PayPal Reaches DOJ Settlement Valued At $30 Million Over DEI Investment Program
PayPal has reached a settlement valued at approximately $30 million with the Department of Justice after DOJ alleged the company's Economic Opportunity Fund unlawfully gave preference to Black and minority-owned businesses based on race, color and national origin.
PayPal launched the fund in 2020 as part of a $530 million commitment to support Black businesses, strengthen minority communities and fight economic inequality.
The DOJ says the problem was that PayPal used protected characteristics as a factor in providing access to financial benefits without tying the program to remedying any specific instance of past discrimination.
“With this settlement, PayPal agrees that race and national origin should play no part in determining which small businesses deserve its investment and financial support,” said Assistant Attorney General Harmeet K. Dhillon of the Justice Department’s Civil Rights Division.
“The Department will use the full range of its enforcement authorities to eliminate discrimination and ensure that all Americans have an equal opportunity to grow their small businesses.”
The settlement requires PayPal to create a new Small Business Initiative that does not use race, national origin or other protected characteristics as eligibility criteria.
Under that initiative, PayPal will waive processing fees on $1 billion in transactions, with an estimated value of approximately $30 million, for eligible American small businesses engaged in farming, manufacturing or technology, including AI, as well as businesses in other industries if certified through the SBA's Veteran Small Business Certification Program.
PayPal will also designate a director for the program, conduct a financial needs assessment, submit plans to the United States, provide annual ECOA training to relevant employees and report annually on compliance.
Importantly, the settlement states that DOJ has not made any determination or finding that PayPal violated ECOA or any other federal law, it is not an admission or finding by either party, and PayPal expressly denies liability.
The agreement also says the new financial needs assessment must be viewpoint and content neutral and must not grant preference or impose restrictions based on political ideology or party affiliation.
PayPal’s proposed structure for the initiative must also describe how its approval process will avoid granting preference or imposing restrictions based on geography, political ideology or party affiliation.
That stipulation is especially interesting given past scrutiny of PayPal policies that raised concerns about whether access to financial services could be restricted based on subjective or politically charged determinations.
PayPal also faced significant backlash in 2022 over proposed Acceptable Use Policy language that would have expanded prohibited activities to include the sending, posting or publication of content the company deemed harmful, objectionable, misinformation or otherwise unfit for publication.
PayPal later backed down after intense public criticism.
Liz Morton
Now the company is facing another version of the same core question: how much discretion should a major payment platform have in deciding who gets access to financial services, benefits or support?
DOJ's position here is clear: if PayPal is acting as a creditor under ECOA, race or national origin cannot be used as a deciding factor unless the program fits within very specific legal boundaries.
The settlement does not appear to include direct payments to affected businesses or a traditional civil penalty. Instead, the $30 million figure comes from the estimated value of PayPal waiving processing fees under the new initiative.
That may provide real value for some small businesses, but it also means PayPal is resolving the matter by creating another program that keeps businesses inside the PayPal ecosystem.
The key questions now are how PayPal will define eligibility, how transactions will qualify for waived fees, and whether the program will be broadly accessible or narrowly limited in practice.
Download the full settlement agreement:
