[Federal Register Volume 83, Number 43 (Monday, March 5, 2018)]
[Notices]
[Pages 9316-9318]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2018-04331]


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FEDERAL TRADE COMMISSION

[File No. 162 3102]


PayPal, Inc.; Analysis To Aid Public Comment

AGENCY: Federal Trade Commission.

ACTION: Proposed consent agreement.

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SUMMARY: The consent agreement in this matter settles alleged 
violations of federal law prohibiting unfair or deceptive acts or 
practices. The attached Analysis to Aid Public Comment describes both 
the allegations in the complaint and the terms of the consent order--
embodied in the consent agreement--that would settle these allegations.

DATES: Comments must be received on or before March 29, 2018.

ADDRESSES: Interested parties may file a comment online or on paper, by 
following the instructions in the Request for Comment part of the 
SUPPLEMENTARY INFORMATION section below. Write: ``In the Matter of 
PayPal, Inc.'' on your comment, and file your comment online at https://ftcpublic.commentworks.com/ftc/venmoconsent by following the 
instructions on the web-based form. If you prefer to file your comment 
on paper, write ``In the Matter of PayPal, Inc.'' on your comment and 
on the envelope, and mail your comment to the following address: 
Federal Trade Commission, Office of the Secretary, 600 Pennsylvania 
Avenue NW, Suite CC-5610 (Annex D), Washington, DC 20580, or deliver 
your comment to the following address: Federal Trade Commission, Office 
of the Secretary, Constitution Center, 400 7th Street SW, 5th Floor, 
Suite 5610 (Annex D), Washington, DC 20024.

FOR FURTHER INFORMATION CONTACT: Ben Rossen (202-326-3679) and Lisa 
Rothfarb (202-326-2602), Bureau of Consumer Protection, 600 
Pennsylvania Avenue NW, Washington, DC 20580.

SUPPLEMENTARY INFORMATION: Pursuant to Section 6(f) of the Federal 
Trade Commission Act, 15 U.S.C. 46(f), and FTC Rule 2.34, 16 CFR 2.34, 
notice is hereby given that the above-captioned consent agreement 
containing a consent order to cease and desist, having been filed with 
and accepted, subject to final approval, by the Commission, has been 
placed on the public record for a period of thirty (30) days. The 
following Analysis to Aid Public Comment describes the terms of the 
consent agreement, and the allegations in the complaint. An electronic 
copy of the full text of the consent agreement package can be obtained 
from the FTC Home Page (for February 27, 2018), on the World Wide Web, 
at https://www.ftc.gov/news-events/commission-actions.
    You can file a comment online or on paper. For the Commission to 
consider your comment, we must receive it on or before March 29, 2018. 
Write ``In the Matter of PayPal, Inc.'' on your comment. Your comment--
including your name and your state--will be placed on the public record 
of this proceeding, including, to the extent practicable, on the public 
Commission website, at https://www.ftc.gov/policy/public-comments.
    Postal mail addressed to the Commission is subject to delay due to 
heightened security screening. As a result, we encourage you to submit 
your comments online. To make sure that the Commission considers your 
online comment, you must file it at https://ftcpublic.commentworks.com/ftc/venmoconsent by following the instructions on the web-based form. 
If this Notice appears at http://www.regulations.gov/#!home, you also 
may file a comment through that website.
    If you prefer to file your comment on paper, write ``In the Matter 
of PayPal, Inc.'' on your comment and on the envelope, and mail your 
comment to the following address: Federal Trade Commission, Office of 
the Secretary, 600 Pennsylvania Avenue NW, Suite CC-5610 (Annex D), 
Washington, DC 20580, or deliver your comment to the following address: 
Federal Trade Commission, Office of the Secretary, Constitution Center, 
400 7th Street SW, 5th Floor, Suite 5610 (Annex D), Washington, DC 
20024. If possible, submit your paper comment to the Commission by 
courier or overnight service.
    Because your comment will be placed on the publicly accessible FTC 
website at https://www.ftc.gov, you are solely responsible for making 
sure that your comment does not include any sensitive or confidential 
information. In particular, your comment should not include any 
sensitive personal information, such as your or anyone else's Social 
Security number; date of birth; driver's license number or other state 
identification number, or foreign country equivalent; passport number; 
financial account number; or credit or debit card number. You are also 
solely responsible for making sure that your comment does not include 
any sensitive health information, such as medical records or other 
individually identifiable health information. In addition, your comment 
should not include any ``trade secret or any commercial or financial 
information which . . . is privileged or confidential''--as provided by 
Section 6(f) of the FTC Act, 15 U.S.C. 46(f), and FTC Rule 4.10(a)(2), 
16 CFR 4.10(a)(2)--including in particular competitively sensitive 
information such as costs, sales statistics, inventories, formulas, 
patterns, devices, manufacturing processes, or customer names.
    Comments containing material for which confidential treatment is 
requested must be filed in paper form, must be clearly labeled 
``Confidential,''

