By Sadie Gurman
PayPal agreed to forgo approximately $30 million in transaction fees to end a Justice Department probe into allegations that the financial services company had adopted unlawful preferences for minority-owned businesses.
Justice Department officials had been investigating whether the company violated a federal civil rights law that prohibits creditors from discriminating against applicants based on race. The department's probe targeted PayPal's $530 million plan to support Black and minority-owned businesses, which the company created in 2020, shortly after the killing of George Floyd by a police officer prompted a nationwide conversation about racial inequality.
Justice Department officials said the settlement requires PayPal to waive processing fees for $1 billion of transactions -- worth roughly $30 million -- for small businesses that are owned by veterans, as well as businesses involved in farming, manufacturing or technology.
PayPal didn't admit wrongdoing as part of the settlement. The company said in a statement it was excited "to infuse American small businesses with even more economic opportunity."
The settlement is part of a broader Trump administration push to root out diversity initiatives in American corporations.
"American corporations are on notice: you will face our aggressive enforcement if you use race or national origin to discriminate against qualified Americans," acting Attorney General Todd Blanche said.
The Justice Department is conducting a number of civil probes under the umbrella of the False Claims Act, embracing the argument that holding a federal contract while still considering diversity when hiring is, in effect, fraud against the government that entitles it to recoup potentially millions of dollars.
That was the theory behind a first-of-its-kind settlement with IBM last month. The company agreed to pay the federal government more than $17 million to settle allegations that it failed to comply with antidiscrimination requirements in contracting by considering diversity in employment decisions.
PayPal is separately facing private litigation over its funding program for minority startups.
An Asian American venture-capital investor sued PayPal in January 2025, accusing the company of illegal discrimination by earmarking investments for Black- and Latino-owned operations.
PayPal moved to dismiss the suit, arguing it contained numerous flaws, including that the plaintiff never formally applied. The litigation is ongoing.
Write to Sadie Gurman at sadie.gurman@wsj.com
(END) Dow Jones Newswires
May 12, 2026 09:45 ET (13:45 GMT)
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