When eBay decided to split with PayPal, it all sounded so civilized with a 5-year operating agreement to ease the transition. Three years later, it's erupting into war, with eBay sellers the casualties.
(NOTE: we've update this story below.)
Today, PayPal sent a stern warning to eBay sellers advising them they might be out of compliance with the terms of their PayPal Working Capital loans if they had opted into the initial phase of eBay managed payments that began rolling out last Monday.
PayPal informed sellers, "We've been receiving questions from our PayPal Working Capital customers regarding how eBay's new agreement with another payment processor may affect their loan. We would like to provide a quick overview of key terms of your PayPal Working Capital loan to help you navigate."
It included the following:
In the Terms and Conditions you agreed to:
1) Maintain PayPal as a preferred payment method set forth on Business' website and/or checkout options in a no less favorable position than as provided on the date of this Agreement;
2) Not take any action to discourage PayPal use or permit any event to occur which could have an adverse effect on the acceptance, authorization or use of PayPal by purchasers of the Business' products and/or services or allow any event to occur that could cause a diversion of any of the Business' PayPal Sales Proceeds from PayPal to any other entity;
Detailed Terms and Conditions of your PayPal Working Capital loan can be found at paypal.com/workingcapital/terms
You can't exactly blame PayPal, given the way Working Capital loans work - if sellers aren't making any sales through PayPal, it's not recouping its money.
One huge component of the mess some sellers are now facing is whether eBay communicated clearly to sellers about the limitations of the managed payments rollout when it extended invitations in the summer. Many sellers said eBay did not inform them that their buyers would not be able to use PayPal to pay for their purchases through managed programs until next summer.
We sent email inquiries to eBay and PayPal to find out what sellers can do at this point - and to find out how in the world eBay came to include sellers with Working Capital loans into its managed payments program.
NOTE 10/4/18: PayPal updated its response to us, we've edited the following paragraph to be more precise about PayPal Working Capital, the gist of its statement hasn't changed.
A PayPal spokesperson explained that PayPal Working Capital is a business loan issued by WebBank that provides financing to approved merchants based primarily on their PayPal Business account history. "The program uses PayPal proprietary data to assess risk without a credit bureau score. So it makes sense that merchants have to use our payments platform in order to continue to use our Working Capital program. You can read more here
She referred us to eBay for questions about eBay managed payments.
We also asked eBay if it's true that eBay employees are advising sellers to get an eBay/Square loan to pay off their PayPal Working Capital loans; it has yet to respond to this afternoon's inquiry. eBay had raised eyebrows when it did its deal with Square rather than PayPal.
We thought eBay managed payments was messy, but this brings it to another level, with sellers bearing the brunt of this new war.
Update 10/2/18: An eBay spokesperson got back to us this evening with the following statement:
With respect to PayPal Working Capital, we have no visibility into whether sellers do or do not have PayPal Working Capital relationships and cannot advise them on the terms of their relationships with PayPal.
Additionally, we did advise sellers opting into managed payments that PayPal would not be available as a form of payment until Summer 2019. Specifically, we disclosed this:
- On the Managed Payments landing page (which all sellers land on prior to sign up);
- A number of times in the "Sell and Get Paid" section of our Managed Payments page on ebay.com, which was shared with all sellers who were invited to participate in the initial rollout of managed payments;
- In our payments FAQs posted to our Seller Center;
- In our Managed Payments Help article online; and
- In our direct engagements with sellers considering opting into managed payments.
Here are two questions we asked today that remain unanswered:
- Are you allowing sellers to opt out? If so, what are the instructions on how to do so?
- Are eBay employees advising sellers to get an eBay/Square loan to pay off their PayPal Working Capital loans?
Note that we had previously asked eBay if it had informed sellers of *all* of the limitations when inviting sellers to participate in managed payments. And we had also asked on September 30th:
- Is there any way a seller can participate in managed payments for some listings but not all - using the same User ID? or on a separate account?
- What's eBay's stance on informing buyers about why there is an increase in the number of listings that do not accept PayPal?
- Is there a publicly available list of categories that are excluded? If not, could you send me the list?
- Are sellers allowed to opt out? If so, how? There are sellers reporting they are unable to opt out of the program.
eBay has been updating the FAQs
since we've been checking in on the page (without notating the changes and additions). Here's the answer to the "opt out" question:
After I register for managed payments, can I opt out?
No. We understand that every situation is unique, and have developed a path for sellers to flag any issues or raise concerns with our Customer Support team to determine best path forward for their business.