Ina Steiner EcommerceBytes Blog
News and insight focusing on ecommerce.
by Ina Steiner, Editor of EcommerceBytes.com
Tue May 12 2015 11:27:13

Sellers Say PayPal Payments Being Diverted

By: Ina Steiner

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Online sellers say some of their PayPal payments from customers are being diverted, leaving them without their funds and leaving their customers impatiently waiting for their orders to be fulfilled. The problem appears to be isolated to Etsy, which acknowledged the problem and is being blamed for the snafu. But it raises the question of whether this could happen to other marketplace sellers as well.

Over a week ago a seller reported the issue on this Etsy thread. "I received an email saying an order was placed yesterday through PayPal. I've got the Etsy receipt number but PayPal never received the transaction. I've contacted PayPal and they need the customer to contact them. Would this be a problem between Etsy and PayPal communication? I've counted the buyer regarding this problem, but thought I would ask here in case it was a bug issue."

Other sellers reported the same issue, including this seller who wrote, "I have a similar issue, and 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."

The next day, a moderator posted a response to that seller. "We've received your email. I've gone ahead and escalated your issue to our team to investigate."

But other sellers wanted to know, "Why would a customer's PayPal payment go to Etsy's account first? If it went to the wrong PayPal account, that's a PayPal problem, assuming all the addresses are right."

Another opined, "Etsy should not have access to our dealings with PayPal, nor should PP be handing our money to Etsy. What the heck?!"

Yesterday, Etsy posted another response. "My name is Joe and I work on the Payments team here at Etsy. We understand the frustration you all are having with this issue, and be assured that we are working hard to resolve it. At this time, we're working directly with PayPal's engineering team to determine the root cause of the issue and how to address it. On our side, it looks as if we're sending the correct information over, however, as you all are reporting, a small number of payments seem to be going to the wrong place. We'll continue to push this until the issue is fixed, and we’ll be sure to update you all as we learn more."

Sellers said their buyers are also getting impatient. "Can Etsy PLEASE give my customer their money back, so I can send her a pay pal invoice OR deposit the money into my account? My customer is VERY frustrated and I would like to be able to send her order out to her. It's been 9 days, and still no answer on this. We all deserve to know what is going on."

How is it possible that a payment made from a customer to a merchant ends up in a marketplace's pocket? Even if it's something on Etsy's end as many sellers suspect, it would appear it's a problem for PayPal as well.

Last October, sellers reported a similar issue, but it affected sellers not only on Etsy, but on eBay, Bonanza, and even people who transferred their money from one account to another. We've got questions in to Etsy and PayPal this morning.

Update: An Etsy spokesperson said the company was aware of the issue and was working to resolve it. "We hope to have more information later today. In the meantime, you can find out more in Joe Blossom's post in the forums."

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Readers Comments

Perminate Link for Sellers Say PayPal Payments Being Diverted   Sellers Say PayPal Payments Being Diverted

by: Watching the Wheels This user has validated their user name.

Thu May 14 04:45:48 2015

@Jane Dough, why,oh why would you trust Etsy with handling your money? They don't even offer real phone support. PLUS have a record of technical snafus that could choke a horse, with THEIR policy of "ADMIT NOTHING!"

Perminate Link for Sellers Say PayPal Payments Being Diverted   Sellers Say PayPal Payments Being Diverted

by: Chicago48 This user has validated their user name.

Thu May 14 06:39:26 2015

I'm sure there are other methods to pay besides Paypal.  Does etsy offer Stripe or major credit cards?  Maybe sellers should disable PP temporary until this is straightened out?

Perminate Link for Sellers Say PayPal Payments Being Diverted   Sellers Say PayPal Payments Being Diverted

by: Robin This user has validated their user name.

Thu May 14 07:42:42 2015

Despite both Paypal & Etsy saying the problem is resolved, the sellers whose money is missing are still being told to contact the other guy.  

As of today, Paypal tweets that it has been resolved, despite the sellers not receiving their money.  

