You should place it in the config folder. Otherwise create a serviceprovider that publishes your config file to the config directory.
Not 100% sure, but I don't think you can call config on a file outside the config folder itself. How about storing your configuration variables inside the .env file? Then you could just make a providers.php file in the config folder, and reference the variables there.
.env
...
PAYPAL_USERNAME=xxx
PAYPAL_PASSWORD=xxx
PAYPAL_SIGNATURE=xxxx
...
config/providers.php
return array(
'paypal' => [
'username' => env('PAYPAL_USERNAME', 'xxx'),
'password' => env('PAYPAL_PASSWORD', 'xxx'),
...
]
);
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