PayPal robbed my bank account | Hacker News Reader

PayPal robbed my bank account

jacquesmattheij.com

378 pointsjacquesm185 comments

The whole idea behind Paypal was:

-- we'll do everything a bank does, but without all those "laws" and "accountability for mistakes" that the other banks labor under

Go on, look it up.

And they achieved that goal. Paypal largely escaped regulation as a banking entity. Banks are trustworthy with your money (to the extent that they are) not because they're magically trustworthy, but because there is a regulatory state forcing them to be. Paypal has no regulatory apparatus overseeing it. Paypal will steal your money and your only recourse is to sue them.

PayPal has made the calculation that the vast majority of their customers will not sue them. Therefore, it is profitable for Paypal to steal from these customers. This is now common knowledge. If you use Paypal today, you have no excuse for not knowing that they will steal your money.

How come nobody sues them? How come there hasn't been enough of an uproar to get congress involved in regulating PayPal?

Reading HN, these horror stories seem to be fairly common, or maybe I'm just hearing the same stories over and over again.

Currently we have two choices. You have banks, which are huge, bloated, slow, massive barriers to entry. If you want to build an MVP and accept payments right away, good luck with a bank. But your money is safe.

On the other hand, we have PayPal. Sometimes they steal your money. For a very small business, paypal is easy to get going with. Millions of small business people have decided that this tradeoff is right for them - worst case, you lose a few grand.

I'm hoping congress doesn't turn PayPal into a bank. If they do, we will only have one choice (banks), and life will be harder for smaller businesses.

Thousands of very small businesses have decided PayPal's offers the right set of costs/benefits, why do we want congress to second guess them?

Then perhaps congress should force Paypal to clearly advertise that they make serious errors and steal from you, so that these small businesses are clear on the choice they are making.

>advertise that they make serious errors and steal from you

Might look a bit like a truism .. Paypal bank is a bank?

Seriously though even knowing that Paypal mess up and take money and have terrible customer service doesn't mean that they are necessarily worse than a highstreet bank. Banks mess up and have poor customer service too - admittedly knowing the occurrence rate of monies taken on both sides would allow the price to be weighed against the negative factors (of both Paypal and regular banks) in a more transparent way.

> I'm hoping congress doesn't turn PayPal into a bank

I'm hoping this doesn't mean you think any new regulatory oversight on PayPal would bring more harm than benefit.

In principle, I'm sure one could come up good regulations. In practice, I'm leery of congress's ability to do anything besides make PayPal more bank-like. That would be bad, since if customers really wanted a bank, they would already have a merchant account at one of {BankAm, Citi, Chase, PNC, ...}.

Some sort of "cc-number portability" regulations might be useful - i.e., if your customers saved their recurring payment cc-number into PayPal, you can take the cc-numbers to a new service provider. It's a minimal intervention which empowers customers.

I'd also be interested in having congress create a BankLite category of institution - more protections than PayPal, but not as heavyweight as BankAm. Some people want something which is 51% paypal, 49% bank, and a BankLite category might fit their needs better. Shoehorning PayPal into this would be a bad idea, but creating the option might be helpful.

[edit: As suggested by extension, better disclosure of PayPal's non-bank like nature would also be very helpful. Minimalist regulations which enhance customer choice/knowledge are awesome.]

I've been using PayPal since 2001 when I signed up in order to send Sluggy Freelance a $5 donation. Since 2002 I've used it increasingly for payments from my freelancing customers - there was no other convenient way to get money from Europe to America, and PayPal revolutionized the translation industry (along with Moneybookers and similar services, but PayPal is the biggest).

Not once have I had any problem with them.

Jacques, I've had a bank - a real live regulated bank - deduct my paycheck instead of depositing it, and not notice until I complained. Granted, they fixed it immediately when I complained, and PayPal may not, but human error does occur. Certainly PayPal has never gratuitously deducted money from my account.

Here's the thing though: when the bank made a mistake, you had recourse. You actually had someone to complain to - you could go to a branch or otherwise deal with a human. With paypal, you have no recourse, except to hope your case gets voted to the top of Reddit and some paypal insider takes pity on you.

There are several 'internet only' banks, or phone only banks. You have a similar amount of recourse with those.

you're overestimating the worth of that human- retail banks are generally franchisees, and they have very limited powers. If the problem has to be escalated, you're in the same place as you would be with Paypal, except BoA insiders don't read reddit.

You're with the wrong bank maybe. Once upon a time I overdrew my account by $10 and was charged $35 overdraw fee. My account balance became -$45. Someone sent me $50. I then withdrew another $50, and because the account balance was negative again, I was charged another -$35 and left with -$80. When I found out I was angry, I knew the rules were that if you overdrew your account you have to pay a fee, but it seemed ridiculous that they'd charge me twice when it only ever briefly went over 0 again. So I went to my local branch and asked one of the bank staff about it. They apologised and reversed not just the second overdraw fee but both as well! Quite happy with my bank that day; The rules were there and I knew them but they still refunded all my fees back.

I can't even imagine a Chase teller doing that, and I like the people at my bank.

