Scam Alert: PayPal Credit, Synchrony Bank Playing Hide and Seek With Special Financing Purchase Offers

by Fearless Rick Gagliano, editor, Money Daily

     When it comes to banking in general, most Americans (Europeans and Asians, as well, we might assume) are skeptical about institutional sincerity and customer care. After all, it was just a decade ago that some of the biggest banks in the world were caught up in a messy triage with overzealous rating agencies and absent regulators that sent global finance to its knees.

Since the Great Financial Crisis (GFC) of 2008, there have been more than few dubious practices entertained by major banks. Wells-Fargo comes to mind, whose employees, paragons of virtue all, no doubt, opened accounts in people's names without their knowledge, among other scandalous activity.

Certainly, the annals of banking history are rife with examples of financial trickery, pandering and assorted crimes and misdemeanors carried on by monied institutions, all in the name of profit and greed.

With the advent of the internet age, banking has become more streamlined, varied and accessible to anyone with a smartphone, tablet or computer. Offerings from non-bank institutions abound. The leader among transactional vendors being PayPal, the the online business-consumer, peer-to-peer middleman company founded in part by Elon Musk, Max Levchin, and Peter Thiel made its name by offering online accounts to anybody who could "fog a mirror" and with a few nickels to rub together.

With an IPO in 2002 and subsequent acquisition by online auctioneer eBay, PayPal became the de facto standard for online payments. Reacting to a squabble from investor Carl Ichan, eBay divested itself from PayPal in 2014 and since then PayPal has been a stand-alone company. It was late in 2008 and early 2009 that PayPal, after acquiring the company known as Bill Me Later, began to offer credit to consumers. Aptly named PayPal Credit, a complete credit and debiting system aimed at the massive consumer audience worldwide was established.

Among their many marketing tactics, PayPal Credit offered a wildly popular option called special purchase financing, bearing zero interest for six months on purchases of $99 or more if paid in full during the allotted time. That promotion still exists today, but the present and recent past are where the issues of dubious claims and incomplete disclosure of terms begins.


Enter Synchrony

PayPal partnered with consumer credit giant, Synchrony Financial, to offer credit cards to PayPal account holders in 2004 and took the relationship even further in 2017, when it sold $5.8 billion in consumer credit receivables to Synchrony Financial, effectively yielding control over the operation of PayPal Credit to Synchrony.

It was around that time in 2017 that how payments on PayPal Credit accounts were allocated was altered. When parent company PayPal was operating PayPal Credit, allocations of payments on accounts were handled roughly as anything over the minimum required payment on the entire account was then allocated to the special purchase financing.

For example, a PayPal Credit account holder, with, say, $1000 existing outstanding balance and a minimum monthly payment of $40, makes a purchase for $500 and takes advantage of the Zero Interest for Six Months if Paid in Full Special Financing Purchase. When the account holder makes a payment, say $100, $40 would cover the outstanding minimum credit payment and the remaining $60 would be applied to the Special Financing Purchase. That was pretty standard, and logical.

No more. Now, when that same account holder (or any account holder) with an existing outstanding balance makes the same transaction, the entirety of his or her payment goes toward the account balance and NONE is allocated to the Special Financing Purchase until the final 60 days of said Special Financing Purchase. In the meantime, interest accrues on the Special Financing Purchase at the full amount, in our case, $500. If the Special Financing Purchase balance is not paid off in full at the expiration of the six months, all of the accrued interest becomes part of the account balance due.

Nowhere in the terms and conditions of Special Financing Purchase is this made obvious or even mentioned to consumers. It is only revealed when (as our Editor found out) one questions PayPal Credit customer support by phone or by online chat. The response to why this devious practice is maintained, is that PayPal Credit and/or Synchrony Financial uses best practices in allocating funds in this manner. It's almost a certainty that said best practices are what's best for the bank, not the consumer, and here's why:

Beyond the failure to disclose this in-house allocation rule, the bank (Synchrony, in this case), has interest accruing on that Special Financing Purchase (remember, ZERO interest for six months if paid in full) at the full amount of the purchase, not at a lesser amount if account holder payment allocations were done the old way, in a moral, reasonable, and logical manner. It also sets up the casual account holder for a shock, when he/she looks at the Special Financing Purchase and realizes that with two months left to pay off the Special Financing Purchase at Zero Percent he or she still owes the full amount.

