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Thu Dec 15 2011 23:12:02

Could States Provide Relief from PayPal Holds?

By: Ina Steiner

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Every day, PayPal freezes sellers' accounts without providing an explanation. When eBay's online payment service PayPal gave itself a license to hold sellers funds at its own discretion in 2008, CNN Money seemed incredulous. Three years later, PayPal eliminated interest bearing accounts, so sellers earn no interest on any funds being held.

Having funds frozen puts enormous cash-flow pressure on small businesses, who need the payments to pay shipping carriers and suppliers. Many sellers have said they had nowhere to turn, and a few resorted to filing a class action lawsuit over the practice.

So when a seller in Florida said he was able to get PayPal to release his funds after contacting his State Attorney General, we looked into the matter more closely. Kenneth Corbin reports in Friday's EcommerceBytes Newsflash that at least one state regulator was unaware of the practice and said he welcomed reports from consumers and sole proprietors.

There is a lot that is troublesome about the practice of PayPal holds:

- PayPal doesn't reveal the criteria it uses to trigger a payment hold, making it impossible for sellers to learn why their funds are being held or to determine if an error had been made;

- Sellers make zero interest on their funds, while PayPal presumably does earn interest on the sellers' funds;

- PayPal has no accountability; there are no auditors or checks and balances.

We'd like to hear from sellers who've been impacted by the policy, which affects not only eBay sellers, but sellers on other marketplaces where PayPal is accepted, including Etsy.




Comments (60) | Permalink

Readers Comments

Could States Provide Relief from PayPal Holds?   Could States Provide Relief from PayPal Holds?

by: Digmen1
Web Site

Thu Dec 15 23:23:15 2011

A year I sold a few low value things on ebay with a 21 day hold as I was new (I thought that may be fair enough)
Then I sold things after that with no hold.

Then I had a break for 3 months.
I sold a few things the other day and I am back on 21 day hold. This seems a little unfair.

Could States Provide Relief from PayPal Holds?   Could States Provide Relief from PayPal Holds?

by: pete

Fri Dec 16 00:29:04 2011

About 3 years ago we had almost $20,000 frozen; we fought every way possible but Paypal would not even listen to why our Christmas season sales had increased over normal sales?????? BUT kept accepting new payments during the hold...in the end the only way we got our funds released was by getting the B.B.C involved....funds were releases after around 2.5 months altogether, and as soon as they were we were told never to use Paypal again???? we are a business that has for 15 years and still sells on-line with almost 70 staff

Paypal and eBay are nothing short of criminal and they should be strictly monitored and controlled

Also how many people have had payments reversed due with Paypal claiming it was due to a buyer request to their bank; YET the buyer knows nothing about it and payment is never credited, honest buyers re-pay but many never do…..Paypal must simply keep the money how are they audited?? to account for all these wayward payments

Could States Provide Relief from PayPal Holds?   Could States Provide Relief from PayPal Holds?

by: L Gann

Fri Dec 16 01:09:21 2011

My Mother is 84 and dabbles in ebay some.  She has done this about two years with 100% feedback and no issues.  All of a sudden pay pal started putting a hold on her funds.  I called for her and was told that she didn't sell enough so she had to wait 120 days or until she was given feedback to get her funds released.  She is so frustrated and when I talked to pay pal representatives they were very hateful and couldn't give a good explanation of why her funds are being held.  I would like to know how to help her on this.

Could States Provide Relief from PayPal Holds?   Could States Provide Relief from PayPal Holds?

by: L Gann

Fri Dec 16 01:12:54 2011

sorry - in the above post I meant 21 days and not 120 days.

Could States Provide Relief from PayPal Holds?   Could States Provide Relief from PayPal Holds?

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

Fri Dec 16 01:19:06 2011

Well folks, there it is, a page of links to all the US States “departments of financial regulation” that regulate “money transmitters”, such as the clunky PreyPay.

Stop whining and start complaining. …

http://www.mtraweb.org/links.shtm

PayPal claims PayPal Is Not a Payments Processor!
http://forums.auctionbytes.com/vbulletin/showthread.php?t=24148

eBay / PayPal / Donahoe: Dead Men Walking.

Could States Provide Relief from PayPal Holds?   Could States Provide Relief from PayPal Holds?

This user has validated their user name. by: Siobhan

Fri Dec 16 01:30:24 2011

Sounds like paypal (aka ebay) is holding onto the money to collect interest they're hurting so bad.

Could States Provide Relief from PayPal Holds?   Could States Provide Relief from PayPal Holds?

by: bygbhfvgf

Fri Dec 16 01:52:39 2011

Write to your congressman it's the only way to get paypal to bend

Could States Provide Relief from PayPal Holds?   Could States Provide Relief from PayPal Holds?

by: Fruity This user has validated their user name.

Fri Dec 16 02:03:53 2011

Ina, I read your/Kenneths article "paypal holding your funds... state regulators want to know" and it linked to this thread to comment.

I want to tell you that these "officials" that you spoke with are obviously not aware of how their departments respond to emails or phone calls. They will all tell you that they dont regulate the deposit accounts.