It was the commmonwealth bank of australia.

I'm from the US, perhaps that's why we don't see eye to eye?

The ability to go into a branch and refuse to leave until something is done is not a silver bullet, but it's something. If you happen to run in to 2 or three other unhappy customers with the same idea, it's even better.

> Certainly PayPal has never gratuitously deducted money from my account.

I'm happy for you and hope that you will never be in my shoes.

Likewise. Sorry you're having troubles. I agree with the sentiments elsewhere in the thread, that you should take it up with the European banking authorities.

I think the whole thing will end up revolving around whether or not giving paypal access to your bank account gives them carte-blanche to remove and / or deposit money at their whim.

I would argue that they don't, that they need an explicit instruction from me to do so, they will probably argue that they don't need any permission at all, that the permission once granted stays granted until explicitly revoked.

I've been using PayPal regularly for over 10 years as well, as in, almost daily, for work. I, too, have never had a single problem. I have had occasion to call them for phone support in one instance where a PayPal debit card was stolen, and in another where there was an error in my account balance, as something was deducted twice. In both instances, they were very helpful and had the matters resolved in minutes.

I'm not discounting the problems other people hav ehad, just sharing my own experience with PayPal.

"Granted, they fixed it immediately when I complained, and PayPal may not"

That seems a rather large caveat.

I second that. I run my entire SaaS business through PayPal, dozens of transactions each day, and while I've had a few problems with large payments being flagged as "suspicious" they've not resulted in me losing any money (as far as I'm aware... ;-).

It isn't necessarily an evil thing to want to be out from under those regulations. A lot of them are what conspire to make your banking experience terrible. For example, why can't you transfer from your savings account all you want? Regulations. Why do banks have such onerous process for signing up for a new account? Regulations.

Which is not to say that PayPal isn't sleazy-as-all-hell. The whole point of PayPal was to find a way around the regulations so that they could make a ton of money by gaming your financial transactions in their favor, and cutting out the credit card middle man. Have you ever paid attention to how ardently PayPal tries to stop you from using a credit card to pay?

The really sad part is that PayPal had the chance to become the Next Big Financial Thing. Their core ideas—if you separate away all the evil, that is—are not bad ones. “Make online payment easier and more secure.” Unfortunately, they seem to have dropped the second part and just settled on “Make online payment”. They took the short-term road to profit and missed a much, much larger play.

"Make payment easier" is a bad idea. The difficulty is designed to make it easy to track. Making it easier makes money harder to track, which is a Bad Thing.

I disagree, in the strongest sense possible. Payments are hard for consumers because banks prefer it if you funnel money through channels they make money on (e.g., Credit Cards and accounts with stiff fees).

For large financial institutions, they move money in different and less expensive ways. For example, ACH fees are a tiny fraction of the cost that you use when you move money by credit card, and they're almost frighteningly easy to initiate (there is 0 authorization for these). It's just rare for the banks to expose a way to do ACH for you except in the specific case of billpay (and even then, many institutions handle these as mailed checks rather than ACH).

The idea that finance has to be hard with big ceremony in order to be secure is a clever ruse by big banks. They're not content with the large amount of security-from-competion that regulation gives them. They want your trust, and they're not afraid to scare you into believing that they're the only option.

Credit cards have stiff fees? Seems to me it's pennies per transaction.

I really don't believe it's a ruse, or even that the fees are that large. They're large for small businesses - and that's far from the only place where small businesses have trouble competing with the economies of scale larger players can use.

The swipe fees (paid by the merchant) are composed of a switch fee (goes to the network), plus an interchange fee (which goes to the bank that issued the card). They can be quite substantial, ~1.9% on average.

Interchange fees in the US are some of the highest in the world, and rising. They are a lucrative revenue stream for banks (iirc, ~$40 billion annually). See this piece by Felix Salmon for more: http://blogs.reuters.com/felix-salmon/2010/01/05/the-interch...

Thanks to the passage of Frank-Dodd, they should be dropping soon.

I either don't agree with your point, or don't understand it. Why is it a bad thing (and who is it bad for) to make money hard to track? I'm also pretty sure payment is difficult for far more reasons than just tracking.

I hate to be so flippant, but do you not care where your money is? If money is hard to track, it's hard to tell who has been paid. Money laundering, for example, would be easier if money were harder to track. So... I can't imagine that making money laundering easier, in general, would be a good thing.

You're saying that everyone should have difficulties with payments so that the government can track criminals. By this logic, why have payment services at all? Then money laundering would be entirely impossible.

It's a bad thing because it requires a business model where bucking the Federal government is a key requirement.

Cynically stating that PayPal is truly attempting to "steal" from their customers is incorrect. Based on most of what I've read (and I, like everyone here, have read a of PayPal horror stories...), PayPal "stealing" is really just PayPal giving a false positive about fraud and having abysmal customer service. While the end-result is indistinguishable from "stealing", they at least deserve the distinction.

However, that certainly doesn't excuse their actions. I wouldn't object to further regulation for PayPal but I have a feeling this won't happen anytime soon.

