The U.S. Consumer Financial Protection Bureau (CFPB) has found out that PayPal is guilty of deceptive advertisement and has been ordered to pay $25 million in fines and refunds.

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The CFPB conducted an investigation against PayPal due to allegations that the company signed up its users to its online credit service called PayPal Credit, without their knowledge and permission.

PayPal Credit's old name was Bill Me Later - a credit line where PayPal users used it to pay for items online. The CFPB also accused PayPal of disregarding its users' payment method and instead directed them to its own PayPal Credit. Billing disputes were also mishandled by the company.

CFPB Director Richard Cordray issued a statement saying that the case sends a clear message that his agency is doing its job in protecting the welfare of consumers whether in real time or online.

PayPal has agreed to pay $15 million in the form of refunds to its customers and $10 million more for the civil penalties. PayPal is also directed to improve the way it discloses the terms of PayPal Credit to its users.

It is said that PayPal will not admit nor it will deny that it did any wrongdoing and the settlement does not mean that PayPal violated the law.

Customers who are qualified for the refund need not to contact the company since PayPal will call them according to the CFPB.

The settlement could not have come at a worse time for the California-based company as PayPal has plans to separate from its parent company eBay in the later part of this year. The recent settlements is said will surely raised concerns from investors since PayPal is planning to launch its initial public offering (IPO).

The settlement will first need the approval of a judge and once given the go signal, Paypal has two months to submit a written list of the customer affected including the amount due.

TagsPayPal, PayPal Credit, Bill Me Later, eBay, refund, cfpb, Consumer Protection, technology, online payment