcement Bureau, wrote in a letter to PayPal on Thursday.
"For more than two decades, federal lawmakers have sought to protect consumers from harassing, intrusive, and unwanted calls and text messages," he said.
FCC rules ban requiring a customer to consent to receive autodialed or prerecorded telemarketing or advertising calls as a condition of a purchase, and the company must give consumers notice of their right to refuse to consent, according to the letter. PayPal's proposed user agreement does not provide such a notice, which could lead to penalties of up to $16,000 per call or text message for the company and its service providers.
Under the PayPal agreement, which comes into force on July 1, customers consent to receive autodialed or prerecorded calls and text messages from the payment processor at any telephone number that they have provided the company or it has otherwise obtained. PayPal may contact the customer with these automated messages with routine information as well as to conduct surveys or questionnaires, and make offers and promotions.
Users of PayPal's parent eBay will also have to agree to similar terms under a new agreement proposed by the e-commerce company.
The proposed agreements of both PayPal and eBay have come under scrutiny of the office of the New York attorney general for the robocalls and robotext provisions. The office is checking whether the companies offer an opt-out option, or whether customers have to agree to the entire policies or stop using the service.
Given the dominant market positions of both these companies, it is unclear whether customers really have a choice, Kathleen McGee, chief of the Internet bureau at the attorney general's office, wrote in letters to both eBay and PayPal, which were obtained by The New York Times.
Ebay plans to spin off PayPal as a separate company later this year.
PayPal said Friday that the company had received the letter from the FCC and looks forward to responding. It pointed to a blog post last week by general counsel Louise Pentland, which said that customers would be able choose not to receive autodialed or prerecorded message calls by contacting customer support.