Etsy needs to CALL each seller whose money is missing and patch in the Paypal rep who understands what happened and can immediately get the money to the right person.

This ''Ask Etsy'' and ''Ask Paypal'' is unprofessional and totally unacceptable.

This issue is not over until ever dime is in the correct account.

Perminate Link for Sellers Say PayPal Payments Being Diverted   Sellers Say PayPal Payments Being Diverted

by: Flying Childers This user has validated their user name.

Thu May 14 08:55:23 2015

When it comes to money, I would trust Tony Soprano before Chad D. any day of the week. Forget about a class action lawsuit, how come this guy isn't be led out in handcuffs?

Perminate Link for Sellers Say PayPal Payments Being Diverted   Sellers Say PayPal Payments Being Diverted

by: Squeaky This user has validated their user name.

Thu May 14 09:25:26 2015

The incompetence and indifference are just overwhelming. I've shut down PayPal for good and am considering alternatives to Etsy. I've been there a lot of years and seen a lot of incredibly stupid moves on their part, which have driven away many of my friends. This may be the nail in the coffin for me.

Perminate Link for Sellers Say PayPal Payments Being Diverted   Sellers Say PayPal Payments Being Diverted

This user has validated their user name. by: Bad Hair Day

Thu May 14 13:23:15 2015

Maybe it's a *test* ?    :]

Perminate Link for Sellers Say PayPal Payments Being Diverted   Sellers Say PayPal Payments Being Diverted

by: tmooreseller This user has validated their user name.

Thu May 14 13:32:05 2015

Interesting. Of course, I left Etsy long ago after several months of waiting for a sale, and now I have already removed my PayPal buy buttons because no one wants to touch them; the buttons cluttered up my product pages and just sat there. If anyone wants to pay that way, I have posted an order form where the buyer can use the option. Now, you read that PayPal and Etsy are at odds with each other about the missing money? I have not received a single payment through PayPal for ANYTHING in the past year and a half, and I don't ship without a payment. The best option for sellers stuck in the middle is: cut your losses and run.

Perminate Link for Sellers Say PayPal Payments Being Diverted   Sellers Say PayPal Payments Being Diverted

by: Ladmo This user has validated their user name.

Thu May 14 16:48:15 2015

SELLERS BEWARE: The new KEY eBay user update(s) concerning PayPal HOLDS kicked in early and - it may cost small SELLERS dearly!

On May 1, 2015 we received an email from eBay:

>>Our updated User Agreement and Privacy Notice take effect for new users on May 1, 2015 and on June 15, 2015 for all other users. The updated User Agreement and Privacy Notice were posted on www.ebay.com on May 1, 2015.>>

It stated in part:

<Fees, holds, returns & cancellations, and eBay Money Back Guarantee: Users now authorize eBay to instruct PayPal to make deductions from their PayPal account(s) for fees, returned items, items not as described, return shipping, cancellations (under our new cancellation policy), and eBay Money Back Guarantee reimbursements. eBay will recommend, rather than request, when PayPal can restrict funds in a seller's PayPal account. We clarified language for holding seller funds, placing charges on a seller invoice and/or charging a payment method on file, and removing funds in a buyer's currency.<<

Since opting in to eBay ''No Hassle'' returns we have had some returns but - NEVER had any funds held by PayPal while the eBay return process proceeded. We follow the rules, communicate with buyers and supplied Return Merchandise Authorization (RMA#) numbers as requested.

Today - PayPal is NOW holding the funds on a NEW eBay return? <<...take effect for new users on May 1, 2015 and on June 15, 2015 for all other users. Apparently NOT.

Ironically, we always communicate with the buyer - and in this case the buyer did not know how to use eBay returns - so we instructed them on the procedure. D'Oh! The buyers reason for returning the item - ''I don't need it anymore.''

We are a drop-shipper so the return process is different for each vendor. The new user policy does NOT outline when the HOLD will be lifted? Upon receipt of the RMA#? When the item has been delivered and approved by our supplier? When OUR refund has been processed?