Unless one is careful enough to scrutinize the monthly statements generated by PayPal Credit, this poor or mis-allocation of payments - done in the name of best practices - can easily go unnoticed, especially if one makes automatic or automated monthly payments, a practice which all banks and credit card companies strongly encourage.

There is some relief, maybe.

Calls to PayPal Credit on this or any credit account issue result in referral to Synchrony. The supervisor with which Money Daily spoke on Thursday, November 7, elicited the response that payments can be allocated to the Special Financing Purchase if one calls Synchrony at 1-844-373-4961 and requests the payments be directed according to the wishes of the account holder, and NOT in the manner usually employed by the BANK (Synchrony). Synchrony says they will honor such requests and process them, but allocations will not show up on online accounts for "a few days."

Additionally, none of this would apply to anybody who isn't carrying a balance (the wise and fortunate 20-30% of account holders) with PayPal Credit and the only purchase made was a Special Financing Purchase. In that case, all of the monthly payment would be applied to the deferred interest financing because that's all there is.

Therein lies the problem. Instead of doing business in a morally correct, logical, reasonable, responsible, and customer-friendly manner, Synchrony Financial has chosen the usual path of 21st century bankers: deceit, incomplete disclosure, "gotcha" terms and "special financing" with in-house rules designed to maximize the bank's profitability, the customer be damned. To do business in what would normally be considered the "best practice" for the consumer, the account holder has to go out of his or her way to make a special phone call, jump through hoops, listen to all of the recordings and prompts to get what should have been done automatically. This is, after all, the age of high-speed communications and the internet, not Ma Bell's twisted copper.

If this practice isn't illegal, it would be no shock today. Financial institutions have been afforded wide latitude in their dealings with the public, to encourage loans, credit, and debt in a wide array of products and offerings.

In a world in which sanity, fairness, and reasonableness would be the norm, this kind of operation might be considered fraud at worst, bait-and-switch at best. But today, in our world of glorification of all things money and financial, where the dollar sign is revered and worshipped, it barely registers a "lookie here." It's a sad commentary on the state of morality and banking when gigantic, faceless institutions are able to run roughshod over consumers. It goes against the public interest, an interest, incidentally, that nobody - from bankers to consumer credit agencies to politicians - seems to be even remotely interested in protecting.

So, what do you think? Is this practice just run-of-the-mill deceit and standard underhandedness by PayPal Credit and Synchrony Financial, or does it rise to or border on criminal mischief, something banking regulators or congress should address? Comments are open, and are moderated.

Anybody experiencing issues such as those outlined above should call Synchrony at 1-844-373-4961 and complain loudly.

Be polite, but overall, be careful.

UPDATE: Found a thread on the PayPal boards dealing with this very issue. Many are fuming about it.
See here: https://www.paypal-community.com/t5/PayPal-Credit/PayPal-Credit-Promotional-Payment-Allocation/m-p/1553309/highlight/false#M8392

UPDATE 11/27/19: This issue will remain, as the actions of Synchrony are guided by Regulation Z. See the updated blog post:
https://moneydaily.blogspot.com/2019/11/weekend-wrap-paypal-creditsynchrony.html

At the Close, Thursday, November 7, 2019:
Dow Jones Industrial Average: 27,674.80, +182.24 (+0.66%)
NASDAQ: 8,434.52, +23.89 (+0.28%)
S&P 500: 3,085.18, +8.40 (+0.27%)
NYSE Composite: 13,395.55, +43.98 (+0.33%)

Is The Economy Changing? What To Buy Now

Since Donald Trump won the presidential election roughly a month ago, the reaction on Wall Street has been, in a word, enthusiastic.