No. They are fully aware that their support is abysmal and they are fully aware of their false positive rate and they are fully aware of the positive consequence to their bottom line. Just because they abstract the stealing process doesn't make it less stealing.

> Theft: the illegal taking of another person's property without that person's freely-given consent.

We all consent to PayPal's terms when we choose them over some of their competitors.

"While the end-result is indistinguishable from "stealing", they at least deserve the distinction."

Sometimes the most straight-forward word to describe a thing brings the most clarity to the discussion. Doesn't pretty much any thief have a euphemism for what it is they do?

I agree, the word "feels" correct. The problem is we consent to using PayPal. Check this out:

> PayPal, at its sole discretion, reserves the right to close an account at any time for any reason, including but not limited to a violation of this Agreement, upon notice to the User and payment to the User of any unrestricted funds held in custody.

Didn't everyone click "I agree" to that?

1) I hate paypal.

2) I would respectfully argue that your point about banks being safe due to regulation is quite false. On the contrary I would say that it is (over-)regulation that causes banks to lose sight of their reason for existence (hint: its not selling mortgages to fanny and freedie), protection of capital (a service they used to charge for - Remember monthly checking fees?).

Banks used to be in the business of protecting capital before the FDIC insured deposits for them at an insanely low price (relative to the risk the banks can take), thus killing the "Capital Preservation" specialized bank and entered free checking / free saving / free homes. Low reserve ratios and a never evolving asset classification (Mortgage backed securities were satisfying the reserve ratio for banks? Only government regulators could think up that one) allowed banks to play with everyone's money. Was it because of greed? Kinda. Exacerbated by having customers deposits insured? Now we're getting somewhere.

Your point is not necessarily wrong, since most regulation is just a standardization of norms and practices common in the industry. But regulation can be bad (as almost anything in excess can be). The real reason Paypal sucks is my next point.

3) The real reasoning for their horror stories lies in the fact that they are simply an intermediary (of sorts, I believe that Paypal, the intermediary, is separate from Paypal, the bank). Person X pays Paypal and Paypal pays person Y. There are many ways this system could break down, but the most expensive for paypal are:

- Person Y (the getting-paid) has their account hacked and starts scamming people on eBay, listing a lot of auctions and getting paid, never shipping stuff, and running with the money. eBay has made it harder to do this though, since you have to provide proof of shipping to get the funds released.

- Person X (The payer) - has their account hacked (or their just a terrible person) and they charge up $1,000 in online shopping. Person Y ships the merchandise and Person X files a chargeback against Paypal. Paypal must then freeze that amount, sometimes taking it out of your bank account, to make sure they have the cash in case they lose the chargeback claim (which is really easy to do).

In the end, I'm not really sure where they system breaks down. Paypal is over-zealous about trying to prevent fraud, but, unfortunately, they are at the mercy of the Credit Card processors. Its kind of amazing that they were able to create a market where they are bullied on all sides, by essentially bullying their customers.

Banks used to be in the business of protecting capital before the FDIC insured deposits for them at an insanely low price (relative to the risk the banks can take)

They were never very good at that business, though. The main problem is that even a very conservative bank can't survive a large-scale bank run, and bank runs happened about every 15-20 years for an extended period of time: in the U.S., the Panic of 1819, Panic of 1837, Panic of 1857, Panic of 1873, Panic of 1893, Panic of 1907, and finally the panics of the late 1920s.

And now we're getting into the some good stuff. While there were events named "panics", before Quantitative Easing was even a buzzword, they oddly resemble their central banking modern day equivalents, primarily because they were/are caused by the same reason - Government meddling in/with the money supply.

I won't go through them all, but they faced the same problems we face today, and the same actors are the cause:

In the panic of 1873, lots of railroads had been financing up to the hilt with debt because you couldn't lose money building railroads (or houses, right?) and they lobbied the government for easy money policies (non-convertable notes, issuing more currency) so that the value of the greenback would drop, making their outstanding debt worth less in real terms.

Then the supreme court ruled in Hepburn v. Griswold in 1870 that "Legal Tender" (non-convertable US notes) was unconstitutional as per article 1 by a 5-3 vote. That shook up the market for the greenback, which was already trading at a heavy discount to gold dollars. But, don't worry, sure to create fear in the markets, President Grant appointed two new Republican judges (one open spot, and another spot created by a Majority member retiring post-vote), who quickly overturned that decision in Knox v. Lee by a 5-4 vote in May 1871.

Add on top of this divide between wanting Gold backed dollars vs US non-backed "greenbacks", the money supply doubled as new banks opened and loaned out too much. According to Murray Rothbard:

"The panic of 1873 was, not to initiate a great depression, but to cause bankrupt- cies in overinflated banks and in railroads riding on the tide of vast government subsidy and bank speculation."

I can see that argument for some of them, but some of them seem clearly unrelated to government meddling with the money supply. For example, the Panic of 1907 was caused by a failed stock-market-cornering scheme, which caused a cascade of failures when it collapsed (the cascade exacerbated by loss of public confidence leading to mass deposit withdrawals).