[[Page 9317]]

and must comply with FTC Rule 4.9(c). In particular, the written 
request for confidential treatment that accompanies the comment must 
include the factual and legal basis for the request, and must identify 
the specific portions of the comment to be withheld from the public 
record. See FTC Rule 4.9(c). Your comment will be kept confidential 
only if the General Counsel grants your request in accordance with the 
law and the public interest. Once your comment has been posted on the 
public FTC website--as legally required by FTC Rule 4.9(b)--we cannot 
redact or remove your comment from the FTC website, unless you submit a 
confidentiality request that meets the requirements for such treatment 
under FTC Rule 4.9(c), and the General Counsel grants that request.
    Visit the FTC website at http://www.ftc.gov to read this Notice and 
the news release describing it. The FTC Act and other laws that the 
Commission administers permit the collection of public comments to 
consider and use in this proceeding, as appropriate. The Commission 
will consider all timely and responsive public comments that it 
receives on or before March 29, 2018. For information on the 
Commission's privacy policy, including routine uses permitted by the 
Privacy Act, see https://www.ftc.gov/site-information/privacy-policy.

Analysis of Proposed Consent Order To Aid Public Comment

    The Federal Trade Commission (``Commission'') has accepted, subject 
to final approval, an agreement containing a consent order from PayPal, 
Inc. (``PayPal'').
    The proposed consent order has been placed on the public record for 
thirty (30) days for receipt of comments by interested persons. 
Comments received during this period will become part of the public 
record. After 30 days, the Commission will again review the agreement 
and the comments received, and will decide whether it should withdraw 
from the agreement and take appropriate action or make final the 
agreement's proposed order.
    This matter involves Venmo, a peer-to-peer payment service owned 
and operated by PayPal. Venmo has offered its peer-to-peer payment 
service to consumers since 2011, and was acquired by PayPal in 2013. 
Consumers can use Venmo to transfer money to one another using a mobile 
application or through a website at www.venmo.com. Venmo's payment 
service incorporates a social networking component through a social 
``news feed'' that shares information about a consumer's Venmo 
transactions.
    The Commission's proposed complaint alleges that PayPal, through 
its operation of Venmo, has violated Section 5 of the FTC Act and the 
Gramm-Leach-Bliley (``GLB'') Act's Privacy and Safeguards Rules.
    First, the proposed complaint alleges that Venmo has represented to 
consumers that money is credited to their Venmo account and can be 
transferred to an external bank account after other Venmo users have 
sent funds to those consumers, but has failed to disclose, or failed to 
disclose adequately, that funds could be frozen or removed because 
Venmo has not yet approved the underlying transaction. As alleged in 
the proposed complaint, Venmo has made representations to consumers 
that they have been paid and they can transfer money from Venmo to an 
external bank account. For example, Venmo has sent users notifications 
that have stated ``Money credited to your Venmo balance. Transfer to 
your bank overnight.'' Despite these claims, the proposed complaint 
alleges that, in numerous instances, consumers have been unable to 
transfer funds to their bank accounts as promised. Venmo has waited 
until a consumer attempts to transfer funds to an external bank account 
to review the transaction for certain issues. This review has resulted 
in Venmo delaying the transfer or reversing the transaction in numerous 
instances.
    Second, the proposed complaint alleges that Venmo has failed to 
disclose material information to consumers about the operation of 
Venmo's privacy settings. As alleged in the proposed complaint, by 
default, all Venmo transactions are shared on Venmo's social news feed, 
which displays the names of the payer and recipient, the date of the 
transaction, and a message written by the user that initiated the 
transaction. Venmo offers privacy settings that consumers can use to 
limit the visibility of their transactions. However, to ensure that all 
future payments remain private, a consumer must change two similarly 
labeled settings. The first setting, referred to in the proposed 
complaint as the ``Default Audience Setting,'' would lead a reasonable 
consumer to believe that they can restrict the visibility of their 
future transactions on the news feed to specific groups, such as 
``Participants Only'' or ``Friends.'' In fact, however, a consumer must 
also change a second setting, referred to in the proposed complaint as 
the ``Transaction Sharing Setting,'' to ensure that all of her 
transactions are private. If a consumer fails to restrict this second 
setting, in some circumstances, transactions will still be published 
publicly even if the consumer has chosen a ``private'' default 
audience.
    Venmo also offers a privacy setting to control the visibility of an 
individual transaction, referred to in the proposed complaint as the 
``Individual Audience Setting.'' The proposed complaint alleges that 
Venmo failed to disclose, or failed to disclose adequately, that the 
Individual Audience Setting does not ensure that an individual 
transaction remains private unless a consumer also separately restricts 
the Transaction Sharing Setting described above. If a consumer has not 
changed both settings, there are circumstances where the other 
participant in the transaction can retroactively change a transaction 
from private to public.
    Third, the proposed complaint alleges that Venmo represented until 
approximately March 2015 that it protected consumers' financial 
information with ``bank grade security systems'' but in fact failed to 
implement basic safeguards necessary to secure consumer accounts from 
unauthorized transactions and did not provide ``bank grade security.'' 
For example, Venmo failed to provide consumers with security 
notifications about changes to account settings from within the 
consumer's Venmo account, such as when a consumer's email address or 
password had been changed. The proposed complaint alleges that Venmo's 
representation that it provided ``bank grade security systems'' 
constitutes a deceptive act or practice under Section 5 of the FTC Act.
    Fourth, the proposed complaint alleges that Venmo violated the GLB 
Act's Privacy Rule and Regulation P by failing to provide users with a 
clear and conspicuous initial privacy notice, disseminating an initial 
privacy notice that does not accurately reflect its policies and 
practices, and failing to deliver the initial privacy notice so that 
each customer could reasonably be expected to receive actual notice.
    Finally, the proposed complaint alleges that Venmo violated the GLB 
Act's Safeguards Rule by failing to have a comprehensive written 
information security program before August 2014, failing to identify 
reasonably foreseeable internal and external risks to the security, 
confidentiality, and integrity of customer information, and assessing 
the sufficiency of any safeguards in place to control those risks 
before September 2014, and failing to design and implement information 
safeguards to control the known risks to the security,

