AuctionBytes Blog
Covering auctions, collectibles and marketplace selling.

AuctionBytes Blog The AuctionBytes Blog has been giving a voice to online merchants since its launch in 2005. Named one of the world's top 30 blogs in 2008 by "Blogging Heroes." Weigh in with your thoughts on the joys and pitfalls of selling online.
Mon June 8 2009 12:25:14

PayPal Explains Holds on eBay Sellers' Accounts

By: Ina Steiner

Sponsored Link

PayPal posted information about its rolling reserve policy on its blog today. Bill Clark, an analyst on PayPal's risk team, wrote, "We've heard a lot of questions from sellers about reserves, so I wanted to explain what these reserves are and why PayPal requires them on some accounts."

PayPal began instituting two types of holds on eBay sellers' accounts to mitigate risk. One is called a "rolling reserve," the other is a 21-day hold. In the blog post, Clark said it instituted rolling reserves "for a very small percentage of our sellers - currently less than 1%."

Why does PayPal institute rolling reserves? "This reserve helps to ensure that money is available in sellers' accounts to cover potential payment reversals or chargebacks if they do not have enough funds in their PayPal balance to do so. When sellers don't have the funds to cover their transaction liabilities, PayPal is responsible for reimbursing buyers which represents a significant cost in our system. We've been using reserves for some time in other parts of the business, and what we've found is that reserves help PayPal control costs so we can provide competitive pricing for all of our sellers, and continue to invest in improving our service."

How does PayPal determine when to institute a rolling reserve on a seller's account? "To determine when to place a reserve, we look at a number of factors that may increase the risk of chargebacks or reversals - things like industry categories that have higher-than-average chargebacks, or sellers who are new to PayPal (where we've historically seen a higher instance of chargebacks or reversals). We reassess risk factors periodically, and if we determine that the risk has gone down in certain seller segments, we will release the reserve."

Clark did not address the 21-day holds for eBay sellers introduced in January 2008 (link), but PayPal had explained the holds last year in an interview on the eBay Ink blog.

Sellers use payments from orders sold to pay suppliers, employees and overhead, and like other individuals and small businesses, often have cash flow issues, so any hold on payments from customers or account balances is of concern to them.

A common concern from eBay sellers is that PayPal is earning interest on the held funds. Clark wrote, "If the seller is enrolled in the PayPal Money Market Fund, then this money will continue to earn interest while it's in reserve."





Comments (55) | Permalink

Readers Comments

PayPal Explains Holds on eBay Sellers' Accounts   PayPal Explains Holds on eBay Sellers' Accounts

by: eBuyer Feedback

Mon Jun 8 12:35:47 2009

What about the sellers with the tight margins that can't afford to lock up a significant percentage of their money every month?  Not everyone makes more than 5% profit.  Wal-mart makes just over 3%.

PayPal Explains Holds on eBay Sellers' Accounts   PayPal Explains Holds on eBay Sellers' Accounts

by: Sally Williams

Mon Jun 8 12:37:34 2009

Does anyone know if these reserves will be applied to PayPal accounts of people that don't sell on eBay?  ie, you use Paypal on venues such as Ruby Lane, See Auctions, etc.  I also receive my Zazzle royalties in my paypal account, but if these reserves will apply to me, a non eBay seller, I may have to rethink continuing to use Paypal.

PayPal Explains Holds on eBay Sellers' Accounts   PayPal Explains Holds on eBay Sellers' Accounts

by: just me

Mon Jun 8 12:59:26 2009

I would like to call this idiot a bold face liar.

My paypal never drops below 3000.00. Been a member since 2000. Never had a claim. I would like this idiot explain why they put a hold on a 2.95 payment from a buyer of mine.

More ebay and paypal slip and slide crap.

PayPal Explains Holds on eBay Sellers' Accounts   PayPal Explains Holds on eBay Sellers' Accounts

by: Patricia

Mon Jun 8 13:22:31 2009

More BALONEY!  More phony excuses!  I have had a Paypal shopping cart on my website for many many years now and NEVER had to have a balance in my account.  When a customer pays it goes right into my account!  It seems Paypal get weird ONLY when its an Ebay transaction!

