Bill Me Later, a registered trademark of I4 Commerce Inc. gets sold off to eBay (Nasdaq EBAY) In an effort to Avoid Sue Me Later.

By now, you’ve all probably heard that Bill Me Later was purchased today by eBay (www.ebay.com) for roughly $820 Million in cash, and over $100 Million in options. When I first read that, I offerred up my golf claps for them. They really dodged a bullet here. Confused? Let me explain.

Bill Me Later used to be called GoPin Inc. (www.gopin.com) and when that didn’t work out, they were renamed to I4 Commerce (www.i4commerce.com). Under I4 Commerce, they played with a LOT of cash, making this eBay purchase the definitive “fire sale”. Confused? Let me explain.

As of 2003, I4 Commerce had raised about $49 Million after 3 rounds of financing.

In March 2006, I4 Commerce went for another $27.4 Million in venture funding.

In December 2006, I4 commerce landed $640 Million in debt financing from Citigroup (NYSE C).

At the time they closed the $640 MM in debt financing, I4 Commerce had said it expected revenue of about $50 million for 2006. I4 Commerce had also said earlier that year that it expected to be profitable in 2006. After the financing, the company changed its tune to expecting to hit profitability in 2007, with “the delay stemming from the fast growth of its loan portfolio.” As of May 2008, Bill Me Later made some press talking about the consideration of an IPO, “once the stock market settles”.

So, here we have a company, Bill Me Later, which had $716 Million in cash, without turning a profit. Ebay swoops in and buys the company for $820 Million. What gives?

Well, if you look closely at Bill Me Later, the service is backed by CIT Bank (NYSE CIT). (not Citibank). CIT Bank (www.cit.com) is a very common backer for consumer financing across many big merchants, including Dell and Gateway. Let’s look at Dell (NASDAQ DELL) Financial Services specifically.

If you look up all the complaints regarding Bill Me Later, you’ll find a lot of consumers felt they were mislead by Bill Me Later’s practices. Well, just this May 2008, a New York  judge ruled that Dell (www.dell.com) Financial Services engaged in fraud, false advertising, deceptive business practices, and abusive debt collection practices. All the same complaints Bill Me Later is currently getting from consumers around the country.

So, guess who is next on the lawsuit chopping block? That’s right. And I can only imagine how much of Bill Me Later’s revenues would be found to be unlawfully earned.

So, bravo Bill Me Later. Good work selling your bait and switch to eBay, and good luck to eBay on settling those upcoming consumer lawsuits. With 6 month 0% financing being offered to consumers, I guess you’ve got a few months before you have to start paying everyone off.

It’s ok, all is good, wont matter much anyway to non stock holders, eBay admits that until 2011, this is a loss leader. I only imagine that like so many other buys, the leader part will never surface.