[[Page 9318]]

confidentiality, and integrity of customer information.
    The proposed order contains injunctive provisions addressing the 
alleged deceptive conduct and Rule violations in connection with 
PayPal's operation of a payment and social networking service. Part I 
of the proposed order prohibits PayPal from making misrepresentations 
regarding material restrictions, limitations, or conditions to use any 
payment and social networking service. It also prohibits 
misrepresentations about data security and privacy, including 
misrepresentations regarding the extent of control provided by any 
privacy settings and the extent to which PayPal implements or adheres 
to a particular level of security.
    Part II of the proposed order requires PayPal, when making any 
representations through any payment and social networking service about 
the availability of funds to be transferred or withdrawn to a bank 
account, to provide clear and conspicuous disclosures that transactions 
are subject to review and, if true, that funds could be frozen or 
removed as a result of transaction reviews. Part II also requires 
PayPal to issue a one-time notice informing current Venmo users that 
when they attempt to transfer or withdraw funds to a bank account, 
Venmo will perform transaction reviews and based on such review, may 
block or delay the transfer or withdrawal, and/or reverse a payment 
transaction.
    Part III of the proposed order requires PayPal to provide clear and 
conspicuous disclosures to users related to how any payment and social 
networking service shares transaction information with other users and 
how a consumer can limit the visibility or sharing of transaction 
information through privacy settings.
    Part IV of the agreement prohibits violations of the GLB Privacy 
and Safeguards Rules.
    Part V requires PayPal to obtain biennial data security assessments 
for ten years.
    Parts VI through IX of the proposed order are reporting and 
compliance provisions, which include recordkeeping requirements and 
provisions requiring PayPal to provide information or documents 
necessary for the Commission to monitor compliance. Part X states that 
the proposed order will remain in effect for 20 years, with certain 
exceptions.
    The purpose of this analysis is to aid public comment on the 
proposed order. It is not intended to constitute an official 
interpretation of the complaint or proposed order, or to modify in any 
way the proposed order's terms.

    By direction of the Commission.
Donald S. Clark,
Secretary.
[FR Doc. 2018-04331 Filed 3-2-18; 8:45 am]
 BILLING CODE 6750-01-P