PayPal Sued over Cybersecurity Negligence

Online payment processor PayPal is facing a proposed class action lawsuit for a data breach that exposed the personal information of nearly 35,000 users in December 2022. The lawsuit, filed on March 2, 2023, accuses PayPal of negligence for failing to protect its users' personal data.

The plaintiffs claim that "PayPal knew or should have known that its computer systems and data security practices were inadequate to safeguard the Private Information of Plaintiff Pillard and members of the Nebraska state subclass, to deter hackers, and to detect a data breach within a reasonable amount of time. PayPal knew or should have known that the risk of a data breach was highly likely."

They claim that PayPal breached its duty of care to consumers by failing to comply with Federal Trade Commission (FTC) guidelines and NIST Cybersecurity Frameworks. That ultimately led to the exposure of sensitive information, such as names, addresses, Social Security numbers, tax identification numbers, and dates of birth.

According to PayPal's notice to affected users on January 18th, the company became aware that the attack occurred between December 6th and the 8th. PayPal assured its users that there was "no evidence" suggesting that user login credentials were obtained from PayPal's systems. Rather, it's believed that the details were obtained from previous data breaches affecting other companies, and users had recycled this login information across multiple accounts, including PayPal.

However, the plaintiffs argue that the company should have implemented stronger security measures to prevent the breach from occuring in the first place.

Bloomberg Law noted that "the complaint levels nine individual charges against PayPal, including unjust enrichment, breach of contract, and negligence per se". The plaintiffs allege that they suffered various harms because of PayPal's negligence and seek unspecified monetary damages and equitable relief, such as funding for lifetime credit monitoring and identity theft insurance.

PayPal has faced increasing criticism for its handling of sensitive data and failure to protect its users' privacy. This new lawsuit adds to its continued scrutiny, and if the case proceeds as a class action, it could potentially represent thousands of affected individuals seeking damages.