The trigger seems less important than the fundamental problem of bank runs, though, which is as old as banking: some trigger will eventually come by, and then you're hosed. The only way besides deposit-insurance I can think of to avoid it is full-reserve banking, where a bank literally holds its depositors' money in the vaults. But such banking has never been commercially very successful, because it has to charge fees and pays no interest to depositors, and when there hasn't been a crisis in some years, depositors' memories grow short, only to be awaked again in panic when it seems another crisis might loom.

One possibility could be to mandate that normal retail banking be full-reserve, by prohibiting banks that take retail deposits from lending that money out. That'd be fairly draconian regulation, though, even more strict than the old Glass-Steagall regulation of what retail banks could do with their deposits. (It seems Rothbard wants to get rid of fractional-reserve banking without the government banning it, but I'm skeptical it would actually go away the way he thinks it would.)

Thanks for the engaging discussion _delirium, its one of the best (well-mannered) I have had on HN in some time.

As far as full reserve banking goes, I think that it is all too easy to forget what bank products were actually intended for and how they are used now. For instance, a bank could in theory offer full-reserve banking without charging a fee to its customers by utilizing age-old banking products: The fixed term Certificate of Deposit (CD) and the Savings account.

If you wanted to invest your savings into something that would draw interest, you would use a CD, and the bank would be able to lend out that money for the designated length of maturity of the CD. Yea, mortgage interest rates wouldn't be 4%, but the proliferation of Buy now, pay later attitudes would decrease also.

If you didn't want to tie up your money for a fixed length of time, you could put it into a savings account. No way, other than by transferring to another account could you get money from this account. The bank could use this for shorter-term liquid investments (treasuries, whatever).

Checking accounts and accounts with access to credit / debit cards would require a fee and the bank could not lend out those funds, as they are held in full-reserve.

Ta-da, full reserve banking (not sure how Rothbard would have felt about the savings account thing). Way off-topic from the OP, but a great debate non-the-less.

"Way off-topic from the OP, but a great debate non-the-less."

I find this discussion very relevant to the question of whether Paypal is a bank, whether it should be a bank, if we were better off if Paypal was brought under government banking regulations, etc.

A bank doesn't exist to safeguard your capital. That's what they tell you to convince you to deposit your funds there. The government promises to make good any bank failure in order to convince you to deposit your funds in a bank both because it helps the economy and because it makes it easier to keep track of you for tax purposes. Before this guarantee it was common enough for a bank to fail and depositors would lose all their funds.

A bank exists to take in deposits, pay interest and then loan that money out to other people at a higher interest rate. It's a completely different model to PayPal, which exists as a payment transfer company along the likes of Western Union. Yes, they avoid banking regulations, but the banking regulations exist to protect the banking industry, as widespread bank failures can seriously damage the economy. This is because banks use fractional reserve banking and actually don't have the funds to satisfy all depositors at the same time. There's no reason why a payments transfer company should be regulated like this, because PayPal should be able to make good all requests for funds at the same time, as they don't (well, I hope not) leverage the funds on deposit and lend them out again.

If any regulation should be applied to PayPal, it should be in the area of consumer protection by having an ombudsman or defined area of recourse for settling disputes. But because of the trans-national design of the business, this is never going to work. And any increase in regulation is going to cause an increase in fees, which is the reason everyone uses PayPal in the first place.

Actually, in Europe Paypal operates as Luxembourg-based bank.

Technically, this is true. Being based in Luxembourg, however, effectively abrogates the effect of the regulatory aspect of things. I am not au fait with the ins and outs of Luxembourg's banking laws, but I do know it is a grey area of banking in the wider scene. Countries that tax worldwide income (e.g., US, Germany) routinely decry Luxembourg as a tax haven. I suspect, therefore, that Luxembourg does not regulate or apply its laws to commerce that occurs outside its borders. As I noted in the last round of "Paypal-was-architected-by-robber-barrons", Amazon in Europe is also incorporated in Luxembourg. Aside from its proximity to Brussels and being at the centre of western Europe, this is almost certainly for tax reasons. That is, they don't ship (or ship pitifully little) to Luxembourg itself and so pay considerably less in taxes than they otherwise might. Similar, though considerably less convenient, havens also include Jersey, Gibraltar, and Cyprus, all semi-autonomous regions belonging to the UK that attract businesses by taxing only commerce that occurs between two parties within their borders.

FWIW, I wouldn't touch PayPal with a barge pole. We use RBS WorldPay because 1. we get favourable terms as we have an account with RBS, 2. we get 1% transaction costs with no monthly fees,and 3. we get fraud protection by RBS WorldPay for free.

The tech folk at RBSWP are not the sharpest tools in the shed, but RBSWP itself has proven to be good for us financially. Another one that is quite popular but whose breadth of availability I do not know is SagePay.

Paypal is regulated by the luxembougish banking association. The most important rule is "know your customer". If you don't do that as a bank, you will go to jail if you have dirty money coming in.

I suspect all those crying foul in the past (also the minecraft) guy never provided identifying information (an email and a name is not enough!) and when your account exceeds a certain quota, you have to provide these information.

