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PayPal Payout Pending

PayPal, the payment platform owned by eBay, is taking steps to pay out millions of dollars to settle a class action suit.

On Friday, the company sent e-mails to present and former account holders to notify them of the impending windfall. "If you opened a PayPal account between October 1999 and January 2004, you may be entitled to a payment from a class action settlement," the e-mail read.

In early 2002, Roberta Toher and Jeffrey Resnick filed separate lawsuits against PayPal, claiming that the company is prone to restricting, freezing or closing customer accounts without good reason; the cases were later consolidated and turned into a class action suit in the United States District Court for the Northern District of California, San Jose Division.

The suit claimed that PayPal failed to supply customers with information about dispute resolution procedures and didn't follow proper procedures when investigating complaints.

PayPal denied wrongdoing and also disputed whether the provisions of the Electronic Fund Transfer Act apply to it. But it settled the suit in June 2004, avoiding a trial.

According to the settlement, PayPal will pay $9.25 million into a settlement fund, to be paid out to members of the class action and the attorneys. The company also was required to change its business practices, which it says it's already done.

The attorneys are asking the court for $3,332,500, plus reimbursement of expenses of up to $135,000, or around 37 percent of the $9.25 million settlement.

Those who actually went through PayPal's dispute resolution process will get the lion's share of the portion of the expected $5.78 million that actually goes to account holders; any account holder can get a split of $1 million reserved for them.

Those interested in getting in the class action can sign up at a special Web site that the company set up.

The Court must give final approval to the terms of the settlement. A hearing is set for September 24, 2004.