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Sellers Caught in the Middle of Etsy and PayPal

Sellers are caught in the middle of two companies, Etsy and PayPal, and have said they’ve gotten few answers over missing funds. EcommerceBytes has been following the problem since May 12th and has also received cryptic answers from the two companies, but it appears the issue began as early as April for some users.

The lack of information from Etsy and PayPal is troubling to sellers, with neither company taking responsibility for the root cause of the problem. In addition, it’s unclear if all payments have been restored to sellers’ accounts.

While there were several threads going back as far as April, this thread started on May 4 chronicles the problem and includes several updates from Etsy.

The thread began with reports from sellers such as this one: “PayPal told my customer that her payment went directly to Etsy rather than to my account. We’ve both talked to PayPal now but are still waiting to hear back from Etsy. And it was marked Paid here on Etsy and in her PayPal Account, but the money just never made it over to mine.”

Etsy acknowledged the problem on Monday, May 11th, and 2 days later, said the issue was resolved. But the problem continued, and on Friday, Etsy posted another message saying the issue had been resolved that day.

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A seller told us on Friday her buyer had just gotten refunded from Etsy for a transaction in April that had never made it into her account. We reached out (again) to Etsy spokesperson Nikki Summer asking if Etsy had been holding onto sellers’ funds in its account, and how that was possible.

She replied late on Friday, “We know how important it is for our sellers and buyers to have their transactions accurately recorded, and we take that responsibility seriously. As soon as we learned of this, we immediately alerted PayPal, who worked diligently to fix the underlying issue. We’re continuing to work with PayPal to ensure all parties are properly credited. We’re so sorry for any inconvenience or concern. If sellers or buyers have any questions, they can reach out to support@etsy.com.”

At that point, Etsy began reaching out to sellers who had posted on the thread and contacted PayPal on their behalf. But there’s no indication that sellers who experienced the problem but did not post on that particular thread have had their problem resolved.

We also asked PayPal for answers again on Friday, including specific questions about the cause of the problem, when sellers should expect to receive their missing funds, and why some PayPal customer service reps were blaming Etsy for the problem. A spokesperson’s response was basically to say the issue was resolved, and he declined to address specific questions.

The email we received on Friday from a seller said she had only discovered the issue that day thanks to her customer who noticed their payment to the seller had been reversed. “I went to look in my PayPal acct and could not find the transaction not even under “reversals”. I contacted Etsy and still have not heard from them 5 hours later so far! I called PayPal and they said there is no record of my receiving that payment and when they checked my customer’s account, they said it shows that the money went directly to Etsy.”

The customer made the payment via PayPal to the seller in April and received the reversal on Friday. The seller had been unaware of the problem because her Etsy account showed the buyer had paid. And it’s concerning that rather than ending up in the seller’s account, the reversal went to the buyer, with no communication to the seller informing them of the missing funds.

At this point, her biggest concern is having to review all of her transactions to see if it happened with any other customers. “I checked deposit records from Etsy and there are long gaps between dates when I know I was receiving sales. What a waste of my time! How many customers will I have to ask for re-payment? They received their purchases. If anyone has any answers I would love to know what they are.”

The seller also doesn’t want to have to check their PayPal account every time they get an order.

“As of today May 17, 2015 I still have not heard from Etsy,” she said.

Some sellers writing on the Etsy thread said they remain concerned about accepting PayPal for Etsy transactions, and a seller told EcommerceBytes on Sunday she was concerned about the “many bugs going on right now with Etsy.”

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Ina Steiner
Ina Steiner
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.