Consumer complaint received 2026-01-23 00:00:00
Product: Money transfer, virtual currency, or money service — Mobile or digital wallet
Issue: Unauthorized transactions or other transaction problem — 
Company: Paypal Holdings, Inc
State: NV

Complaint narrative:
I setup a subscription payment through PayPal for XXXX and selected my PayPal balance, PayPal debit card and my bank debit card at checkout. On XX/XX/year> the payment was due. I had {$15.00} available in my PayPal balance on XX/XX/year>, which I authorized to be used only as part of a complete transaction.The remaining portion of the payment was rejected by my backup payment method. I did not authorize PayPal to use my bank account for an e check. PayPal attempted to debit my bank anyway, and my bank XXXX XXXX rejected that attempt as unauthorized. Because the full payment failed, the transaction should have been rejected in full. Instead, PayPal paid XXXX using PayPals own funds and applied the {$15.00} PayPal balance, even though the transaction was incomplete.

I contacted PayPal and requested that the transaction be rejected as it should have been, and that the {$15.00} be returned to my PayPal balance since the payment was not completed. I explained that I do not authorize PayPal to extend credit or advance funds and that I only use PayPal for funds already in my account. A PayPal manager refused and stated they would not reject or correct the transaction and would continue to treat it as paid. He claim a subscription agreement authorizes paypal to do that. The manager stated that I needed to resolve the issue directly with XXXX. However, XXXX did not cause this issue. The issue is PayPals decision to complete a failed transaction, apply my PayPal balance, attempt an unauthorized bank debit, and misrepresent the funding source. PayPal is the payment processor and is responsible for correcting its own transaction records. Referring me to the merchant does not resolve PayPals error. That's not in PayPal user agreement. 
PayPal has breached the agreement. I contacted PayPal multiple times and requested that they correct their system to reflect that my bank ( XXXX XXXX ) rejected the transaction and that the payment was not authorized. I requested that PayPal reverse the unauthorized portion of the transaction, return the {$15.00} taken from my PayPal balance, and reject the payment rather than treating it as paid. PayPal refused and stated they would keep the transaction marked as paid because I am a good standing customer. I informed PayPal that I do not have any credit agreement, PayPal Credit, or authorization allowing them to extend credit or attribute the payment to my bank. A PayPal manager stated they would not change the record. PayPal has previously informed me that I am not eligible for PayPal Credit. Based on this, I have always used PayPal only for funds available in my account and selected payment methods. Because PayPal has stated I would not be extended credit, I did not and could not consent to any credit advance or extension in this transaction. PayPals decision to complete a failed payment anyway is inconsistent with its own position regarding my ineligibility for credit and was done without my authorization.

PayPals conduct raises concerns under multiple consumer protection laws and contractual obligations. 
Electronic Fund Transfer Act and Regulation E ( 12 CFR 1005 ) : I did not authorize PayPal to initiate an electronic funds transfer from my bank account. XXXX XXXX rejected the attempted debit as unauthorized. Despite this, PayPal attempted to complete the transaction and misrepresented the funding source.

Unauthorized Extension of Credit / Deceptive Practices : PayPal completed a failed transaction using its own funds without my consent and without any PayPal Credit or other credit agreement in place, then refused to reverse or reject the transaction.

Unfair, Deceptive, or Abusive Acts or Practices ( UDAAP ) : PayPal continues to falsely represent that my bank funded the transaction after the bank rejected it, refused to correct known inaccurate records, and instructed me to resolve the issue with the merchant rather than correcting its own processing error.

Breach of Contract : PayPal breached its User Agreement by substituting payment methods without authorization, completing a transaction that should have been rejected, and failing to act in good faith by maintaining false transaction records after notice of the error.

Federal consumer protection laws are mandatory and non-waivable. Arbitration is not a forum for negotiating compliance with federal law, nor can it excuse or legitimize violations of federally protected rights.

Company response to consumer: Closed with explanation