PayPal is changing its User Agreement, including a provision in which non-verified accounts will be unable to use their balance to make purchases.
PayPal is updating its User Agreement
for US users effective April 19, 2018, and one of the changes in how it handles identity verification has a reader concerned. In its March announcement, PayPal explained the change:
We're changing the balance functionality for your PayPal account depending on whether we have been able to verify identifying information that you provide to us.
- If we have not verified your identifying information, a balance in your PayPal account can generally only be held in your PayPal account and transferred to a linked bank account or debit card.
- If we have verified your identifying information, a balance in your PayPal account can be held in your PayPal account, transferred to a linked bank account or debit card, used to make purchases or send money to others.
Restrictions and limitations on such accounts may be lifted upon validation of the user's identity by PayPal.
The reader was concerned that PayPal accounts would lose a great part of their value to users whose identities PayPal failed to verify as a result of the change. In addition, if it impacted a great many US users, it could impact merchants inside and outside of the US, since users whose identities are not verified would be unable to make purchases with their PayPal funds.
He explained his concerns: "Without being "verified" - PP's account balance cannot be used for anything else, except "only be held in your PayPal account and transferred to a linked bank account or debit card. Cannot be used to make purchases or send money to others, cannot be used to through the marketplaces (e.g. eBay, Etsy and others), cannot be used to pay through big-box merchants (who accept PP), neither small/micro merchants through their site, neither cannot do "subscriptions" or pay bills."
The earned PayPal balance for payments received for sold items is becoming worthless and useless, both commercial and for payments from family and friends, he said.
We asked PayPal's spokesperson what must be "verified" and why. She replied, "We will ask users for first name, last name, DOB (date of birth), physical address, and last four of SSN (or tax ID for businesses). We are collecting this information as part of our regulatory obligations."
Does every US PayPal user have to submit documentation outlined in the PayPal help pages (such as this page
), and how many users will be impacted?
"US customers using a balance to complete a P2P transaction or a purchase are required to submit the information," the spokesperson told us.
"We're updating the User Agreement to clarify that PayPal may make changes to a customer's account's balance functionality based on whether we have been able to verify identifying information they provided to us. We're implementing these changes to comply with regulations that require that we obtain verifying information for customers that use PayPal balances to send money or make purchases.
"The changes impact customers that hold balances in their PayPal account. We don't release those numbers. These changes will not impact all users, but only U.S. users who wish to send money to third parties or make purchases using PayPal balance."
It's possible a great many users are already verified. We asked PayPal how users could check to see if they meet the verification requirements. She responded, "Customer who do not meet the verification requirements will be notified by PayPal and we will work further with the user to verify their identity."
This may impact casual sellers more than business sellers, since individuals may be more leery of having to provide social security numbers and documentation to PayPal. (They'll be able to withdraw their funds, but it would mean they wouldn't be using balances to make online purchases.)
Is PayPal identity verification an issue that should concern sellers? Either way, be aware that if your account is not verified, you won't be able to use your balance to make purchases.
Thanks to the reader who raised this concern, it will be interesting to hear what other sellers think about the policy change.