Bill Me Later button got one woman in trouble

January 14, 2011 7:20:33 PM PST
A lawsuit is pending against a new company owned by eBay. It's over an online method of payment that is growing in popularity. This new payment option is appearing on more and more shopping websites these days. The lawsuit claims the pay system is catching consumers unaware and that they're about to be hit with heavy finance charges.

April Colombu thought she'd surprise her fiancé with a quick trip to New York, so she went online, reserved seats on JetBlue and clicked "bill me later" -- figuring she'd cancel if he couldn't go.

"Work wouldn't let him off, so I canceled, printed out my cancelation, thought nothing more of it," said Colombu.

She thought nothing of it until a surprise three months later. Out of the blue, Colombu received a bill for that flight she never took. It turned out, when she clicked "bill me later,'' she wasn't dealing with JetBlue, she was entering a loan agreement with a separate company called Bill Me Later and it was charging big late fees and interest.

"I called Bill Me Later and said, 'Are you aware that I canceled the flight within 24 hours and that I never flew?'" said Colombu.

But Bill Me Later said she still owed the money. While Colombu tried to straighten things out, she was charged late fees of $39 per month, plus 19.99 percent interest. After a year and a half, the finance charges totaled more than the plane fare -- $649 in fees and interest for tickets costing $623.

"We allege that the company Bill Me Later is lending at illegal interest rates as well as charging illegal late fees in violation of California law," says Attorney Jeff Friedman.

Friedman filed a class-action lawsuit against Bill Me Later and its parent companies the online auction giants eBay and PayPal.

The lawsuit claims Bill Me Later violates California consumer protection laws by charging more than 10 percent annual interest and imposing excessive late fees. The court has dismissed the claims about illegal interest rates and is still considering the claims about excessive fees.

"People are absolutely shocked when they open their bill and they've made purchases for $20 or $30 and they are seeing late fees that equal their outstanding balance," says Friedman.

Bill Me Later, like PayPal, appears on many shopping websites as a payment option. Consumers enter name, address, four social security digits to be approved for instant credit.

"What we believe is that it's not very clear to the consumer that the interest rates will hit this high," says Friedman.

In a statement, eBay said, "Many consumers choose Bill Me Later because there is no annual fee ...and for fee and no charge as long as the bill is paid on time." eBay also said, "The allegations in the lawsuit are baseless."

It says California's consumer protection laws don't apply to Bill Me Later because the actual lender is a bank, governed by federal laws that allow higher interest and fees.

The lawsuit however, claims Bill Me Later is simply using the bank's charter as a sham to avoid California's laws that protect consumers. The suit includes many online complaints from consumers saying the fees doubled the original cost of their merchandise. One consumer said he sent a $45 bunch of flowers, but it wound up costing $200.

As for Colombu, from now on she'll get billed now, not later.

"We'll book online and we will pay as we," says Colombu.

As for jet blue, it says that when Colombu clicked Bill Me Later, she purchased her airline ticket and it is not refundable. It says she received a credit for a future flight that expired after one year, although Colombu says she doesn't remember seeing such a credit. JetBlue also says it has not received other complaints about Bill Me Later.