PayPal revises ‘hate’ policy as federal regulators scrutinize debanking

PayPal has revised its acceptable use policy to drop language barring “hate” and “intolerance” that critics said could be used to cut off customers over their political or religious views, Alliance Defending Freedom announced Nov. 5.

Americans “should never fear that their bank or financial services provider will cancel them or deny them service,” Jeremy Tedesco, senior vice president of the Counter Censorship Task Force at ADF, said in a press release. He said ADF will continue to watch whether PayPal carries out its commitments and applies them fairly.

PayPal’s previous policy prohibited transactions involving “the promotion of hate, violence, racial or other forms of intolerance that is discriminatory.” The company’s policy page, last updated Nov. 4, now prohibits transactions involving violence or discriminatory activity based on race, religion, and other legally protected characteristics. ADF said PayPal also narrowed a restriction on misleading information to apply only to communications about PayPal transactions.

ADF’s release says PayPal also added a line to its FAQ page stating that it reviews accounts fairly and consistently, based on account activity and not on religion, race, political affiliation, or other protected characteristics.

PayPal’s plans to open an industrial bank – also known as an industrial loan company – in Utah  have fallen under federal scrutiny due to the above-mentioned former policies. The Federal Deposit Insurance Corp. (FDIC) was notified by ADF in July that PayPal’s terms allowed account cancellations for subjective reasons. ADF said it withdrew its objection after PayPal informed the FDIC of the changes it was making.

The revision follows the Office of the Comptroller of the Currency’s (OCC) final debanking report, which the agency released Oct. 14. It examined the nine largest U.S. banks it supervises, including JPMorgan Chase, Bank of America, and Wells Fargo, and reviewed nearly 100,000 complaints and about 420,000 pages of bank documents. The OCC found that broad reputation risk policies “disadvantaged certain Americans based on their political, religious or social views.”

PayPal is not among those banks and is not named in the report, but the report describes similar language at a payments company owned by JPMorgan Chase. 

Until April 2022, the terms for its WePay subsidiary barred merchants involved in “hate, violence, racial intolerance,” and neither the bank nor WePay had written standards for deciding what met that test. WePay closed accounts for a seller of Trump-themed merchandise and for what employees called a “religious conservative non profit,” among others. The OCC said the language appears to come from card network rules and that other agencies may want to review them.

The OCC cautioned that the banks’ reforms may not last. The government agency said it could not say with confidence that current policies prevent a return to the practices it described. Among the shortcomings it cited are that no bank has fully and publicly acknowledged its past debanking decisions and that the OCC was unable to quantify the full extent of debanking at the nine banks.