eBay faces a federal probe of its Bill Me Later payments service

From: InternetRetailer.com

125 retailers in the Top 500 Guide offer the payment option.

Zak Stambor, Managing Editor

The U.S. Consumer Financial Protection Bureau  is investigating eBay Inc.’s Bill Me Later division for potential consumer abuses related to its practices, the online marketplace disclosed last week in its U.S. Securities and Exchange quarterly earnings filing. Bill Me Later is a subsidiary of eBay subsidiary PayPal.

The federal agency, created in 2011, regulates consumer protection of financial products and services. It informed eBay of the investigation Aug. 7. The online marketplace bought Bill Me Later in 2008. The Consumer Financial Protection Bureau did not immediately respond to a request to explain the specifics of the investigation and eBay provided no details.

“EBay, PayPal and Bill Me Later take consumer protection very seriously and are cooperating with the CFPB’s investigation,” says an eBay spokeswoman.

Bill Me Later lets shoppers borrow money to make online purchases. It is offered as a payment option by 125 of the largest 500 North American e-retailers, according to Top500Guide.com. That’s up slightly from 121 merchants in the 2012 Top 500 Guide.

Shoppers using Bill Me Later typically don’t pay interest for a six-month promotional period. If the consumer doesn’t repay the loan within that promotional window, the interest that accrued during that initial time period —loans carry a 19.99% annual percentage rate—is added to the shopper’s loan balance, along with a $25 late fee.

EBay notes in the filing that Bill Me Later is not a bank, nor is it another type of financial institution authorized to make loans. Instead, it works with Comenity Capital Bank to issue credit to the consumer and pay the merchant. EBay then buys the loan from the lender.

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