PayPal has added itself to the ever expanding list of companies adding a mandatory arbitration provision to its  Terms of Service.  Many PayPal users received this email from PayPal yesterday:

PayPal recently posted a new Policy Update which includes changes to the PayPal User Agreement. The update to the User Agreement is effective November 1, 2012 and contains several changes, including changes that affect how claims you and PayPal have against each other are resolved. You will, with limited exception, be required to submit claims you have against PayPal to binding and final arbitration, unless you opt out of the Agreement to Arbitrate (Section 14.3) by December 1, 2012. Unless you opt out: (1) you will only be permitted to pursue claims against PayPal on an individual basis, not as a plaintiff or class member in any class or representative action or proceeding and (2) you will only be permitted to seek relief (including monetary, injunctive, and declaratory relief) on an individual basis.

PayPal has also continued the recent trend of allowing consumers to “opt-out” of the arbitration provision.  But this “opt outs” are not always what they appear to be.  In the case of eBay, the consumer can “opt out” and retain the ability to sue in court, but only by reading the small print do you learn that the only place you can bring suit is in Salt Lake County, Utah.  

PayPal’s opt out right is no better.  What the Policy Update failed to mention is that if you opt out and bring your claim in court, that court must be located in Santa Clara County, California or Omaha,  Nebraska.   

So which is more likely to discourage consumes from filing claims?  An arbitration provision that requires you to bring a small claim without the benefit of similarly situated consumes to share the costs and risks with you or  the need to travel to file your claim in Nebraska or Southern California.?  Heads PayPal wins, tails  the consumers  lose.