PayPal announced Thursday it has signed a voluntary agreement with 28 United States Attorneys General and has reached a preliminary settlement agreement with a proposed class of PayPal customers.

According to the settlement with the Attorneys General, PayPal will, among other things, shorten and streamline its user agreement and communicate more information relating to its protection programs. PayPal's announcement states it has already complied with many of the terms in the agreement.

To cover the cost of the investigation, PayPal will pay $1.7 million to the Attorneys General. The Attorneys General involved in this agreement represent Alabama, Arizona, California, Delaware, Florida, Georgia, Hawaii, Illinois, Indiana, Iowa, Louisiana, Maryland, Minnesota, Mississippi, Nebraska, Nevada, New Jersey, New York, North Carolina, Ohio, Oklahoma, Oregon, South Dakota, Tennessee, Texas, Vermont, Washington, and West Virginia.

PayPal also announced it has reached a preliminary settlement agreement with a proposed class of PayPal customers in an action pending in U.S. District Court in Brooklyn. The suit was filed in 2005 on behalf of a class alleging that PayPal did not clearly communicate information about its consumer protection programs related to specific types of transactions.

The settlement fund, which will be paid by PayPal, will total $3.5 million, less administrative costs and any amount awarded to plaintiffs' counsel by the court. The settlement will be presented for preliminary approval to the District Court in the coming months.

Under the terms of the settlement agreements, PayPal is not admitting any liability for any of the allegations in the two cases.