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EcommerceBytes-NewsFlash, Number 2931 - November 08, 2012 - ISSN 1539-5065    3 of 5

Guide to State Laws Governing PayPal, Money Transmitters

By Kenneth Corbin
EcommerceBytes.com
November 08, 2012




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Online sellers frequently object to holds that payment processors place on funds bound for their account. As frustrating as unexplained holds are - sellers often complain that they occur with transactions where there is no evidence of fraud or other foul play - there remains considerable confusion about what recourse, if any, merchants have.

The truth is that when it comes to holds on funds, payment processors like PayPal, Amazon and Google are generally regulated at the state level, where they are classified as money transmitters. Often, they are governed by the same laws that set the rules for other financial-services products, such as travelers checks and money orders.

Click here to see EcommerceBytes Guide to State Laws Governing Money Transmitters.

In all states where money transmitters are regulated, they are required to register and obtain a license. The licensing stipulations often require money transmitters to maintain a baseline level of net worth, and some include language describing the expectation that the company's executives adhere to certain standards of conduct. States that regulate money transmitters also have certain financial reporting requirements, and generally insist on notification when certain events occur, such as a bankruptcy, felony conviction of a high company officer or material changes in the information provided on the license application.

PayPal maintains a list of its state licenses here. Amazon's list of state licenses can be found here.

When it comes to holding funds, the rules vary from state to state, just as many other provisions of the laws do. Some states, such as Florida, stipulate a maximum amount of time that a money transmitter may hold funds (10 business days, in Florida's case), while many others do not. And some states - New Mexico and South Carolina - do not regulate money transmitters at all.

But in states with regulations on the books, officials organized in the state's banking or finance department oversee the entities that process online payments. These authorities are designed as agents of consumer protection, and they want to hear from customers who feel their payment provider is unfairly holding their funds, even if they don't have a rule stipulating a maximum hold time.

Ecommerce Bytes has analyzed each state's law governing money transmitters, identifying the maximum hold time provided in the statute or regulations, if one is specified. The chart also includes contact information for state officials and links to the relevant agency and statute. Visit the guide to state laws governing PayPal and other money transmitters to see your state's requirements.

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About the Author
Kenneth Corbin is a freelance writer based in Washington, D.C. He has written on politics, technology and other subjects for more than four years, most recently as the Washington correspondent for InternetNews.com, covering Congress, the White House, the FCC and other regulatory affairs. He can be found on LinkedIn here .

About the author:

Kenneth Corbin is a freelance writer based in Washington, D.C. He has written on politics, technology and other subjects since 2007, most recently as the Washington correspondent for InternetNews.com, covering Congress, the White House, the FCC and other regulatory affairs. He can be found on LinkedIn here.

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