The U.S. Department of Justice (DOJ) announced that it has reached a settlement with PayPal to resolve an investigation into a DEI-related investment program set up by the digital payment giant to support Black and minority-owned businesses – described by the DOJ as “discriminatory” – with the deal including an agreement by the company to waive fees worth $30 million for a new small businesses-focused initiative.

The investigation formed part of a series of anti-DEI actions by Republican politicians in the U.S. over the past several years, following a Supreme Court ruling in 2023 that struck down Harvard’s use of race-based affirmative action criteria in college admissions, which led to increased scrutiny over the legality of key aspects of corporate DEI policies.

The pace of the anti-DEI campaign has picked up steam since the election of President Trump, starting with an Executive Order signed by Trump after taking office eliminating DEI preferencing in federal contracting, and requiring contractors to affirm that they “will not engage in illegal discrimination, including illegal DEI.” In the past few months, federal agency The Equal Employment Opportunity Commission (EEOC) has launched an investigation into Nike, based on allegations that the company discriminated against white workers through its DEI programs, and initiated a lawsuit against the New York Times alleging that the company violated laws prohibiting race- and sex-based discrimination by passing over a white male employee for a promotion due to its DEI policies.

Acting Attorney General Todd Blanche said:

“This Department of Justice is delivering on President Trump’s vow to root out illegal DEI from every corner of corporate America. American corporations are on notice: you will face our aggressive enforcement if you use race or national origin to discriminate against qualified Americans.”

The DOJ investigation centered on PayPal’s Economic Opportunity Fund, launched by the company in 2020 as part of a series of commitments to allocate $530 million to aimed at expanding economic opportunities for Black and underrepresented minority businesses and communities. At the time, PayPal said that the initiative would include “bolstering the company’s relationships with community banks and credit unions serving underrepresented minority communities, as well as investing directly into Black and minority-led startups and minority-focused investment funds,” with the fund seeking to “support and strengthen Black and underrepresented minority businesses and communities over the long term, and designed to help drive financial health, access and generational wealth creation.”

Under the new settlement, PayPal has agreed to launch a new Small Business Initiative, which the DOJ said “excludes criteria based on race, national origin, or other protected characteristics,” with the company also agreeing to waive approximately $30 million of processing fees as part of the initiative for eligible small businesses that are veteran-owned or engaged in farming, manufacturing, or technology.

The DOJ said that under the settlement, PayPal will also 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 U.S., provide training to employees on the Equal Credit Opportunity Act (ECOA), and report on the initiative annually.

In a statement provided to ESG Today following the announced settlement, a PayPal spokesperson said:

“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.”