PayPal logoPayPal is the latest corporation to join Public Citizen’s “rogues gallery,” a continually updated list of corporations that insert forced arbitration clauses in their terms of service with consumers.

These terms effectively force its customers to surrender their time-honored right to seek redress in court, and require them to resolve disputes in secret arbitration, where PayPal dictates the rules for the process.

PayPal’s new terms, which become effective on November 1, also deny users their right to band together in class actions, which are useful to seek accountability against companies who cheat large numbers of consumers out of individual small amounts of money. Most consumers are not going to seek to recover for small losses on their own. Meanwhile, by forbidding class actions, corporations can reap the benefit of their misconduct.

PayPal, however, gives users the ability to “opt-out” of the arbitration terms. Consumers must opt out by mail, which is quite ironic given the fact that every other consumer transaction with PayPal takes place online, with a simple click of a button.

Here are the opt-out rules:

New PayPal users must opt-out no later than 30 days after the date they accept the terms of service for the first time. Current PayPal users must mail a notice of opt-out postmarked no later than December 1, 2012, to PayPal, Inc., Attn: Litigation Department, 2211 North First Street, San Jose, CA 95131.

We’ve prepared a sample letter for PayPal customers who want to opt out (the sample is a Word document). In the notice, each user must:

1) state that you do not agree to the “Agreement to Arbitrate”
2) include your name, address, phone number,
3) include the email address(es) used to log in to the PayPal account(s) to which the opt-out applies, and
4) sign the opt-out Notice.

(This suggestion is not intended as legal advice.)

Take note, you may have to opt out of the arbitration clause again. PayPal terms state that: “Opting out of this Agreement to Arbitrate has no effect on any previous, other, or future arbitration agreements that you may have with us.” What this means is that the company really doesn’t want you to opt out. But we recommend you do it anyway.

Like eBay’s terms, what PayPal is doing is “unjust, but not illegal,” as we recently told Tech Crunch.

Why are PayPal, eBay and other corporations changing these terms right now?

Consumerist’s Chris Morran sums it up nicely:

The use of mandatory binding arbitration clauses has skyrocketed since the 2011 U.S. Supreme Court ruling in favor of AT&T, which had argued that the inclusion of a tiny little arbitration clause in a massive contract that no one ever reads was sufficient for nullifying customers’ right to join together in a class-action lawsuit. Instead, each individual customer must go through the prescribed arbitration process.

Earlier this month, we launched a campaign against similar terms and opt-out requirements in the terms of service recently updated by eBay (which, incidentally, owns PayPal).

Visit our campaign page to find out how to opt out of eBay’s terms and join the fight against giant corporations using this sort of fine print to take away consumers’ rights.

Flickr photo via Methodshop.

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