" I suspect, therefore, that Luxembourg does not regulate or apply its laws to commerce that occurs outside its borders."

is just plain wrong.

It may be. But it is true that most tax havens, including the other three I mentioned, do not tax anything that does not happen within their borders. That is why there is the infamous address in the Caymans to which some 8000 businesses are registered, according to Obama.

What you are claiming holds for Delaware (which is in the USA!). Just google for delaware tax haven.

What you said is not true. According to the first link in the google search you recommend...

http://www.lectlaw.com/filesh/bbg33.htm

"Delaware LLCs pay a $100 annual tax and are otherwise tax free if no business activity is carried on in the US, most of its members are not US citizens or residents and it does not invest in US companies."

That's a lot of if's that there's no way a company like Amazon could satisfy. Also:

"Although there is no state income tax, as with all states no matter their particular tax laws, all US companies (or any entity for that matter) are subject to applicable federal tax laws & reporting requirements."

In other words, of course US taxes are still payable for companies incorporated in Delaware.

How do you get no monthly fees? We have an account with NatWest (RBS group), but the site says 20 euros/mo.

Talk to your WorldPay account manager. We started off at 20 pounds/mo + a set transaction fee and then switched to 1%. It doesn't hurt so much when you are first starting out and it gives a helpful percentage to use in projections.

Thank you, I've send them a contact enquiry. How can it be so cheap, though? PayPal does 3.4% + $0.35, and WorldPay does just 1%? Is there a catch?

Does this mean that the horror stories of frozen assets donn't/won't happen to European accounts?

I also confirm. My account is frozen for no good reason since 1 year. No reply to any mails. Germany.

I once used my Bank to get back my money from Paypal. Paypal took an amount from my credit card. So I called the bank and told them, Paypal did it without authorization. I had to fill a form and got my money back within a few days. I gave Paypal only access to my credit card, not to my bank account. Although they claim in their terms and conditions that this is correct (account OR credit card), I assume this is the main reason why my account is frozen. I can't even close it or delete data.

I can confirm that they are sitting on 2000 GBP of mine and not responding to anything.

Stop contacting them, and start contacting the relevant authorities.

It's looking increasingly likely that I will have to sue them.

Just recently a story was published in Germany where they evaded their responsibilities as a bank by clever shifting of responsibilties between eBay, PayPal and the credit-card issuer. So in case of a TV shipped to a identity thief chargebacks were no longer possible (I cannot find the article right now).

Another story where PayPal doesn't provide chargebacks to the customer after paying a non-shipping company:

http://www.heise.de/ct-tv/artikel/Video-Vorsicht-Kunde-80133...

(Update: I had the description and the video mixed up...)

Considering that this story was from Europe, that doesn't appear to be the case.

I can assure you (from my own experience) that these horror stories also apply to EU accounts. In fact, the article was written about a Dutch PayPal account.

Businesses don't need the government to tell them how to treat their customers. It is in a company's best interest to be accountable for their mistakes because if they don't they will lose business.

Fraud is and always has been illegal, so why we would need a regulatory institution to tell businesses how to treat their customers is beyond me.

If anything, regulations just protect bigger companies from smaller competition because smaller companies can't afford to bear the cost of complying with regulations.

Businesses don't need the government to tell them how to treat their customers.

Apparently some do.

The annoying thing is that in cases like this, people are not supposed to just resign themselves to take it and they are not supposed to try to get Congress to force PayPal to do what they want by fiat, they are supposed to look around, say, "Oh, PayPal is a dishonesty entity that makes a lot of money from stealing; if it hasn't happened to me yet, it is more happenstance than anything else", and not use PayPal. This is a great opportunity for someone to create a non-broken, non-evil PayPal and make money off of it.

That is how the market is supposed to work but people are generally too lazy to care or do any research before they go on with something. What good is it to keep running to the government to tattle on everyone who crosses us? We need to teach people to cultivate a brain and learn from their mistakes instead of getting upset and running to Uncle Sam crying about the bully down the street; instead of trying to make your dads fight, just don't play with the bully anymore and the problem goes away.

PayPal should be running amiss of generic anti-evildoing laws involving fraudulent activities and deceitful business practices without the need for any specific legislation.

I don't think the problem is as much that end-users don't care enough to want alternatives, but that it's near impossible for an alternative to exist. During the dot-com era when PayPal came about, there were many other 3rd party processors doing the same thing, and they went out of business primarily because they were losing more to fraud than they were making on fees. PayPal was losing tens of millions of dollars a month at one point, but they managed to create good enough screening systems and policies in place to stay in business.

These days even if another company were to manage the fraud as well (which will almost automatically make them as bad as PayPal with freezing funds and accounts... you know real merchant accounts underwritten by banks do this too), but the regulatory climate around finance is so different that they'd be unlikely to get off the ground. Visa/MC/Amex/Discover would never agree to allow such large scale factoring (accepting payments on behalf of another business, forbidden in every standard merchant account agreement) again.

I wouldn't jump to conclude that regulation is the only answer. One of the reasons we have so little competition and innovation in this space is regulation.