PayPal Explains Holds on eBay Sellers' Accounts   PayPal Explains Holds on eBay Sellers' Accounts

by: Joe

Mon Jun 8 14:30:54 2009

We recently has 2 holds placed on ebay transactions, despite being a long time seller in perfect standing.... paypal said the customers had filed a claim, therefore the instituted the holds. We contacted the customers and they had no idea paypal had placed a hold on their payments, they both denied filing a claim, and immediately called paypal to find out why their payments were being held. The payments were immediately released and all evidence of the holds dissappeared from our paypal account history. paypal lies.....

PayPal Explains Holds on eBay Sellers' Accounts   PayPal Explains Holds on eBay Sellers' Accounts

by: Rick

Mon Jun 8 15:27:43 2009

Nothing like good old free enterprise to help solve this.  PayPal has the market advantage to be able to make this choice.  We are the customers that pay the PayPal fees.  Sounds like our companies should start looking at the other electronic payment providers to check their position and policies.

http://tinyurl.com/9ofwk4

PayPal, be careful when you slap the hands of your customers that pay the bills, us, the ones that receive payments.  Look what happened to 'Capital One' credit card when the President had to step in and limit the beating they give their customers, the ones that pay the bills...  

http://tinyurl.com/llku3t

PayPal, be careful.....  Look what happened to eBay when they continued to raise fees and not listen to their customers.  They lost and are still loosing market share....

http://tinyurl.com/c25ue5

PayPal Explains Holds on eBay Sellers' Accounts   PayPal Explains Holds on eBay Sellers' Accounts

by: EventHorizon1984

Mon Jun 8 16:11:32 2009

When people understand the magnitude of the numbers, they'll see that PayPal ''might'' be telling the truth on the percentages.


PayPal on the 21 Day Hold:
''We’re talking about single-digit percentages. Usually less than 5% of transactions.''
Monroe Labouisse, Director of PayPal's business on eBay in the U.S. and Canada

We did an off-the-cuff rough calculation of what 5% means in a short article.
http://eventhorizon1984.typead.com/event_horizon_1984_blog
/2009/01/the-ebay-paypal-5-solution.html


PayPal
on the Rolling Reserve:
''for a very small percentage of our sellers - currently less than 1%.''
Bill Clark

This is 1% for ONE quarter, based on eBay's 2008 SEC filing.  Worse case for sellers (best case for PayPal):

Active eBay users affected:  830,000
Number of new listings affected:  5,556,000
Gross merchandise volume, HELD:  $143,950,000

Active registered PayPal accounts affected:  548,000
Net total payment volume, HELD:  $115,690,000


The above is PayPal's definition of ''very small''.


''It does prove though how everything is a matter of perspective. You see what you think is daylight, and you assume it's morning. Take it away, you think it's night. Offer you a sandwich, if it's convenient, you'll think it's mid-day. The truth is fluid, the truth is subjective.''
Babylon 5

PayPal Explains Holds on eBay Sellers' Accounts   PayPal Explains Holds on eBay Sellers' Accounts

by: Patricia

Mon Jun 8 16:24:36 2009

"Active eBay users affected:  830,000
Number of new listings affected:  5,556,000
Gross merchandise volume, HELD:  $143,950,000

Active registered PayPal accounts affected:  548,000
Net total payment volume, HELD:  $115,690,000"

Very interesting....and what's the "float" on that amount of money?  ;-)

Seems to me Ebay is in trouble and is trying nickle and dime its way into looking good to its investors.

PayPal Explains Holds on eBay Sellers' Accounts   PayPal Explains Holds on eBay Sellers' Accounts

by: Jimmy The Idiot Boy

Mon Jun 8 19:43:14 2009

According to a CNN article 3/08, Paypal made $10 Million a quarter in interest on your money. That was before the 21 day BS, it must be at least double that by now.

PayPal Explains Holds on eBay Sellers' Accounts   PayPal Explains Holds on eBay Sellers' Accounts

by: Patricia

Mon Jun 8 20:40:58 2009

I heard that too Jimmy.  $40 million extra a year still is not pocket change - not even to Ebay.  This new 5 day free listings every month is another ploy to give the small sellers a break and have the larger selling items pay for it.  Ebay never "gives" anything to anyone!  There's always something in it for them.  

