PayPal has agreed to pay $25 million to settle allegations that it illegally signed up and billed tens of thousands of consumers for its online credit product.

In a civil suit filed Tuesday, the U.S. Consumer Financial Protection Bureau said PayPal enrolled consumers in PayPal Credit without their knowledge or consent, made them use the product instead of their preferred payment method, and failed to honor promotional offers it had advertised. The promotions included a $5 or $10 promised credit toward purchases.

As part of a proposed judgment and consent order, PayPal will pay $15 million in redress to victims and a $10 million civil penalty.

“PayPal illegally signed up consumers for its online credit product without their permission and failed to address disputes when they complained,” CFPB Director Richard Cordray said in a news release. “Online shopping has become a way of life for many Americans and it’s important that they are treated fairly. The CFPB’s action should send a signal that consumers are protected whether they are opening their wallets or clicking online to make a purchase.”

PayPal has offered PayPal Credit, formerly Bill Me Later, to consumers making purchases from thousands of online merchants, including eBay, since 2008.

According to the CFPB, PayPal often automatically enrolled consumers in PayPal Credit when those consumers were signing up for a regular PayPal account or making purchases. Other consumers were enrolled while they tried canceling or closing out of the application process.

“Many consumers were enrolled in PayPal Credit without knowing how or why they were enrolled and discovered their accounts only after finding a credit-report inquiry or receiving welcome emails, billing statements, or debt-collection calls for amounts past due, including late fees and interest,” the bureau’s suit says.

In addition, the CFPB alleged that consumers used PayPal Credit even when they intended to use another method of payment bacause PayPal automatically set or preselected PayPal Credit as the default payment method for all purchases.

The proposed settlement requires PayPal to, among other things, give clear disclosures during the PayPal Credit enrollment and checkout process.

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