It would be nice if Paypal got pulled in to line a little, but what I would really like is an alternative.

BTW, don't we already have laws against stealing?

Ugh. Yet another PayPal disaster. I'm gearing up to go live with a new Mac application in about 6 months time, and I had planned on using PayPal as the preferred payment method, as it seems to come with the least headaches. But it seems you can't go a month without yet another PayPal tragedy popping up on HN.

Is there any other payment service out there that doesn't have as many problems (especially with customer service) as PayPal? Or better yet, is anyone on HN creating a startup to handle credit card payments that I could use instead of PayPal - ideally, it needs to be dead simple to use - I'm thinking less than 20 lines of ruby, or 50 lines of C to use. Anyone working on something like this?

As evidenced by Max Levchins recount of Paypal's problems in "Founders at Work", the massive problem with handling credit card payments is fraud, not coding or something similar. That's most probably the reason why so few firms tackle this space.

Exactly. A huge number of people seem to ignore this and make the naive "Why doesn't someone just do what paypal are doing, but better?" type statements.

There are so many problems Paypal faces when offering the service they do, granted some of these problems faced by people are ridiculous (like this one we're posting in) but the average problem that is reported is reasonable.

Maybe it can be argued that unless Paypal can guarantee fantastic service they shouldn't operate as a business, but I (as a customer of Paypal) love their service, it'd suck if they went :-(

First off, I had a bad PayPal experience years ago, so no amount of discussion would persuade to me to use them. I wouldn't use them if they, or anyone else, paid me. They are that bad.

Putting my bias aside, what you need to consider is the time and stress that will occur if -- I'm straining not to say when -- things go wrong. If they do go wrong, then you will meet a void of silence.

You will spend huge gobs of time -- and incur costs -- trying to sort things out, and you will completely without control. You will lose sleep. You will be distracted. And if the sum involved is large enough, it could be disastrous for your business and perhaps your life.

Now, ask yourself: what you would pay to avoid those risks?

I suggest the simple answer is to sidestep the risk and simply not go there.

You know what? I should have known better. We had $50K frozen for 6 months about 10 years ago when paypal suddenly decided they liked our money more than we did.

Eventually they paid it back but not after all the symptoms that you just described.

Then, about a year ago I did a project with a freelancer in the US (another HN'er) and I ended up having to pay him using paypal because we had no other viable option.

So, I thought maybe they'd cleaned up their act in the meantime.

Now I kick myself for being so stupid.

After a few bad experiences with Paypal, I always use wire transfer when paying someone else or being paid as a freelancer... It works well, it's more often than not cheaper than Paypal and anyone who has a bank account can receive wire transfers.

When, or how, is a wire transfer cheaper than Paypal? In the US, wire transfers through banks tend to have fixed initiation costs on the order of $25-$35.

I can wire money to anyone within SEPA [1] (EU pretty much) without any fees.

[1] http://en.wikipedia.org/wiki/Single_Euro_Payments_Area

Yes but with Paypal between fees for changing currency (2.5%) and other fees it quickly adds up...

Plus, you have to convert to a business account (additionally to having to send a lot of different documents to prove your identity) if the amount is more than 2800$ and then it's 3.5% fee.

So yes internally in the US paypal is cheap but once you go cross border it's expensive and it's a headache

http://www.fastspring.com/

Never had problems with them. They have a great customer support and a neat admin interface. They take payments from PayPal too, so you don't have to renounce to those.

While it forces you to get an actual merchant account, the experience when using ActiveMerchant is super easy to integrate. It's certainly less than your 20 lines of Ruby.

And if you wanted to go that route, it supports a ton of backends, so you could actually start with PayPal until you get a merchant account, and then switch over.

Google checkout?

Nope. The experience is just as crummy, the support is even worse and there are pretty big geographical restrictions on both sides of exchanges (sales and buys).

For instance, as far as I know you still can't buy or sell from Canada (with a canadian bank account anyway) via Checkout.

Only alternatives are going straight for the credit card, or using international bank transfers (which I doubt are without hassles)

For single payments (freelance stuff or whatever), Western Union ( http://www.westernunion.com/ ) might be the way to go.

I received money via WU for about a decade with zero problems.

But for online shopping, I don't have an alternative.

Western Union is aimed at transfering money, not buying/selling goods. I had to transfer money to someone with WU and had to ring them up to verify it. They explicitly asked on the phone if I was sending money in exchange for goods, and that they don't support that, and you shouldn't use WU for that.

This is would scare off most customers and is not a good business idea.

I think those kind of checks are country-specific... I always received money here in Uruguay (from Austria and Canada) and nobody called the senders (family members or friends of family).

Still, you're right... Wikipedia says: "Western Union advises its customers not to send money to someone that they have never met in person."

Western Union is very expensive, especially when currency exchange is involved. Maybe once a year I accept a payment from some part of the World where this is the buyer's only option. WU usually eats my margin, but I feel a little better for getting stuff out to where it otherwise wouldn't.

I feel like WU has also been tainted by their frequent use by the 419 scammers.