The big joke is it doesn't take long for sellers to see right thru it and that leaves Ebay with even more egg on its face!  Hear that Donahoe.

Oh...saw him in an interview on Yahoo just today.  He was extolling the virtues of Intel and his seat on that board - downplaying Ebay all he could and hiding behind Paypal ;-)

PayPal Explains Holds on eBay Sellers' Accounts   PayPal Explains Holds on eBay Sellers' Accounts

by: Patricia

Mon Jun 8 20:42:54 2009

Here's that interview if anyone can stomach watching it:

http://cosmos.bcst.yahoo.com/up/player/popup/?rn=289004&cl=
13879377&src=finance&ch=1316259

PayPal Explains Holds on eBay Sellers' Accounts   PayPal Explains Holds on eBay Sellers' Accounts

This user has validated their user name. by: Ming the Merciless

Mon Jun 8 20:52:13 2009

Corporations will do ANTHING necessary by ANY means necessary to remain in business and make money including throwing their own mothers under the bus if that's what it takes.

I suspect Auctiva is just the first ebafia "partner" that will charge or raise fees for ebafia sellers in order to make up for lost revenue from ebafia.

If you pay seller fees from your PayPal account, one way to keep your money for as long as possible is NOT proactively pay your fees on the due date and make ebafia debit your PayPal debit card. The difference is typically 14-15 days, and there's cash back. You deprive ebafia/PayPal of using your money during that period.

However, until the government requires PayPal to adhere to banking regulations and then enforces them, PayPal will play every possible angle to use seller money by any means possible for as long as possible to accumulate interest.

For years, ebafia and PayPal have one by one transferred as much of the risk, expense, and liability of away from them and onto sellers.

Chargebacks are a fact of online sales life. The question is who should bear the responsibility.

I've had three PayPal chargebacks in several years on ebafia. I challenged all of of them as two of them weren't customer initiated and won both of them with the help of the customers.

The third was a thief and hot check artist who claimed he hadn't received the item yet the Post Office website showed he'd signed for the package. I won that one as well.

Nevertheless, PayPal had custody of my money (several hundred dollars) for a total of seven weeks that generated revenue for them while I lost money market interest. PayPal denied to my request to restore the interest that money would have earned to my account.

PayPal wants to achieve zero risk and liability while sellers assume 100% of the risk and liability.

The fact is that ebafia and PayPal will do whatever they please UNTIL the government, the state attorney generals, or class action lawsuits stop them.

Ebafia Corp. is a lawless entity that feels free to throw its weight around because there are few if any negative consequences when they do.

PayPal Explains Holds on eBay Sellers' Accounts   PayPal Explains Holds on eBay Sellers' Accounts

by: PP

Mon Jun 8 20:56:41 2009

"I would like to call this idiot a bold face liar."

Too right, why can't they call a spade a spade....maybe because they're using one as a paddle, hurtling down sh*t creek

PayPal Explains Holds on eBay Sellers' Accounts   PayPal Explains Holds on eBay Sellers' Accounts

by: shame on JD

Mon Jun 8 22:09:59 2009

Vote! Who do you think is the worst CEO?
http://www.cnbc.com/id/15838459/


PayPal Explains Holds on eBay Sellers' Accounts   PayPal Explains Holds on eBay Sellers' Accounts

by: RicRoe

Mon Jun 8 23:26:31 2009

Questions for PayPal....

Why does it seem that toward the end of quarterly reporting periods the frequency of payment holds increases? It would appear that PayPal is artificially inflating the bottom line to make their balance sheet appear stronger than it might really be.

Why does PayPal not identify revenues which it is holding in their financial reports? The reserve revenues  should be identified and detailed on quarterly reports, since the reserve funds are actually a liability which is due to be paid out at some point.

Why does PayPal refuse to pay interest when account funds are held. Since PayPal at its own whim and pleasure decides what and how much reserve revenue will be held, it should be required that interest be paid -- by law. Paying interest would go a long way to disprove the accusations that PayPal holds these funds at whim to their own benefit, since they earn and keep the interest on reserve balances.

PayPal has been very careful from it's inception to structure itself in such a way to avoid being considered a bank in the eyes of the law.

Yet PayPal processes payment transfers, processes electronic checks, issues credit and debit cards, pays interest if account holders opt in. These are the same services provided by banks.