First off this isn't about money transmission. This is about deposit accounts, on demand accounts. Money transmission, covers your ACH transfer or funding to your pp account and out of it. Deposit accounts, that's a for the state banking division to enforce. Paypal funds = Deposit account, specifically for the benefit off (account holder). You need to go talk to the FDIC and you ask them which regulator oversees deposit accounts. They will tell you the State Banking agencies do. Then go to the State and good luck getting them to do anythign because they will say we dont regulated paypal, we regulate banks. Paypal has a money transmitters license, you need to go to that agency to complain. And the MTL agency will say we dont regulate domestic.. or we dont regulate deposit accounts, thats a state banking issue. What is happening is there is a gap of adequate regulation over the deposit accounts. You're not getting that and you should. Because of the gap, paypal and ebay are dipping into funds that they have no right to, because in order for them to get the FDIC (apass through) insurance they cannot derrive a financial benefit from it. Get it? No probably not. OK.. Paypal or Ebay is experiencing something that has caused them to contract and start seizing these funds. A regulator needs to look at them to determine whether they have the proper capital reserves to manage THEIR RISK TAKING and see whether they are financially benefiting from this float money.... because these clowns over at Paypal are MAKING UP LIES alongside legitimate holds. They're telling people the moneys not available because "they haven't created it yet" or that you have a certain risk. You know what the risk is? the SENDERS that Paypal apparently can't bear to block their loot.
Anyone who files a complaint better emphasize that because EVERY regulator understands that because this is exactly what went down with Wall Street and the too big to fail banks

Throw that back at California. Paypals not messing with the money transmitter portion thats in the MTL. They're messing with the deposit accounts, which are not adequately regulated

Could States Provide Relief from PayPal Holds?   Could States Provide Relief from PayPal Holds?

This user has validated their user name. by: Marie

Fri Dec 16 02:17:14 2011

@FRUITY

PayPal is classified as a Money Transmitter.  You may consider them just a keeper of deposits, but legally they are classified as a money transmitter.

Could States Provide Relief from PayPal Holds?   Could States Provide Relief from PayPal Holds?

This user has validated their user name. by: Ed Gadfly

Fri Dec 16 03:02:12 2011

You should ask this question at the next eBay Live or the monthly Town Hall.

PayPal is the MOST LOVED payment system in the world. John D. says so, therefore it must be true.

PayPal rips you off because you let them. Sit there some more. Don't do anything.

Uncle Griff and Sandy will look out for you. It's someone else with the problem.

It will never happen to you.

You're Special!

PayPal loves you too!

Could States Provide Relief from PayPal Holds?   Could States Provide Relief from PayPal Holds?

by: vitalstat170

Fri Dec 16 04:42:18 2011

quit the disinformation!!!

the money is held by paypal until there is feedback left or DC shows deliverred.

don't blame paypal,blame all the scumbag ebay sellers who have been ripping buyers off for years.

Could States Provide Relief from PayPal Holds?   Could States Provide Relief from PayPal Holds?

by: OhForPetesSake

Fri Dec 16 05:15:54 2011

@ vitalstat

I agree. People like to blame others for there own faults.

They blame car makers when the engine in their car dies because they have neglected to put oil in it.

These people will always complain that it is someone else's fault.

Could States Provide Relief from PayPal Holds?   Could States Provide Relief from PayPal Holds?

by: GA

Fri Dec 16 08:26:59 2011

I sell on 5 accounts. 4 are Top rated seller, 1 is less then 90 days old. The payments are put on hold for that account. I get hundreds of payments that go through smoothly and yet they insist on holding payments from that account. I've sold on ebay since 1998.  I've never had problems as a seller on ebay.

Not only do they hold the payments, their automatic release has not worked correctly for at least 2 1/2 months that I've been affected. One out of every 4 payments does not release according to their criteria. (3 days after DC shows delivery) I have to call and have it manually released.  What a bloody waste of time.  

It's ridiculous. On one account I get a $500 payment that goes through with no issues, yet a $15 payment from that new selling account is held for 7-10 days until I prove it was delivered.

You can't make this stuff up. It is ridiculous.

Could States Provide Relief from PayPal Holds?   Could States Provide Relief from PayPal Holds?

by: pace306

Fri Dec 16 08:38:17 2011

As some who's funds are held 60 DAYS .... Im in NY State ... anyone else here in NY that would like to band together and get thier funds released by threatening court action?

gortechny@yahoo.com if you are interested! Im tired of paypals BS!

Could States Provide Relief from PayPal Holds?   Could States Provide Relief from PayPal Holds?

by: mtnbrk
Web Site

Fri Dec 16 09:00:32 2011

I bet if you report a complaint and Paypal get hold of your name Paypal will remove your account.

Could States Provide Relief from PayPal Holds?   Could States Provide Relief from PayPal Holds?

by: craftstation This user has validated their user name.

Fri Dec 16 09:12:08 2011

Do PP acct holders even know state laws apply to PP?  I didn't.  If CA laws, where PP operates from, can't enforce these regs PP will continue to do what they want ''at their discretion'' because that's what PP has been doing for years.

I had a hold that lasted 8 months even when the buyer reversed their claim.  8 months!

