PayPal Settles US Discrimination Probe and Revises Small Business Program

US authorities accused PayPal of favoring businesses belonging to ethnic minorities through criteria deemed discriminatory in accessing financing. The fintech company will now launch a new initiative for small businesses that does not use criteria based on race or national origin.

The U.S. Department of Justice has closed an investigation into PayPal related to a program supporting minority-owned businesses, which U.S. authorities deemed discriminatory. The agreement requires the company to waive approximately $30 million in transaction fees as part of a new initiative aimed at small businesses.

PayPal resolves US investigation into its minority-focused funding program and shifts to a new small business initiative under federal agreement

At the center of the investigation was the Economic Opportunity Fund, launched by PayPal in 2020 following protests over the killing of George Floyd. The fund was part of a broader $530 million plan created to support Black and underrepresented minority businesses and communities , including through investments in startups led by African-American entrepreneurs and partnerships with financial institutions active in minority communities.

According to the Department of Justice, the program violated the Equal Credit Opportunity Act, the U.S. law prohibiting discrimination in access to credit, because it used criteria related to race and national origin to select beneficiaries. Authorities argue that such criteria are unlawful if they do not address specific, documented cases of prior discrimination.

The agreement reached with PayPal is part of the Trump administration’s broader offensive against DEI (diversity, equity, and inclusion) policies, which has intensified in recent years following the 2023 Supreme Court ruling against affirmative action policies in American universities. In recent months, several US companies have come under scrutiny for internal programs deemed discriminatory against other ethnic or social groups.

Under the agreement, PayPal will launch a new “Small Business Initiative” that will not be able to use criteria based on race, national origin, or other legally protected characteristics. The company will also waive approximately $30 million in fees on transactions valued at approximately $1 billion for eligible small businesses, including agricultural, manufacturing, technology, and veteran-owned businesses.

The agreement also includes a series of additional obligations for PayPal , including the appointment of a dedicated manager for the new initiative, an assessment of the needs of American small businesses, internal training programs on anti-discrimination rules in access to credit, and the submission of annual reports to federal authorities.

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(Featured image by Marques Thomas via Unsplash)

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