Here's the potential problem. The buyer could theoretically wait a week before shipping the return and the vendor may take a week or more to inspect and process our refund. And PayPal may not update the credit in a timely manner.

We spoke to eBay resolution CS and were told ''ONLY Top Rated Sellers'' are NOT subject to PayPal holds.  And of course the predictable ''that's the policy'' and ''nothing can be done.'' We courteously elevated a call back from a eBay resolution supervisor to clarify why the NEW policy has been started before June 15th?  

Returns are a necessary part of online retail selling and to be expected. But capriciously and arbitrarily holding funds during the eBay return process is definitely not ''No Hassle'' for the small seller. It could be devastating from a cash flow perspective.

If this the way of the future maybe -  opting out of eBay's returns process - is warranted? eBay sellers, what do you think? Fact based comments are appreciated.

Perminate Link for Sellers Say PayPal Payments Being Diverted   Sellers Say PayPal Payments Being Diverted

This user has validated their user name. by: The End

Thu May 14 18:55:20 2015

STOP USING PAYPAL.
They are Unworthy of our Business.

Perminate Link for Sellers Say PayPal Payments Being Diverted   Sellers Say PayPal Payments Being Diverted

by: MS Vintage This user has validated their user name.

Thu May 14 19:33:50 2015

Disrespect now that both PP and Etsy are being traded publicly.  

This disregard for the needs of small sellers that helped build both businesses is nothing new.  It's been imitated by B**Az* and other sites.

Bah.

Perminate Link for Sellers Say PayPal Payments Being Diverted   Sellers Say PayPal Payments Being Diverted

by: ebay refugee camp This user has validated their user name.

Fri May 15 08:46:45 2015

Everyone should check all Etsy payments to MAKE SURE THAT THEY HAVE BEEN ADDED TO YOUR BALANCE, Do not rely on just an email from Paypal stating you received the payment.
The real worry here is how much power is going to be given to John Donahoe as he sits on the board of paypal, I fell sorry for all of the people who have to deal with him, he is evil.

Perminate Link for Sellers Say PayPal Payments Being Diverted   Sellers Say PayPal Payments Being Diverted

by: Robin This user has validated their user name.

Fri May 15 10:12:42 2015

It happened again, just this morning, according to a report in the Bugs thread.

Nobody seems to be taking this seriously, not Etsy, not Paypal and not even Ina who is not following up on this and seems to just accept the corporatespeak.  

I just disabled my paypal on Etsy.  Whichever is at fault, or a combo of both, it's too dangerous at my price point to have my money go astray to an Etsy corporate account, rather than mine.  :(

Perminate Link for Sellers Say PayPal Payments Being Diverted   Sellers Say PayPal Payments Being Diverted

by: tawhite This user has validated their user name.

Fri May 15 12:24:20 2015

So distressing for affected sellers. So bad for the buyers & potential buyers.

BTW the thread is still active.

As far as I'm concerned, one of the smart techies at Etsy hacked into the PayPal address database and made a killing. Paypal neglected to note this suspicious activity and voila! Both are covering for one another because they both screwed up.

No surprise that Etsy is looking for a Network Security Engineer! The job was posted a week into the PayPal fiasco.
http://www.startuphire.com/job/network-security-engineer-br
ooklyn-ny-etsy-316678

Perminate Link for Sellers Say PayPal Payments Being Diverted   Sellers Say PayPal Payments Being Diverted

by: Watching the Wheels This user has validated their user name.

Fri May 15 15:40:26 2015

Personally I think Chad is going renegade and pulling stunts to increase the use of DC on Etsy. Now that they're public, eventually the shareholders will want to see profits.

Let's be real. It wouldn't be their first stunt. Does anyone remember the META TAGS fiasco in 2009, where someone at Etsy had added the words HAND MADE into the meta coding of EVERYBOY'S LISTINGS?

OR when edits were timing out indefinitely so no one felt safe to sell because of the potential Bait and switch potential?

OR how about when they were keeping the FVS's when we had done a return and had canceled out the sale.