The investing class is betting that Trump will have a positive impact on corporate bottom lines and all indications are that he will try to slash US corporation tax rates and repatriate corporate money from abroad to pump back into the US economy.

But, it's not at all that simple. Stocks are at record highs already, so, if you're invested in a 401k or other plan at work, sit tight. If you're one of the three dozen or so active individual investors out there still standing after years of mauling and manipulation, you have to notice that p/e ratios are at pretty high atmospheric levels.

Stocks are great if you have the patience and appetite for the ups and downs of active markets, but buying at these levels would seem a bit on the foolhardy side. There's likely to be a pullback if the business cycle still has any tethers to reality. Besides, the FOMC is going to raise interest rates, making bonds, gold and silver and other fixed investments appear more palatable.

Who knows? Banks might actually be offering 4-5% interest on savings in a few years, though it's a dubious call. A return to normalcy in markets and credit would cause the national debt to skyrocket immediately, as in "overnight," and that's not something a president Trump (or any other president for that matter) wants on his historical resume.

So, what's a bargain? As usual, the central banks and their cronies (yes, despite the Donald, there's still plenty of crony capitalism to go around. One is not going to destroy Rome in a day or even one term.) put the kibosh on the precious metals just after the election and they don't seem to be relenting at this point.

The world has changed, but it's probably too early to tell what effects those changes are going to have on businesses or investing or sectors or bonds or anything. Give it a little time, but bear in mind that the FOMC is meeting on the 13th and 14th of December and the odds are very, very good that they're going to hike the federal funds rate another 25 besis points or 0.25%, bringing the effective rate to 0.50-0.75.

Now, there's nothing special about those rates except that they're still historically low. The world is still recovering from the devastation from the crimes of 2008 that were never reconciled. It's unclear whether the Trump administration is going to get tougher on Wall Street shenanigans or allow them free reign, but either way, there's still a price ot be paid for recklessness. The trick is to know when the piper shows up and nobody is that good.

Until then, silver still looks like the bargain of the century, though leaning towards outright purchases of solar panels and the associated technology is still a viable plan.

At the bottom of it all, Americans should be investing in their own businesses. Run from home or a storefront or on a shoestring, we may be entering a time of unfettered capitalism from the ground up.

Go for it.

Closing Prices for Thursday, 12/01/16:
DOW: 19,191.93, +68.35 (0.36%)
NASDAQ: 5,251.11, -72.57 (-1.36%)
S&P 500: 2,191.08, -7.73 (-0.35%)
NYSE Composite: 10,821.85, -16.61 (-0.15%)

Fade the Banks: BofA, JP Morgan, Citi, Goldman Sachs Under Scrutiny

We found significant deficiencies that represent not only unsafe and unsound practices, but a breakdown in way customers are treated...

That was the statement made by acting Comptroller of the Currency John Walsh in regards to the Consent Order directed at the nation's sixteen largest banks, issued by his and other regulatory agencies yesterday.

Initial reaction was that the ruling was more a wrist-slapping by the regulators, but Walsh came out in its defense, as did others, such as FDIC's Sheila Bair.

The order includes provisions for the banks to undertake a complete review of their foreclosure practices and rectify any errors that may have affected consumers negatively. Additionally, the banks are instructed to pursue a “comprehensive, independent review” of their foreclosures from 2009 and 2010, institute a system for a single contact person for each foreclosure or mortgage modification action. The agencies - which include the Federal Reserve and the Office of Thrift Supervision - will closely monitor the banks' progress, look more closely at their practices and determine appropriate fines for each firm.

These actions, apart from the voluminous litigation already begun and sure to follow, plus the conclusion of 50 state attorneys general is likely to cost the banks a good deal of time, effort and money. When all is said and done, revealing their openly fraudulent practices and procedures will have two major effects: 1) they will not be so prone to play fast and loose with mortgage money, and 2) housing loans will become even more difficult to get.

