|Thu Dec 15 2011 23:12:02|
Could States Provide Relief from PayPal Holds?
By: Ina Steiner
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.