DOJ forces PayPal to scrap DEI business initiative in $30M settlement
The Justice Department said PayPal agreed to a roughly $30 million settlement after allegations that its diversity, equity, and inclusion program unlawfully favored businesses based on race and national origin. As part of the deal, PayPal will waive processing fees on about $1 billion in transactions for eligible small businesses under a new “Small Business Initiative.”
The examination centered on PayPal’s “Economic Chance Fund,” launched in 2020 to invest in black- and minority-owned businesses following George Floyd’s death. DOJ officials said the program may have violated the Equal Credit Opportunity Act because race and national origin were used as eligibility criteria without being linked to fixing specific past discrimination.
PayPal did not admit wrongdoing, and DOJ said it made no formal finding that paypal violated federal law. PayPal said it will proceed with a revised initiative,and the agreement also includes requirements such as appointing an oversight director,assessing small-business financial needs nationwide,training staff on compliance,and providing annual reports. The settlement is presented as part of the management’s broader crackdown on corporate DEI programs.
The Justice Department announced Tuesday that PayPal agreed to a roughly $30 million settlement to resolve allegations that the company’s diversity, equity, and inclusion investment initiative illegally favored businesses based on race and national origin.
Under the agreement, PayPal will waive processing fees on roughly $1 billion worth of transactions for eligible small businesses as part of a newly created “Small Business Initiative,” according to the settlement agreement announced by top DOJ officials in President Donald Trump‘s administration.
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“This Department of Justice is delivering on President Trump’s vow to root out illegal DEI from every corner of corporate America,” acting Attorney General Todd Blanche said in a statement. “American corporations are on notice: you will face our aggressive enforcement if you use race or national origin to discriminate against qualified Americans.”
The initiative will apply to veteran-owned businesses and companies engaged in farming, manufacturing, and technology, including artificial intelligence, regardless of race or ethnicity.
The settlement stems from a federal civil rights investigation into PayPal’s “Economic Opportunity Fund,” a program launched in 2020 following the death of George Floyd that aimed to invest hundreds of millions of dollars into black-owned and minority-owned businesses and communities.
The Justice Department said the earlier program potentially violated the Equal Credit Opportunity Act because it used race and national origin as eligibility criteria without being tied to remedying specific instances of past discrimination.
Assistant Attorney General Harmeet Dhillon said the settlement reinforces the administration’s broader effort to eliminate race-conscious corporate programs.
“With this settlement, PayPal agrees that race and national origin should play no part in determining which small businesses deserve its investment and financial support,” Dhillon said.
PayPal did not admit wrongdoing as part of the agreement, and the DOJ said it made no formal findings that the company violated federal law.
A PayPal spokesperson said the company plans to move forward with the revised small business program “to infuse American small businesses with even more economic opportunity.”
In addition to the fee waivers, PayPal agreed to appoint a director to oversee the initiative, conduct a nationwide assessment of small-business financial needs, train employees on compliance with the Equal Credit Opportunity Act, and provide annual reports to the federal government.
The settlement marks another major action under the Trump administration’s expanding crackdown on corporate diversity, equity, and inclusion programs. Like many S&P 500 companies, PayPal began boasting about its DEI efforts in the late 2010s and into the 2020s, specifically following national racial justice protests that erupted in 2020.
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According to data gathered by the Washington Post, PayPal saw an influx of more than 10 mentions of DEI across its corporate platforms in 2021, before dropping to few or no mentions of DEI by 2024.
Last month, the DOJ also announced a separate $17 million settlement with IBM over allegations the company used race- and sex-based employment preferences tied to federal contracting requirements.
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