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EcommerceBytes-NewsFlash, Number 2758 - March 12, 2012 - ISSN 1539-5065    2 of 5

eBay to Change Practices on PayPal 21 Day Holds

By Ina Steiner
March 12, 2012

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After a New York Times columnist investigated PayPal's 21-day holds policy on behalf of a reader, eBay said it would refine the model and would stop profiting from the practice, which the Times estimated affected as many as 250,000 eBay sellers.

William Ferrall from Nantucket wrote to the Times "The Haggler" column complaining of the 21-day hold that was placed on his eBay account. eBay told The Haggler it had placed the hold because Ferrall had taken some time off from selling last year and because the value of the merchandise was lower than what he had previously been selling.

After being contacted by the newspaper, eBay sent an email to Ferrall saying, "We didn't do right by you," and eBay VP Christopher Payne told The Haggler that it would "tinker with its filter so that people like Mr. Ferrall wouldn't be flagged in the future. We're constantly refining these models, and we're going to learn from this experience."

Payne also told the Times that sellers' frozen funds were held in an interest-bearing account, and said, "from now on, held money would be placed in a bank account that didn't bear interest."

Surprisingly, the New York Times said Payne told its columnist that the 21-day hold was introduced last fall, which is incorrect. eBay announced the 21-day hold policy in 2008, as reported in this February EcommerceBytes Newsflash article titled, "PayPal's 21-Day Hold Policy for eBay Sellers." Also see PayPal Explains Holds on eBay Sellers Accounts and eBay Confirms More 21 Day Holds from PayPal, both from 2009. The Haggler even points to an eBay forum where the second post states the 21-day hold policy "has been going on for years."

In fact, Fortune Small Business reported extensively about the PayPal holds in 2008, and wrote, "because PayPal has sole discretion over whether to freeze funds, sellers are upset about a perceived lack of accountability."

Three months ago, a reader from Florida reported he was able to get PayPal to release his funds after contacting his State Attorney General. EcommerceBytes discovered that businesses struggling to win prompt release of their funds have varying degrees of success when seeking recourse from state authorities depending on where they reside and their businesses' legal structure.

In a rare Saturday Announcement Board post, eBay Vice President of Merchant Development Michael Jones reacted to the New York Times column, writing in part, "When sellers experience a hold, we want to help them get access to their money as quickly as possible. That's why we ask sellers to ship their items quickly and provide tracking information. In the vast majority of these cases, when sellers follow these guidelines, their money is available within 3-6 days."

Readers were skeptical about eBay's response, with one seller writing, "A possible reason they are working so hard on putting a positive spin on this issue is so that it does not give retailers who might be considering the PayPal Mobile Payment program a reason to back away out of fear of a major public backlash."

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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 ina@ecommercebytes.com.

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