The Consumer Financial Protection Bureau (CFPB) filed a complaint and proposed consent order in federal court against PayPal, Inc. for illegally signing up consumers for its online credit product, PayPal Credit, formerly known as Bill Me Later.

The CFPB alleges that PayPal deceptively advertised promotional benefits that it failed to honor, signed consumers up for credit without their permission, made them use PayPal Credit instead of their preferred payment method, and then mishandled billing disputes.

Under the proposed order, PayPal would pay $15 million in consumer redress and a $10 million penalty, and it would be required to improve its disclosures and procedures.

“PayPal illegally signed up consumers for its online credit product without their permission and failed to address disputes when they complained,” said CFPB Director Richard Cordray. “Online shopping has become a way of life for many Americans and it’s important that they are treated fairly. The CFPB’s action should send a signal that consumers are protected whether they are opening their wallets or clicking online to make a purchase.”

PayPal Inc., a California-based company, offers a line of credit known as PayPal Credit that consumers can use to pay for online and other purchases.

PayPal Credit operates like other forms of credit — consumers make purchases using it as a form of payment and then repay the debt over time.

As with credit cards and other forms of credit, consumers using PayPal Credit may incur interest, late fees, and other charges. Consumers often enroll in PayPal Credit while purchasing a good or service online or while creating a PayPal account.

Since 2008, PayPal has offered PayPal Credit to consumers across the country making purchases from thousands of online merchants, including eBay.

The CFPB alleges that many consumers who were attempting to enroll in a regular PayPal account, or make an online purchase, were signed up for the credit product without realizing it.

The company also failed to post payments properly, lost payment checks, and mishandled billing disputes that consumers had with merchants or the company. Tens of thousands of consumers experienced these issues.