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EcommerceBytes-NewsFlash, Number 2984 - January 22, 2013 - ISSN 1539-5065    1 of 5

PayPal Holds Are Passe but Frozen Funds Are PR Problem

By Ina Steiner
January 22, 2013

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PayPal continues to get sporadic public relation "black eyes" for the way it handles frozen accounts - but only when the accountholders are high-profile or otherwise garner media attention.

The latest case in point is Jay Lake, a writer whose efforts to raise money via PayPal donations was stopped in its tracks when PayPal froze his account. (He explains more about the case on his blog.)

When the issue got mass attention on social media site Twitter nearly two weeks ago, PayPal reinstated his account and apologized. PayPal's spokesperson Anuj Nayer said at the time it had worked to reduce such situations from arising and said PayPal planned to do more to "open the kimono" so people could see how the process worked.

CNN picked up the story on Monday, and also wrote about another high-profile case involving a Kickstarter project.

Nayer told CNN that PayPal is fixing shortcomings with its resolution process, which requires accounts that are frozen to supply it with paperwork that doesn't apply to fundraisers. He promised that PayPal would fix "a lot of those pain points."

Nayar would not go into specifics about what would change, but said transparency was a major focus.

Meanwhile, eBay sellers and online merchants who use PayPal to process payments have to live with PayPal holds and rolling reserves.

A year ago, PayPal promised to adjust its 21-day hold practices after the New York Times scrutinized the policy on behalf of a reader. But it actually expanded its holds policy two months later.

PayPal's rolling reserve policy hits sellers hard, but the issue does not receive much mainstream media attention.

For those PayPal accountholders concerned about such policies and how they're enforced, EcommerceBytes created a chart of state agencies that deal with complaints about money transmitters.

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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