I would like to see more scrutiny of PP practices esp their Dispute policies.  I disputed a pmt to a lawyer who did no work, PP ruled in my dispute in 5 minutes.  My appeal was shot down in 3 minutes.  Ever heard of PP taking action and re-action in 8 minutes?  That was no dispute, that was anything but a dispute.  

If PP was re-classified as a bank or new regs were written for pmt processors (which is a growing industry) then we can start focusing on the rights of the acct holders.

PP gets away with it because they have and they can.  

Could States Provide Relief from PayPal Holds?   Could States Provide Relief from PayPal Holds?

by: JB

Fri Dec 16 09:19:33 2011

If I understand fruity correctly, pp is exploiting a loop hole. Loop holes are not corrected unless there are enough complaints that force elected officials to address the issue.

If this is correct there may very well be a serious problem with all this....The economy.... The system is designed to attract buyers, and the added pp regulations against sellers, along with the features pp uses to attract buyers, and buyers are needed to help boost our economy, buy buy buy. It may be a hard sell with the elected officials. Not to mention you may see eBay and pp lobby against any change in this area as well.

Could States Provide Relief from PayPal Holds?   Could States Provide Relief from PayPal Holds?

by: PP victim too

Fri Dec 16 09:50:16 2011

Though my troubles with PP are over I have a comment.

I agree with Philip Cohen. Not to be snarky, but quit whining, start complaining to the proper authorities.

I'd also like to remind everyone what happened when Paypal tried to pull their PP stunts in Australia. Those people came together with a purpose, and whaddayaknow? They prevailed.

In fact, it may have been that they impressed someone so much they got help from an entity that no one could have imagined, if not for a bonehead move by someone forgetting to removed all properties from the file we would never have known who that entity was. coughgooogle-achoo cough

So just again to show everyone, if you stand up for yourselves, others will stand up for you too. You have to care first, or no one else will.

I feel that ebayers would be wise to make more noise in more places too. Outside of ebay I rarely see anything about these issues, other than whining with no solutions offered. But the few places where they are, no one seems to have listened or followed the advice.

Lastly, I always wondered why the "helpers" and "Advisors" over there on ebay forums never actually help or advise anyone on how to get your money unheld. Instead they parrot the line that 'you signed the ToS so it's legal'.

I'm under the impression that giving that advice is probably not legal, especially when given by "undercover" employees or representative working on behalf of ebay and or paypal. It most certainly is sleazy.

Complaints need to be filed about that too.

The fact remains that the ToS contains illegal terms.  The ToS does not override or void your states' laws.

Could States Provide Relief from PayPal Holds?   Could States Provide Relief from PayPal Holds?

by: keeping an eye on them ALL
Web Site

Fri Dec 16 10:12:59 2011

I just now sent a letter/email to pay pal informing them that I had removed paypal as a payment option on all 11 web sales sites I own.

I then filled out a form on line to the FL Sate Attorney Generals office registering a complaint against pay pal for illegal withholding of funds.

Please note that I am a 15 YEAR veteran of on line sales, booth on and off ebay (Thankfully the vast majority is OFF ebay these days!) and pay pal’s B.S. statements concerning "At Risk Sales" as a reason for the holds on one certain account I have (HAD, now!) with them are the biggest pile of smelly stuff you could ever imagine...
After 15 YEARS of sales records and happy customers I'm NOW a "Risk"??

They just placed a Hold on Funds on a NON EBAY SALE AND SITE - I THINK NOT!

Amazon Checkout & Google Payment Checkout work just fine for me with absolutelyZERO, NOTA, NONE of the hassle or grief of dealing with pay pal.

What a joke... Ebay and pay pal are doing these Holds for 1 reason and 1 reason ONLY, and that is to generate operating capital and gross illegal profits off the interest they gain on the millions of “Held Funds” to prop up a completely and totally failed ebay venue.

One would think Wall Street and Investors would care enough to REALLY dig into the records and uncover the accounting slight of hand, trickery and lies that are being fed to them concerning both companies balance sheets but apparently that's too much work for them and they continue to eat the crap reports and lies pay pal and ebay keep churning out concerning their finances.

People, PLEASE take the time to start reporting these thieves and con artists such and ebay and pay pal to your States Regulators - it's the ONLY way anything will ever be done to bring them down and in line, and stop all the crazy abuse both companies heap upon their users!!

Folks… YOU, each and every one of you are “The PEOPLE” and you have the power to change unjust actions by companies or Government agencies!!!

But that only happens if you stand up and say “ENOUGH” and DEMAND something be done by your Government Representatives to bring about the change!
Sitting around just complaining will accomplish NOTHING - GET PROACTIVE or don’t complain about the treatment you are receiving from these immoral and illegally operating companies!

Could States Provide Relief from PayPal Holds?   Could States Provide Relief from PayPal Holds?

by: pat O

Fri Dec 16 10:35:13 2011

In Illinois PayPal must release money transmitted to the recipient within 3 days...NO Exceptions.  Also in Indiana both PayPal CEO and eBay CEO must be fingerprinted to be licensed as a money transmitter, bet that hasn't been done at either company.

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