PayPal Inc. agreed to waive roughly $30 million in processing fees to resolve a federal fair lending investigation into a race-based investment program the Justice Department said favored black and minority-owned businesses.
The agreement requires PayPal to create a new Small Business Initiative that excludes criteria based on race, national origin, or other protected characteristics. PayPal will waive processing fees on $1 billion worth of transactions for eligible American small businesses that are veteran-owned or operate in farming, manufacturing, or technology.
Acting Attorney General Todd Blanche said the settlement advances President Donald Trump’s push to eliminate illegal “Diversity, Equity, and Inclusion” practices from corporate America.
“This Department of Justice is delivering on President Trump’s vow to root out illegal DEI from every corner of corporate America,” Blanche said. “American corporations are on notice: you will face our aggressive enforcement if you use race or national origin to discriminate against qualified Americans.”
Justice Department Says PayPal Fund Favored Minority-Owned Businesses
The investigation focused on PayPal’s Economic Opportunity Fund, which the company announced in 2020 as part of a broader commitment to support black businesses and minority communities.
PayPal created the fund to invest in black and minority-owned businesses and gave applicants preference based on race, color, and national origin, the Justice Department said. The department also said the program did not seek to remedy any specific documented instances of past discrimination.
The Equal Credit Opportunity Act bars creditors from discriminating against credit applicants based on race, color, religion, national origin, sex, marital status, age, receipt of public assistance income, or because an applicant exercised rights under the Consumer Credit Protection Act.
Assistant Attorney General Harmeet K. Dhillon of the DOJ’s Civil Rights Division said the agreement reinforces equal access to business financing.
“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. “The Department will use the full range of its enforcement authorities to eliminate discrimination and ensure that all Americans have an equal opportunity to grow their small businesses.”
PayPal Denies Liability
The settlement agreement includes important limiting language.
The agreement states that the United States “has not made any determinations or findings” that PayPal violated the Equal Credit Opportunity Act or any other federal law related to the Economic Opportunity Fund. It also states that the agreement does not amount to an admission or finding by either party and that PayPal “expressly denies any liability” related to the fund.
A PayPal spokesperson said the company has helped small businesses access digital financial tools for more than two decades and is “excited to launch the Small Business Initiative,” Reuters reported.
New Small Business Initiative Will Face Justice Department Review
The agreement requires PayPal to appoint a director for the Small Business Initiative, conduct a financial needs assessment of American small businesses, submit initiative plans to the federal government, train employees on compliance with the Equal Credit Opportunity Act, and file annual progress reports with the Justice Department.
The new initiative must remain viewpoint and content-neutral, according to the agreement. PayPal may not grant preferences or impose restrictions based on political ideology or party affiliation.
President Donald Trump’s Justice Department has also scrutinized race-based policies in business, education, public employment, and government contracting.
Similar federal actions have already reached public agencies and local governments. The Dallas Express previously reported that the Justice Department opened investigations into the City of Austin and California’s Environmental Protection Agency over policies allegedly tied to race- and sex-based employment preferences.
The policy shift has also affected Dallas, where city officials moved to restructure several social-service and contracting programs after new federal rules restricted the use of DEI criteria in government-funded initiatives.
For DFW businesses, the PayPal agreement shows that the federal government is applying anti-discrimination law to corporate grant and investment programs, not just traditional lending decisions or public-sector hiring.
Small business owners in Texas who use PayPal processing services may want to monitor the new Small Business Initiative, though the Justice Department release and settlement agreement did not specify a public application process.
