EcommerceBytes-NewsFlash, Number 2658 - October 24, 2011     4 of 5

Lawyer Mulls Class Action Lawsuit over PayPal Funding Issue

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A law firm in West Virginia is investigating how its client ended up paying his bank tens of dollars in fees for a single eBay purchase using PayPal. Charles Rusty Webb of The Webb Law Firm said his client is a longtime buyer on eBay who set up his PayPal account with two funding sources so he could buy things easily online.

But when the client's primary source of funding was insufficient one month, PayPal failed to collect the funds from his secondary source, according to Webb. When his client opened up his bank statement the following month, he got an unpleasant surprise when he saw the fees his bank charged him.

PayPal had continued to ping the bank account that was associated with the client's account each day instead of using his credit card, which was set up as a secondary funding source, according to Webb, who said the bank charged his client fees for having insufficient funds each time PayPal pinged his bank account looking for the funds.

Webb believes his client may not be alone in his experience and has been collecting stories from other PayPal users through a form on his website at

He's conducting the investigation for a possible class action lawsuit against the company. Questions on the survey include: "Were you charged bank overdraft fees because Paypal did not use your back up funding source," "How many times did Paypal attempt to use your primary funding source even though your back up funds were sufficient," and "What was the total amount of bank fees incurred as a result of Paypal's reluctance to use your back up funding source."

Webb quickly discovered that PayPal users have a host of complaints about the service, and he said he was open to exploring other issues as well. "It seems like everyone has an issue with PayPal," he said, including the issue of PayPal's practice of freezing users' accounts.

EcommerceBytes is awaiting a response from PayPal regarding its policies on funding sources.

About the author:

Ina Steiner is co-founder and Editor of EcommerceBytes and has been reporting on ecommerce since 1999. She's a widely cited authority on marketplace selling and is author of "Turn eBay Data Into Dollars" (McGraw-Hill 2006). Her blog was featured in the book, "Blogging Heroes" (Wiley 2008). Follow her on Twitter at @ecommercebytes and send news tips to

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