PayPal settles ‘DEI’ case with Trump’s Department of Justice

• Key insights: PayPal settled a “DEI” case with the Department of Justice for $30 million. 
• What’s at stake: The government cited a PayPal program that focused on Black and minority-owned small businesses as illegally having a racial preference. 
• Forward look: As part of the settlement, PayPal announced a new Small Business Initiative that includes education and financial assistance. 

The Trump administration’s pressure on financial services designed for Black and minority communities has reached PayPal, which has agreed to a $30 million settlement tied to a former program that supported Black and minority-owned businesses. 

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The $30 million will go toward fee-free payments for other eligible small businesses that are veteran-owned or engaged in farming, manufacturing or technology, according to the Department of Justice. Additionally, PayPal will launch a Small Business Initiative that will exclude “criteria based on race, national origin or other protected characteristics.” 

PayPal’s settlement reflects a broader attempt by the administration to dismantle financial investments and other corporate programs it deems as “woke” or that pursue “diversity, equity and inclusion.” While the term “woke” has no legal definition, the administration contends the programs and strategies illegally use racial preferences. 

“With this settlement, PayPal agrees that race and national origin should play no part in determining which small businesses deserve its investment and financial support,” said Assistant Attorney General Harmeet K. Dhillon of the Justice Department’s Civil Rights Division, in a release. “The Department will use the full range of its enforcement authorities to eliminate discrimination and ensure that all Americans have an equal opportunity to grow their small businesses.”

In addition to fee waivers, PayPal also agreed to designate a director of the Small Business Initiative, conduct an assessment of the needs of American small businesses and determine how PayPal can best support them, submit plans and proposals for the initiative to the United States government, provide training to employees on the Equal Credit Opportunity Act, and report on the initiative annually.

Prior to the settlement, the DoJ was investigating the Economic Opportunity Fund. PayPal launched the fund in 2020 to invest in Black and minority-owned businesses, with the DoJ  saying the settlement covers $1 billion in transactions tied to the program. For context, PayPal processed $936 billion in total payments in 2020 and more than $1.5 trillion in 2025. Former PayPal CEO Dan Schulman launched the Economic Opportunity Fund, which is no longer active. 

“For more than two decades, PayPal has helped small businesses start, scale and thrive by expanding access to digital financial tools. We’re excited to launch the Small Business Initiative to infuse American small businesses with even more economic opportunity,” a PayPal spokesperson told American Banker in an email. PayPal did not admit to wrongdoing in its settlement.

In a separate release, PayPal this week announced a “new global goal” to reach 25 million people and small businesses with the resources and training tied to the digital economy. PayPal also reported that it has provided access to more than $30 billion in capital through more than 1.4 million loans and cash advances to over 420,000 business accounts globally in the company’s history, expanding access to business funding in “underserved communities” where traditional financing options may be limited. 

“Small businesses are the backbone of the global economy, and at PayPal, we believe digital technologies can help level the playing field,” said Amy Bonitatibus, chief corporate affairs and communications officer at PayPal, in a release. “By equipping entrepreneurs with the tools, training, and access they need to innovate and compete, we can help strengthen economic opportunity and resilience in communities around the world.” 

PayPal is the latest in a series of financial institutions to face scrutiny tied to investments in minority communities. As a result, banks have reduced references to language around DEI and similar programs. Goldman Sachs, for example, used the word “diversity” six times in its 2026 proxy statement, down from 39 times in 2024. Goldman also changed its “One Million Black Women” financial inclusion program to include other groups.

Banks are also reducing diversity as a factor of compensation. Only 8% of banks had DEI-linked annual bonus programs in 2024, down from both 2022 and 2023, when 53% of the banks linked some portion of their executives’ yearly bonuses to meeting specific DEI goals.

And in early 2026, the administration banned Fannie Mae and Freddie Mac from offering special-purpose credit programs for disadvantaged groups, with FHFA Director Bill Pulte referring to diversity initiatives as “nonsense.” Among other big technology firms, IBM recently settled a DEI claim with the DoJ for $17 million over hiring practices. Like PayPal, IBM denied wrongdoing.

“This illustrates how well-meaning programs by private corporations can still violate the law if they are not coordinated with a government program,” Aaron McPherson, a principal at AFM Consulting, told American Banker. “That said, I find it strange that the [PayPal] settlement calls for the transaction fee waiver to target farming, manufacturing, technology, or veteran-owned businesses. Why those specific categories? Operating in such a politically polarized environment is certainly difficult, as what is allowed changes drastically depending on who is in power.”

PayPal’s Small Business Initiative and DoJ settlement come at a challenging time for PayPal overall. The payment company, which recently hired a new CEO, has been reorganized into three units: checkout solutions under PayPal, consumer financial services under Venmo and merchant payment services and crypto under Braintree. There has also been speculation that Stripe may be interested in a potential acquisition of PayPal or its assets.

“The central debate remains: does PayPal have significant remaining competitive advantage either online or at the physical point of sale? We think not,” analysts from William Blair said in a research note. “Unlike the past, when security, e-commerce conversion, and data generated by the two-sided network distinguished its branded offering, these have either been commoditized or supplanted by more complete solutions, such as those offered by the networks. Further, we do not think PayPal can compete with next-generation tech stacks on conversion.”