On the surface these outcomes may be more of a detriment to recovery in the housing market, but homes will at least become more affordable. Making it difficult to qualify for a loan, the cost of residential housing will fall accordingly until some balance is achieved in the market. After that, homeowners can begin going after tax assessments and "fair value" assessments which are now likely more than 40% too high in many hard-impacted communities.

While the process will be riddled with starts and stops, the long-range outcome should be more affordable housing for lower and middle class people, without onerous tax implications. we may be turning a corner after all.

One other note of interest in terms of bank-hating worldwide was Senator Carl Levin's well-directed attack on Goldman Sachs today:

The Senator says he wants the Justice Department and the Securities and Exchange Commission to examine whether Goldman Sachs violated the law by misleading clients who bought collateralized debt obligations without knowing the firm was betting they would fall in value.

Levin believes that not only did Goldman Sachs' executives delude their clients and break their fiduciary trust, but also lied to congress when brought in front of the Financial Inquiry panel.

Heck, as our link confirms, even FoxNews is pushing this agenda forward, but it remains to be seen if Attorney General Eric Holder will come out of hiding and actually pursue prosecution. If not, maybe it's time to indict the AG himself, because Levin and other members of congress have rightly identified Goldman Sachs and their brethren in the "big banking" world as the criminals who caused the financial meltdown of 2008 and sank the economy.

Watch Senator Levin tear into Goldman Sachs' Daniel Sparks:



Wall Street's reaction to this background noise was all-too-typical behavior by the very same banks that have grown in size over the past 2 1/2 years: they turned a perfectly plausible market downturn into marginal gains. The Dow was down 107 points before the pimps and pumpers jacked it up to a 14 point gain by the closing bell.

As expected, in the face of bad news, the financial gamblers could only cover their tracks, put on happy faces and say "all is well." Perhaps these thieves will be singing another tune when a few of them are perp-walked from their ivory towers in full view of the public which has grown to hate them and all they stand for.

All we've seen from the likes of the biggest banks in America is denial of wrongdoing, obfuscation, outright lying, and complete, unabashed manipulation of all markets they touch - bonds, equities and commodities - not to mention the under-the-table mortgage securitization, CDO and debt swap markets.

They are the most ruthless criminals on the planet, completely without conscience, and hopefully, lawmakers are beginning to catch on to their evil ways. Corners must be turned; equity and law must prevail.

Dow 12,285.15, +14.16 (0.12%)
NASDAQ 2,760.22, -1.30 (0.05%)
S&P 500 1,314.52, +0.11 (0.01%)
NYSE Composite 8,374.16, +6.85 (0.08%)

Not to belabor the obviously-fragile nature of the markets, advancing issues outdid decliners oddly enough, 3611-2838. However, new lows overtook new highs on the NASDAQ, 50-49, but new highs remained stubbornly ahead of new lows on the NYSE, 53-23, though the margin has shrunk considerably over the past few session. Volume remained purely a function of lack of interest.

NASDAQ Volume 1,728,764,375
NYSE Volume 4,249,863,500

Perhaps in response to the continuing turmoil, or maybe because the "Sultans of Swap" were too busy shedding documents to keep a handle on them, commodities took another robust turn positive. Crude oil gained another $1.00 during the NYMEX session, to close at $108.11, but gold and silver took home the trophies. Gold rocketed to another in a series of all-time highs, gaining $16.80, to $1,472.40 and silver exploded up $1.43, to $41.66, though both were higher in foreign markets, with gold at $1475.70 and silver romping higher at $42.14 per ounce.

Perhaps, more than turning corners, financial markets are meeting their eventual end, with paper currencies under attack from the growing howls of the general public worldwide, unhappy with rising prices and stagnant wages, governments with too much power and not enough nerve, honesty or will to do right.