Does anyone actually want to pay right out of their bank account? I won't even use my debit card online.

In Europe, yes.

Bank transfers are the default form of payment here, until very recently most people didn't even own credit cards.

Even today you can't use credit cards in most supermarkets in Austria, but you can normally pay with a direct bank transfer.

Or chip and pin.

Only for US and UK sellers (and Amazon's payment service is only for US sellers iirc).

Honestly, it's really not that difficult to set up a merchant account. The only drawback (from my perspective) is the monthly fee.

Is it? Who can I get a competitive merchant account and processing with here in the UK that lets me charge arbitrary amounts (i.e. not selling "products") without a laborious signup process? PayPal's the only thing I've found close to this over the years.

Sorry, I'm not familiar with the available options in the UK.

jacquesm, There are two potential solutions. The first is having a separate bank account specifically for use with paypal. This gives your "real" bank accounts some degree of separation from the at-risk account you've used to become "verified" according to paypal (note the unhealthy amount of sarcasm on "verified"). This is the only working approach if you must be "verified" by them.

The second method is far better; _ONLY_ give paypal a credit card number. You will not be "verified" according to paypal, but you now have control. If palypal does anything stupid, you just file a dispute/charge-back with your credit card company. When you reach the stupid "spending limit" for an "unverified" account, simply delete your credit card number from your paypal payment methods, then close your paypal account. Now you can create a new paypal account with a new email address and the same credit card. The result is you just by-passed their spending limit that _forces_ "verification" when reached.

EDIT: Yes, I feel giving paypal your bank account credentials is absolutely foolish. They try everything they can to get access to your bank account(s), but at least there is a way around their stupid games.

We're in the 'first' situation now, but the downside is that if paypal does decide to plunder your account that you are instantly below 0. I never even realized they could do that until it happened.

The second method is better but unfortunately paypal would not authorize any payments (from my credit cards!) until they had a confirmed (and thus accessible) bank account.

I had something similar happen with a shady merchant account company. I had changed some details I had on file with them a year earlier, so they said I couldn't cancel the contract I had with them without penalty, because we signed a two year contract and "it hadn't been two years" (it had been four years, I just changed the address and other simple details on file but apparently they were saying it was only a one year old account). I called my bank, told them to block all charges from the merchant account company and give them no access, and they did. The merchant account company sent a number of threatening letters and would call me at asinine hours (5AM Los Angeles time) but eventually they went away, and they didn't get their $600 cancel fee or whatever nonsense. This was a few years ago, when online payments was more of a wild wild west type deal, I think it's gotten better since then.

Anyways - you can always call your bank and explicitly them to block access. For bonus points, tell them you're recording the call in the beginning (even if you're not), and take down the person's info. Then if there's a problem, you can say, "I explicitly told teller John Winterman on 18th October at 2:25PM to deny access to Paypal." This kind of accurate record keeping makes banks take you very seriously. So yeah - call the bank and deny access, or reverse-reverse charges... the bank is generally on your side if they're decent. (And if they're not decent, get another bank! I've found all the RBS owned banks to be good quality - RBS, Citizen's, and Charter One, if any operate near you)

> unfortunately paypal would not authorize any > payments (from my credit cards!) until they > had a confirmed (and thus accessible) bank > account.

Please elaborate. I'm not sure what you mean by this, and there may be (are!) differences between how paypal operates in the .us versus the .eu.

Were you not allowed to _send_ money with only your credit card on the paypal account?

Or were you not allowed to _receive_ money with only a credit card on the paypal account?

Sorry. It's late here, I'm tired, and I'm not reading your words as clearly as I should. Though I haven't done much in recent weeks, I do volunteer work for a non-profit organization here in the US that specializes in helping victims of online fraud. Sadly, the "paypal drained my bank account" story is repeated regularly.

> Were you not allowed to _send_ money with only your credit card on the paypal account?

Yes. They kept asking for a verification of the account, without that no further processing possible. Please note that this is a corporate account, not a personal account.

> Sadly, the "paypal drained my bank account" story is repeated regularly.

ouch.

Ahhh, though you said "corporate account," I'm betting you actually mean a "Merchant Services" account. There are actually a number of different types of paypal accounts, each with their own set of rules and features. Paypal --very intentionally-- tries to confuse people by not clearly listing both the various types of accounts and the various risks associated with them. They also very intentionally do _EVERYTHING_ they can to get your bank account credentials.

For example, in your situation, there may have been a somewhat hidden link to "other payment options" but of course, the only default you saw was "enter your bank account number." Paypal pulls this shit constantly, and all it takes is one wrong click (or less than careful reading) to trap you into an endless page reloads of "please enter your bank account" nonsense. --It's extremely scammy and they use every anti-pattern in the book, heck, they probably wrote the book.

I should also note, NEVER use a bank account debit card with paypal or online. These are also another way your bank account can be completely drained by attackers or less than honorable businesses.

> to trap you into an endless page reloads of "please enter your bank account" nonsense.

That pretty much describes what happened.

I will take your information to heart and get paypals access revoked and I'm going to close that account and open a new one just to be sure.

