PayPal amp; State Regulations

Licensing Issues
Louisiana has sued PayPal for operating as an unlicensed bank.
States such as Louisiana and New York have charged PayPal with operating as an unlicensed bank. In 2002, Louisiana demanded that PayPal suspend services to state residents until it was licensed by the state as a bank. PayPal has since resolved these licensing issues by being licensed as a money transmitter the same as Western Union.
Dispute Resolution and Arbitration
California has sued PayPal over violating state law governing business practices and dispute resolution.
In March 2002, PayPal was sued in California for violating state law with its business practices and dispute resolution procedures. A formal settlement was agreed to in June 2004 in which PayPal agreed to change their dispute resolution practices and paid $9.25 million to resolve the matter. In August 2002, PayPal was accused of violating California law with parts of its user agreement and arbitration process and was made to change them to comply with state law.
Client Rights and Liabilities
New York ordered PayPal to disclose customer rights and liabilities.
In March 2004, the New York Sate Attorney General ordered PayPal to more accurately disclose client's rights and liabilities. The company complied.