These explosive moves in the precious metals are not to be taken lightly. The global Ponzi scheme of fiat money is being put to a severe test and is failing badly, today's activity just another warm-up for the real fireworks coming when the US congress considers whether or not to raise the debt ceiling, something they've done 174 times before.

From the ominous sounds emanating from the Tea Party wing in the House of Representatives, these could be the final days not only for the dollar as a reserve currency, but for every form of money not backed by some tangible asset, of which gold and silver are the obvious choices.

After the bell, Google announced its results for the first quarter of 2011, and from the looks of how it was trading after hours, investors were none too pleased that they missed their earnings per share estimate by three cents.

Even though Google topped revenue expectations, the stock was down nearly 30 points in the after-hours, a decline of more than five per cent.

That does not bode well for tomorrow's opening, which of course will have as an added bonus, the earnings release of the bank everyone loves to hate, Bank of America. Friday ought to be a doozy of a day.

New Regs for Financials; TARP Repayment Sparks Midday Rally

The Obama administration announced a number of proposed regulatory changes which, if enacted, would materially impact the overall functioning of the US economy. The Office of Thrift Supervision would be replaced by a new Consumer Financial Protection Agency and the Federal Reserve would have a larger role in the supervision of the US economy.

To some - including myself - giving the Federal Reserve any more control of the economy is a step in the wrong direction. The Federal Reserve, far beyond any other government or commercial body, bears the brunt of any blame for current economic conditions. After all, they are the issuers of the currency.

Requiring banks and mortgage brokers to offer simplified, clear, concise mortgage documentation is a step in the right direction. Imposition of a national usury law would be even more helpful. The recommendations now fall into the lap of congress to debate.

On the markets, Dan Gallagher has an excellent piece on the record-breaking supply of new issuance in May and speculative analysis of the condition.

S&P lowered credit ratings on 18 banks including Wells Fargo and Capital One, among some of the largest. The first banks began to repay TARP money to Treasury and began negotiating terms to purchase warrants from the government. 10 banks are reportedly repaying $68 billion. While this is truly good news, it is dilutive to the banks. That understanding sent financials to substantial losses on the day.

Stocks began to hit their best stride in late morning, reaching highs of the day shortly before 2:00 pm, but the advances were spare and not broadly-based with only 5 of 12 sectors sporting gains. By day's end, only the NASDAQ ended in positive territory. As far as snap-back rallies are concerned, this had to rank as one of the more disappointing. Besides the NASDAQ, this is the third straight day of losses for major indices. Not only was the midday rally cut short, but the usual late-day bounce failed to materialize approaching the close.

Dow 8,497.18, -7.49 (0.09%)
NASDAQ 1,808.06, +11.88 (0.66%)
S&P 500 910.71, -1.26 (0.14%)
NYSE Composite 5,864.55, -22.21 (0.38%)

Advancing and declining issues were nearly even, with losers leading winners, 3292-3003. New lows surpassed new highs for the 4th straight day, 70-32. Interestingly, volume was at its highest level in the past 8 sessions, suggesting that there's more dumping of stocks than would be apparent and that most of the buying was concentrated in tech and health care.

NYSE Volume 1,316,102,000
NASDAQ Volume 2,561,073,000

Commodities spent the day without much direction, but eventually ended mostly higher. Crude oil gained 56 cents, to $71.03, while gas prices in the US increased for the 50th straight day. Gold finished $3.90 higher, to $936.00. Silver gained another 15 cents, closing at $14.28 the ounce.

May CPI showed an increase of just 0.1%, a far slighter rise than analysts expected, furthering the deflationary argument. Stripping out the gains for gasoline and adjusting for the margin of error, consumer prices were net negative for the month.

Another sign of the times is today's bankruptcy filing by retailer Eddie Bauer (EBHI) and bid agreement to sell the remaining assets to a private equity firm.

For the optimistic crowd, here's Charles Schwab Chief Investment Advisor Liz Ann Sonders declaring that the recession is over. We'd like to believe her, but isn't she really longing to say that the worst of the recession may be over? See for yourself.