Ina Steiner EcommerceBytes Blog
News and insight focusing on ecommerce.
by Ina Steiner, Editor of EcommerceBytes.com
Thu Mar 22 2018 22:48:17

Pay Attention to PayPal ID Verification Changes

By: Ina Steiner

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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.



Comments (10) | Leave Comment | Permalink

Readers Comments

Perminate Link for Pay Attention to PayPal ID Verification Changes   Pay Attention to PayPal ID Verification Changes

by: angryllama This user has validated their user name.

Fri Mar 23 02:50:28 2018

OK.   I'm glad that Ina follows up on things like this, but in THIS EXAMPLE I see this action / notification by PayPal as somewhere between a PLUS... and NothingBurger.  I see no reason for anyone to HyperVentalate over this as I can't really imagine ANY Bank, Credit Union, or Credit CARD company NOT wanting this short list of required data.  

Perminate Link for Pay Attention to PayPal ID Verification Changes   Pay Attention to PayPal ID Verification Changes

by: TomH This user has validated their user name.

Fri Mar 23 03:04:28 2018

I'm surprised that it has not happened much, years, sooner. I don't know of course, but I can picture that the Feds may have tweaked them a bit.....

Personally I would like to see all buyers on eBay required to provide the same, plus a verified C/C...

Perminate Link for Pay Attention to PayPal ID Verification Changes   Pay Attention to PayPal ID Verification Changes

This user has validated their user name. by: Rexford

Fri Mar 23 06:08:23 2018

I use a credit card anyway for all purchases.  The credit card companies have always had my back when I have an issue.  

Perminate Link for Pay Attention to PayPal ID Verification Changes   Pay Attention to PayPal ID Verification Changes

This user has validated their user name. by: iheartjacksparrow

Fri Mar 23 10:54:30 2018

Didn't PayPal start doing this a while back? I remember distinctly getting a notice from PayPal that my account had to be verified before I could use it again, and they wanted personal information I was not willing to provide through an unsecured e-mail message. I telephoned them, and the CSR took all the information over the phone and verified the account instantly.

Perminate Link for Pay Attention to PayPal ID Verification Changes   Pay Attention to PayPal ID Verification Changes

by: exdwh This user has validated their user name.

Fri Mar 23 19:09:58 2018

Maybe things have changed, but you always needed to link a bank account once you hit a certain spending cap.

Perminate Link for Pay Attention to PayPal ID Verification Changes   Pay Attention to PayPal ID Verification Changes

This user has validated their user name. by: Marie

Sat Mar 24 02:27:06 2018

A linked bank account is not the only part of the verification process.  Certainly part of it, just not all of it.

Perminate Link for Pay Attention to PayPal ID Verification Changes   Pay Attention to PayPal ID Verification Changes

by: IFindBugs This user has validated their user name.

Mon Mar 26 12:02:44 2018

I am surprised that PayPal has not taken this step much earlier. Because of the international nature of the platform, the PayPal system has the potential to be used in illegal money laundering operations.  Though they may not have said so that I have read, I suspect that PayPal has been told by the U.S. Treasury Department (and or the E.U.) that it needs to get up to compliance with the money laundering laws or risk getting shut down.  Just because any given user might never make an international transaction, PayPal has to treat everybody as if they do or will.

I had a similar experience with a foreign exchange company that we use as an intermediary for bank account to bank account international payments.

WARNING TO CORPORATIONS: Even if you are a very small corporation, eventually, if PayPal follows the money laundering laws, you are going to have to supply a LOT more information to PayPal, such as copies of your corporate charter, information and identity documents of your corporate officers, etc., etc., etc.

WARNING TO D/B/A BUSINESS: Whether or not you are a corporation, if you are operating under a business name that is different from either your personal name (for which you supply social security number) or corporate name (for which you supply employer identification number), for PayPal to comply with the laws, they will have to request your proof of your "doing business as" identity.  In our state this meant that we had to file notarized paperwork with our county's register of deeds office, and then obtain a copy of that filed paperwork and send it to our foreign exchanged company.  Also, images of drivers license, etc., etc.  

The money laundering laws are extremely obnoxious because the crooks are extremely clever.  If PayPal intends to fully comply, we (as a community) will be working our way through this annoying process for years.

Perminate Link for Pay Attention to PayPal ID Verification Changes   Pay Attention to PayPal ID Verification Changes

This user has validated their user name. by: thehosst

Tue Mar 27 10:19:16 2018

No true, I was told to upload pictures of social security, taxes, bank account statement, passport or drivers license and utility bill, ALL THAT, and I already had entered full social security, address and verified bank account and credit card. Paypal is trying to collect as much personal and financial information for some unknown reason. There is no last 4 digits of social security number and the bank/card verification is not valid. Paypal is way misleading and is telling different things to people. They need to clarify this in writing for EVERYONE. I been using Paypal for a long time and with this nasty behavior I'm really not happy to use them anymore.  

Perminate Link for Pay Attention to PayPal ID Verification Changes   Pay Attention to PayPal ID Verification Changes

This user has validated their user name. by: JusTrains

Tue Mar 27 20:29:49 2018

RE: RESPONSES FROM IFindBugs and thehosst...

Totally agree having the same experiences.

We are incorporated in two countries and have gone through all of which you both have mentioned. There is a restriction (several years ago) on our account (established in 1999) for lack of "proof", although I don't see it affecting our business transactions, PayPal did pull our PayPal branded card, because after fully identifying the Corporate identity and the top level officers, PayPal also wanted each individuals financial documents as well. That's not acceptable to us.

The Company under law is an "individual" and having us fork over another set of personal information that may or may not be maintained or if that employee is still with the company causes us concerns. The government and banking documents have always been, and should be, enough to identify who is trading under the user name.  

Perminate Link for Pay Attention to PayPal ID Verification Changes   Pay Attention to PayPal ID Verification Changes

by: jaysimkin This user has validated their user name.

Sun May 26 11:55:58 2019

I decline, absolutely, to provide any part of my Social Security Account Number (SSAN) to Paypal. The reason: Paypal's website becomes another place, from which the SSAN can be stolen.

Neither Paypal - nor any other firm - can afford to spend what's require to keep data secure. When JPMorgan Chase - one of the World's larger banks - gets hacked, no one's data are secure, unless security is provided by the US National Security Agency (NSA). The NSA does not provide security to private firms. Thus, I'll cheerfully forego making payments via Paypal.

Data security is not about "privacy". The consequences of a breach of "privacy" might be embarrassment, job loss, or even divorce. Most of use have experienced at least one of these.

Data are lethal. A person, fleeing an abusive ex-spouse / partner, isn't embarrassed if her/his address becomes known to the abuser. The abused person may be murdered.  

On 18 April 1943, U.S. Army aviators intercepted and shot-down a Japanese aircraft, killing Adm Isoroku Yamamoto, planner of Japan's attack on Pearl Harbor. The U.S. had decrypted a radio message, with Yamamoto's itinerary. The U.S. flyers knew where Yamamoto would be and when he would be there. That's all they needed. Data are lethal!



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