On September 14, 2026, the rules for arguing with PayPal changed. The company replaced the “Agreement to Arbitrate” in its U.S. user agreement with a new section called “Dispute Resolution,” and the difference is not cosmetic. The arbitrator is different, there is now a mediation step before anyone can file, there are new rules for what happens when thousands of people file at once, and any dispute that escapes arbitration belongs to a courtroom in New York County.
PayPal posted the change on September 1 and made it effective two weeks later; the agreement itself now reads “Last updated on September 14, 2026.” If you kept using your account after that date, you accepted it. That is how the PayPal user agreement works, and it says so in the clause on unilateral changes: the company can change the terms, it will post a notice, and it is on you to check.
Our sweep caught the document moving twice — on September 3, after the notice went up, and again on September 15, once the new text was live. This is what those two reads found.
Who this actually affects
Everyone with a U.S. PayPal account is bound by the new section. But it is not a change that matters equally to everyone.
If you use PayPal to buy a pair of shoes twice a year, the dispute section is theoretical. If money lands in your account — you sell on eBay or Etsy, you invoice clients, you run a store with PayPal Checkout, you get paid for freelance work through it — the dispute section is the only lever you have when PayPal limits your account, holds a payout, or reverses a payment. PayPal’s own agreement says a balance in your account is not FDIC-insured and earns no interest. Getting that balance back when something goes wrong is, precisely, a dispute.
This update sits on top of PayPal’s 2025 tightening of the rules on using a personal account for business. Sellers are the population PayPal has been writing for lately. Read this as written for you.
What changed, clause by clause
You now have to mediate before you can file
The old clause asked for an informal attempt to resolve things. The new one builds a process. You send PayPal a Notice of Dispute; the two sides then go through mediation — the text describes a first and a second mediation, with PayPal paying the mediator’s fee — before either of you can start an arbitration or go to small claims court. A notice that misses a required element can send you back to the start, so do not rely on a summary, including this one: read the dispute clause on the document and follow it exactly.
There is an interesting door at the end of that corridor. If mediation fails, the text gives you an option to take that dispute out of arbitration and into court instead, by sending a signed written notice within 30 days after the second mediation ends — and gives PayPal a matching option to do the same. Whether you would want a Manhattan courtroom over a JAMS arbitrator is a question for a lawyer; the point is that the choice now exists inside the process.
The arbitrator is now JAMS, not the AAA
For years PayPal’s arbitration ran through the American Arbitration Association. The new section names JAMS, under its Streamlined Arbitration Rules and its Mass Arbitration Procedures. Both are private providers; both publish their own rules and fee schedules; both have consumer minimum standards that keep the company from charging you the full cost.
The switch is procedural rather than a change in what you are owed. But two things are worth knowing. First, anything you read before September about “how PayPal arbitration works” is out of date. Second, the demand itself got more formal: it must include a copy of your Notice of Dispute, a certification that you completed the process, and your original handwritten signature, sent by certified mail to a PayPal legal address in Omaha. Email will not do.
There are now rules for mass arbitration
This is the part of the update that tells you why it exists. Consumers have learned that a company that forces everyone into individual arbitration can be swamped by thousands of filings at once, each carrying a fee the company has to pay. Companies have answered by writing “mass arbitration” procedures into their clauses: rules that batch similar claims, run a handful of test cases first, and pause the rest.
PayPal has now added “Additional Procedures for Mass Arbitration.” If you are one of many people with the same complaint, your claim may be grouped and delayed under those rules rather than heard on its own timeline. Whether that is fair is an argument for lawyers; what it means for you is that the “file and wait” calendar is longer than it was.
Disputes outside arbitration go to New York County
Anything that is not arbitrated and not taken to small claims court now belongs, “to the extent permitted by law,” exclusively to the state and federal courts in New York County, New York. If you are in Oregon and you have a claim that falls outside the arbitration agreement, that is where it is heard.
What to do this week
Read the new section, not the old one. The current read of PayPal’s agreement links every point to the clause it came from. Start with dispute resolution and unilateral changes.
If you accepted the agreement in the last 30 days, decide now. The opt-out survived the rewrite: you can opt out of the Arbitration Agreement by following its Opt-Out Procedure and sending a written notice postmarked no later than 30 days after the date you first accepted. That is a postmark deadline, not a “we received it” deadline, and it only exists for new accounts. If you are inside it, here is how the letter works. Opting out does not affect your account.
Watch the document. PayPal changes its agreement several times a year and expects you to check its Policy Updates page. You will not. Watch it here instead and you get an email the day the text moves, with the grade and the diff.
What did not change
The rest of the agreement — fees, holds, reserves, seller protection, the rules on what you can sell — was not part of this update. Those clauses still say what they said in August, and PayPal can still change fees and close your account on the terms already in the document. The September update is narrow. It is about what happens when you and PayPal disagree, and it was written by one side.