Flawed Customer Services have weighed heavily on PayPal, with the Federal authorities seeking $25 million in penalties on account of defective credit service, deceptive advertising, and faulty payment method and for signing up customers for its credit service without their knowledge.

On Tuesday, PayPal, a subsidiary of eBay Inc., in a proposed settlement with the Consumer Financial Protection Bureau (CFPB), has agreed to the consent order, which is now pending before a judge in U.S. District Court in Maryland.

The CFPB announced that the proposed settlement will see the eBay subsidiary refunding customers for a total sum of $15 million and pay a $10 million penalty, along with improvements in the company's policies and disclosures.

Richard Cordray, CFPB Director stated, "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".

The issue arose when the company's lending service, called 'Bill Me Later', was scrutinized by the CFPB since 2013. PayPal has also been charged of illegally signing up many consumers for its credit service without their knowledge, and then mismanaging the customer accounts and failing to deliver promised promotional benefits.

Corday added that PayPal failed to post payments properly, lost payment checks and mishandled billing disputes. Additionally, payments were compulsorily made through PayPal Credit, even in cases where consumers had chosen another payment method.

However, a PayPal representative has stated that PayPal Credit takes consumer protection very seriously and continually improves its products and communications to ensure a superior customer experience. It was also asserted that the focus of PayPal is on ease of use, clarity and of providing high-quality products that are useful to consumers and are in compliance with applicable laws.