CHAD was Chief Technical Officer throughout all of these things. This same person is now CEO making over $500,000 grand a year.

Wall Street has recommended that Etsy needs to increase their revenue streams. DIRECT CHECKOUT WOULD ACCOMPLISH THAT.

The people working for the VC's have been weasles ever since I began selling there.

I have NEVER SIGNED ONTO THE DC, and have had sales, since this scandal broke.

As long as the sellers keep ASKING within a forum thread, "WHERE IS MY MONEY, ETSY?", YOU WILL CONTINUE TO BE BLOWN OFF.<--- THIS has always been their MO.

I would advise calling the news, :) and try to aim for stations that Etsy has gotten free press from in the past.

Plaster it ALL OVER FACEBOOK and TWITTER  and YOU CAN ALWAYS VISIT THE ONLINE FINANCE PAGES. There are news stories under Etsy's chart. THIS IS JUST THE THING THAT A SHAREHOLDER WOULD LOVE TO HEAR, ESPECIALLY WHEN THERE'S A TROOP OF LAWYERS INVESTIGATING THE IPO.

You have to fight fire with fire.

The other choice:

EAT THE LOSS AND REMAIN PARANOID.

Perminate Link for Sellers Say PayPal Payments Being Diverted   Sellers Say PayPal Payments Being Diverted

by: Watching the Wheels This user has validated their user name.

Fri May 15 16:14:34 2015

http://www.startuphire.com/job/office-hacker-194864

Perminate Link for Sellers Say PayPal Payments Being Diverted   Sellers Say PayPal Payments Being Diverted

by: cayenna This user has validated their user name.

Fri May 15 17:38:11 2015

I think I know why this is happening. Etsy holds our money till we receive it. Perhaps they do this to draw interest first? Is that possible? It was almost a month they had the money I was supposed to get until my customer received a refund from etsy. I had to request a re-payment from my customer! I would have never known it had happened and that I had not gotten paid if my customer had not contacted me! I still have yet to hear from etsy. Now I have to go through every transaction to see if I got paid!

Perminate Link for Sellers Say PayPal Payments Being Diverted   Sellers Say PayPal Payments Being Diverted

by: Go tell the Spartans This user has validated their user name.

Mon May 18 01:10:15 2015

Instead of complaining, why not just call your local US Attorney's office and file a formal request for an investigation.

Perminate Link for Sellers Say PayPal Payments Being Diverted   Sellers Say PayPal Payments Being Diverted

This user has validated their user name. by: The End

Mon May 18 03:19:18 2015

"Passed in 1970, the Racketeer Influenced and Corrupt Organizations Act (RICO) is a federal law designed to combat organized crime in the United States. It allows prosecution and civil penalties for racketeering activity performed as part of an ongoing criminal enterprise."
Just sayin'...

Perminate Link for Sellers Say PayPal Payments Being Diverted   Sellers Say PayPal Payments Being Diverted

by: WhoKnewIt This user has validated their user name.

Mon May 18 08:42:18 2015

Yet one more reason I quit using PayPal long ago.....anyone that doesn't check their accounts (Etsy Direct Checkout OR PayPal) immediately after a transaction is setting themselves up for problems.  When I used PayPal I would immediately transfer those funds to my listed "bank account"...I then transferred it out of there into a bank account PayPal couldn't get to.  With Etsy Direct Checkout I transfer it as soon as I can.  I don't trust either one of them.  Yes, it's time consuming but I have never lost a penny either....

Perminate Link for Sellers Say PayPal Payments Being Diverted   Sellers Say PayPal Payments Being Diverted

by: cayenna This user has validated their user name.

Mon May 18 09:55:07 2015

Who would have thought a person would have to do this. I plan to do the transfers also after I have verified I have received everything. What a PAIN! So far as of today; I still have not heard back from etsy, nor received their reimbursement for taking my money. It literally shows the money went to etsy; at least my customer confirmed that in her acct. And it showed I was paid in my etsy shop so I had no reason to think otherwise.

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