It is time that the Federal Government took a long look at PayPal, and adjust the regulations so that PayPal and other ''payment'' services are regulated just like banks.

PayPal Explains Holds on eBay Sellers' Accounts   PayPal Explains Holds on eBay Sellers' Accounts

This user has validated their user name. by: Philip Cohen

Tue Jun 9 00:20:10 2009

Funny, a trader with a credit card merchant account has his money in his bank account the following day. That is because the credit card companies are intimately connected to the banks who “know” their account holders.

The sooner Donahoe arranges for the sale of PayPal to the credit card companies the better off we will all be, including eBay, because the more successful PayPal becomes (which is doubtful) the more likely the credit card companies will add such a card/terminal-less dialogue to their portal, and they will do it properly, and that my friends will be the end of PayPal outside of the Donahoe-ever-shrinking eBay marketplace.  

PayPal Explains Holds on eBay Sellers' Accounts   PayPal Explains Holds on eBay Sellers' Accounts

by: This is criminal

Tue Jun 9 06:19:36 2009

What a bunch of crap this is. Because since paypal is not a bank, they have no right to hold other people's money. All paypal should be able to do is be a platform for transferring $ from one person to another. Looks like another lawsuit waiting to happen. Paypal has no say on transactions on other sites nor should they.

PayPal Explains Holds on eBay Sellers' Accounts   PayPal Explains Holds on eBay Sellers' Accounts

by: Nancy

Tue Jun 9 06:51:12 2009

Since PP sits outside the bank regulations, they can do just about anything they want, and not in the interest of its customers.  Reserves are to enhance their own cash balances and valuation, not to enhance their customers.
Reserves are one problem.  Pay disputes are another, and last year, PP held the money in dispute for 7 months before they gave it back to me, AND charged me $10 for "doing the research" on a cc dispute that was resolved with the customer in 3 days.  Call so PP elicited this response:  "Do you know how much this is costing us to investigate this dispute?"
Since then, PP removed money from my account over an outside fraud claim to my money------and my low opinion of how PP operates went into the toilet.

PayPal Explains Holds on eBay Sellers' Accounts   PayPal Explains Holds on eBay Sellers' Accounts

by: deelee

Tue Jun 9 07:42:52 2009

There is a great amount of interest being made my PayPal on the money being floated. Good for their bottom line but not the retailer. Ebay should step up to the plate and resolve this but they won't because they don't have to.

PayPal Explains Holds on eBay Sellers' Accounts   PayPal Explains Holds on eBay Sellers' Accounts

by: imelda

Tue Jun 9 07:58:56 2009

Read MING's post.

WRITE TO CONGRESS, write to your senators, KEEP ON writing. Write a letter a day, encourage others to do the same. The only reason they wouldn't want regulation is because they are cheating people and lying to them. and EARNING interest on YOUR money while they play games like children. And allow a person with 3 days' tenure to answer the phone.

This place is a billion dollar bank with NO regulation.

It's insane.

The people over there make stuff UP when you talk to them on the phone, they don't even know what their own RULES are?

I've had them tell buyers I was "making up" the rule about a signature over 250.00. Etc, etc. You wouldn't BELIEVE some of the things they tried to tell ME.

WRITE, WRITE  WRITE.

E-mail them. (the senators) Find out who is on the Senate banking committee, WRITE THEM.

What will all of you above DO if pay-pal goes belly up due to their stupidity like other banks? All I E-V-E-R leave in there is eBay fees.

If that disappears, oh SO sorry.... I am not taking any risk.

Go, look at the stories out there, read them, about 3/4 of them are true.

WRITE, CALL, let's get this place regulated before they get any MORE power mad.

Click to view more comments
1 2 3  [Next Page]


Login is required to post comments.
To sign in to leave a comment using your AB Verify User Name, fill in the form below. If you have not yet signed up for AB Verify, or if you'd like more information, go to the Registration Page
.

Login for AB Verify
Be sure and use your email address and password to log in.

 
Email:
Password:
 
 Forgot Your Password?
 Even though you are signed in with the AuctionBytes Blog, you will have to sign in to the EcommerceBytes blog. But you can sign in with your existing AB Verify info.