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11th Circuit Upholds|Judgment in PayPal Case

ATLANTA (CN) - The 11th Circuit rejected a collections agency's appeal of damages awarded to a PayPal user for unfair debt-collection practices.

I.C. System argued that Barry Oppenheim's claim should have dismissed on summary judgment because it was never chasing an actual "debt."

Oppenheim had sold his laptop computer to a buyer through Craigslist, and told the buyer to direct payment to his personal account on the online payment service, PayPal.

After the transaction went through, Oppenheim transferred the funds to his personal bank account from PayPal. But weeks later, PayPal demanded its money back because the payment it received from the laptop buyer was actually fraudulent.

Under the PayPal user agreement Oppenheim signed to create an account, he authorized the company "to 'reverse' a transaction if, among other reasons, a payment is invalidated by the sender's bank or if the sender did not have authorization to transfer the funds."

Oppenheim agreed to "bear the risk" of any potential payment reversals, according to the agreement.

When Oppenheim refused to pay, PayPal hired I.C. System to collect. Oppenheim sued the collection agency in Florida federal court, and took home $1,000 in statutory damages, after the debt collector harassed him with three months of phone calls.

The appeals court rejected I.C. System's bid for summary judgment, and the Atlanta appeals court affirmed, finding that PayPal was owed a "debt."

I.C. System also argued that its debt-collection practices are not at issue since Oppenheim's transaction was a commercial one. The unsigned appellate opinion found, however, that the transaction constituted a personal, consumer debt.

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