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Is PayPal Increasing Payment Holds on eBay Sellers?

EcommerceBytes has received several reports from longtime sellers that PayPal is placing holds on transactions – the first time in their selling history – and tell us the targeted transactions do not appear to be any more risky than the others they process.

Robert Lieberman, Managing Director of Glass Packaging Solutions, has been hit twice in the last 4 months. His company does the majority of its own payment processing through a merchant credit card account.

PayPal explains the practice of holds: “Funds availability is when we delay access to funds for a specified amount of time – usually 21 days or less” – and calls it a “common industry practice that helps maintain a safe environment for both buyers and sellers.”

It goes on to explain, “It ensures that if any problems with your orders arise, there’s money in your account to resolve them. The money still belongs to you – it’s just unavailable for withdrawal until we’re sure your buyer received their item in the condition promised.”

Lieberman is puzzled by the PayPal payment holds he’s encountered this year since he has a decent balance in his PayPal account from eBay and Etsy sales as well as from the small percentage of PayPal transactions that come in through the company’s own websites.

Ironically, PayPal has tried to get Lieberman to offer PayPal on two of the company’s websites that don’t offer it. “We are a customer of PayPal for over 14 years with believe it or not – NEVER a chargeback … and yet when they do this type thing – how do they think any large merchant would ever trust them to process more sales?”

PayPal states the reason for the hold in its notification email, but doesn’t get specific:

We’re holding the money because this transaction may involve higher than usual risk. This may be because:


  • We found an unusual change in selling price for this transaction.
  • The transaction is inconsistent with your business model.
  • You’re selling an item that can potentially cause dissatisfaction with customers.


  • Your account was inactive for a while.

“Never once has a credit card company told me they would, or could hold my funds until a customer was happy – or until a certain number of days passed – or until we even provided proof of shipment (can you imagine?),” Lieberman wrote to EcommerceBytes.

PayPal’s practice of payment holds is not new, and the company has agreed to settle a class action lawsuit for $4 million that was filed in 2010. In the settlement, PayPal denied all allegations of wrongdoing and liability (a hearing is scheduled for July 13, 2016 to decide whether to approve the settlement).

Under the settlement, the practice of holding sellers’ funds will continue, but PayPal agreed to change some of its business practices, but as we noted at the time, it doesn’t have much bite;

Here’s an example of one of the practices that PayPal agreed to in the preliminary settlement agreement:

“In response to calls to customer service, PayPal will disclose the reason for a hold, reserve or limitation to the extent not inconsistent with PayPal’s security requirements, which will be determined at PayPal’s sole discretion. If PayPal is unable to inform a user of the reason for a hold, reserve or limitation due to security requirements, it will inform the user that it cannot tell the user the reason due to security requirements.”

As we noted above, the PayPal hold notifications we’re seeing currently include several possible reasons for the holds. Another reader who forwarded an identical payment hold notification as the one Robert Lieberman received told EcommerceBytes he’s a longtime seller and just received his first hold.

“This is a first for me,” he said. “Over 18 years eBay with nearly always 100% feedback and on PayPal since the day it opened around 16 years ago never with even 1 problem, never had to ever call PayPal or have any complaint.”

The eBay seller emailed PayPal asking why they would hold the money – it was not an e-check, and eBay told the seller to ship the item. “It has now been 6 days with no reply. Message suggests they reply within 24 hours!”

Unlike many sellers especially small marketplace sellers, Lieberman has more leverage when it comes to choosing whether to offer PayPal. He said if PayPal takes 48 hours to release funds, he will remove it as an option and stick to his own credit card processing company. “Never heard of us losing a sales because we “didn’t” offer PayPal,” he said.

Are you seeing any changes in PayPal’s practices around payment holds? Let us know either way.

Comment on the EcommerceBytes Blog.

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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). She is a member of the Online News Association (Sep 2005 - present) and Investigative Reporters and Editors (Mar 2006 - present). Follow her on Twitter at @ecommercebytes and send news tips to ina@ecommercebytes.com. See disclosure at EcommerceBytes.com/disclosure/.