eBay’s Bill Me Later Under Investigation

eBay's Bill Me Later Under Investigation

eBay’s Bill Me Later Under Investigation

WASHINGTON—The Consumer Financial Protection Bureau is probing a lending business owned by eBay Inc. that has been criticized for allegedly imposing excessive finance charges.

The online marketplace disclosed in a regulatory filing on Friday that it received a civil subpoena in August from the U.S. consumer finance watchdog about a financing service known as “Bill Me Later.”

The service, acquired by eBay’s PayPal division in 2008, allows consumers to borrow money to finance purchases at dozens of online retailers, including Wal-Mart Stores Inc., Apple Inc., and several airlines. Customers generally don’t have to pay interest on the loan as long as it’s paid in full at the end of a six-month promotional period. If it isn’t repaid within that period, customers are charged interest accrued over the entire life of the loan.

An eBay spokesman said eBay and PayPal “take consumer protection very seriously, and are cooperating with the CFPB’s investigation.”

On its website, Bill Me Later said it offers loans at an annualized interest rate of 19.99% and an initial late fee of $25 and subsequent fees of $35. Since late August, loans have been extended by Comenity Capital Bank, a unit of Dallas-based Alliance Data Systems Corp. that evaluates borrowers applications.

A spokesman for Alliance Data declined to comment.

The CFPB subpoena comes as part of the agency’s scrutiny of so-called “deferred interest” financing, particularly credit cards issued by retailers.

In a report issued earlier this month, the CFPB raised concerns about such financing, saying it “can sometimes be more expensive” than putting the balance on an existing credit card, because the interest rate is often much higher.

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