Honolulu regulators have delivered a costly wake-up call to one of the biggest names in digital payments, announcing a $6 million settlement with PayPal that caps a three-year-old legal fight over what consumers were told about Venmo and PayPal protections. According to a news release from the Hawaiʻi Department of Commerce and Consumer Affairs, the state’s Office of Consumer Protection said PayPal, Inc. and PayPal Holdings, Inc. will pay $6 million to resolve the suit. Filed in December 2022, the case accused the company of unfair and deceptive acts or practices tied to how PayPal and Venmo operate. "Hawaiʻi consumers depend on PayPal and Venmo for critical daily tasks like paying rent, receiving wages and compensating child care providers," OCP Executive Director Mana Moriarty said in the release.
The lawsuit accused PayPal of using deceptive advertising to promote broad "Purchase Protection" for goods-and-services transactions on Venmo, overstating privacy protections for sensitive financial information, and promising easy access to funds on platforms that were marketed as safe from scams and fraud, as reported by Hawaii News Now. PayPal has denied those allegations in court but agreed to the settlement to put the litigation behind it.
How Regulators Say Users Got Burned
The complaint and subsequent reporting describe users being frozen out of their own money for months when accounts were locked and point to profile settings that allegedly made it far too easy for scammers to pose as friends or relatives. One local report recounts a Hawaiʻi user discovering a stranger using his five-year-old child’s photo as a profile picture, while another person ended up sending $300 to an impostor, as per Aloha State Daily.
PayPal Pushes Back
PayPal, for its part, has tried to strike a conciliatory tone without giving ground on the core accusations. The company said it "takes our responsibility to our customers very seriously" and that it continues to improve both its products and its communications, adding that it was "pleased to have reached an agreement," Hawaii News Now reported. In court filings, PayPal has continued to deny the underlying claims.
What the Settlement Does and Does Not Do
State officials say the agreement resolves the Office of Consumer Protection’s lawsuit, but they have not laid out how, or even if, individual consumers in Hawaiʻi will see direct payments. The release does not spell out specific injunctive terms or changes that PayPal must make to its practices. Instead, it notes that the OCP was assisted by outside counsel in bringing the case, and that the payment settles the claims without any admission of liability by PayPal. The Hawaiʻi Department of Commerce and Consumer Affairs said the agreement closes the matter for the state.
How Hawaiʻi Fits Into the National Fight Over Fintech Promises
This is not the first time regulators have taken issue with how Venmo and PayPal talk about fund access and privacy. In 2018, the Federal Trade Commission approved a settlement with PayPal over Venmo disclosures that required clearer explanations about when funds could be frozen and how privacy settings actually work, as outlined by the Federal Trade Commission. Hawaiʻi’s action slots into that broader trend of regulators scrutinizing how payment platforms pitch safety, security, and convenience to everyday users.
Officials in Hawaiʻi have not yet detailed whether residents will receive refunds or exactly how the $6 million will be allocated. For now, the settlement shuts down the state’s claims while leaving PayPal’s denials on the public record as part of the final deal.