Thank you very much for the helpful info, I knew paypal was bad, I always thought the 'bad' limited itself to my balance on their end (which I made sure I never had).

This is a bit of a shocker really.

I wish it wasn't such an unpleasant shock for so many people, but very few people even think about how something actually works and the risk models being used. In the case of paypal Max Levchin (sp?) created a brilliant fraud detection (risk analysis) system, and also made sure to mitigate risks to his company by making sure someone else could be put on the hook when something goes wrong (i.e. why they press so hard for direct access to your bank accounts). Even though it is a brilliant design, and a profitable business, the entire company is dubious because it profits from putting normal people (users) at risk without ever informing them of the risks.

> I will take your information to heart and get paypals access revoked and I'm going to close that account and open a new one just to be sure.

To be fair, PayPal transactions to/from your bank account happen via ACH. ACH (automated clearing house) has been around long before PayPal existed. It is also used by various other entities for periodic payments (like insurance, utilties, etc).

I was once told that a common savings account can have inbound ACH (money sent to you) but not outbound (money sent from you). Might want to talk to your bank about this.

One of the things I love Greek banks for is that they have none of this overdraft nonsense. If you have no money in your account, the transaction fails. I've tried to buy groceries and things a few times without having money in the account, and it just didn't go through.

In Austria, you go negative, it's a loan. No penalties, just interest, if you don't fill it back up quickly. Reasonable interest.

That seems like the sanest option to me. (I don't think it happens very often, either - Austrians don't use credit and they have a lot of savings on average.)

You can get this in the United States, too. Get a checking account with ING Direct. I don't make a habit of overdrafting, but it has saved my bacon a few times when e.g. I forgot that a credit card payment and estimated tax payment both happened the day before my client's check cleared.

US service members or their families can get the same with USAA. You can choose another account, credit card, or line of credit.

I can choose whether I want automatic loans or failed transactions.

That's also much better than the overdraft ripoff, but I'd much rather not owe anyone. I guess the best thing would be for the bank to offer that option when opening the account.

Isn't that exactly what the new CARD Act requires all US banks to do?

The worry about Paypal dropping you below zero is a very good one, as I wrote about my experience with it: http://news.ycombinator.com/item?id=1664224

Just curious - how does it look from the technical side? Does PayPal use direct debit or something different?

Yes, direct debit. They authorize you account by taking out a minimal amount that you then use as a one-time pin to verify that you are the owner. After that they apparently can do as they please which is not how I thought it was going to work (I expected a verification step from my bank with each payment, a system called iDeal here).

You can (and should!) dispute direct debit. I believe that in most countries you should get a refund no questions asked. Check out the details with your bank.

That's a good one, I wasn't aware of that possibility (nobody ever got it in to their heads to take more than was due). From what I recall direct debit payments can be disputed when they're periodical, and then only for the last transaction, this is not at all like that but I will inquire anyway, because if that works I can resolve this really fast.

Thanks for the hint!

It might depend on the country, but I don't think there's one where you hand out your wallet and have no recourse whatsoever against fraudulent withdrawals. My bank (Poland) lets me revert any DD withdrawal through they web interface. The time limit is 30 days (business accounts 5 days only.)

> business accounts 5 days only.

It's a business account but I'm going to try to anyway.

I can't wait to hear how it turns out. I've just joined ebay and became a paypal customer and your story creeps me out.

The first is having a separate bank account specifically for use with paypal.

IMHO, this is crucial. Years ago some friends started an online business selling trinkets and they asked me about paypal. The advice I gave them and still give is to open a completely separate account for your paypal deposits. As as soon as paypal pays you, move that money into your real business account. This will not prevent paypal holding your money hostage, but it will stop them from taking money back out of your account.

If you only need to use paypal to purchase things you can use the method above, but it's easier to just hook it up to a credit card.

In many European countries (I don't know about other countries) there's not so much different between these two options. In fact, in Austria it's even easier to cancel a charge to your normal bank account (which you can do without giving any reason, and even if you initially approved the charge), compared to your charge to your credit card (where you need to claim that the charge was unjustified).

Real banks make mistakes all the time.

I once had a $35 check clear the bank for $4,035. That caused a domino effect of bounces. But the bank fixed it up -- I even got them to write me a letter of explanation to give to my landlord, and use in the future for any credit questions.

My wife is a bit anal about the bank (she's an accountant). She used to call the 800 number every morning (that was before online banking) to double-check the balance. It was quite common to see random discrepancies of as much as $5, which would resolve themselves the next day (this was a different bank than the anecdote above). I have no idea how that happened, but it didn't seem to make any difference to the monthly bottom line.

> Real banks make mistakes all the time.

Indeed they do. Not only do banks make mistakes, but the Federal Reserve does as well. For those who don't know this, the Fed is responsible for national check clearing (other than bank-to-bank cash letters, what we in IT would call direct peering). The Fed is the operator, for check clearing, of what we would call the core routers.

A number of years back, the Fed made a mistake in my favor (a sizable mistake). I discussed it with the bank. The bank said they had to wait for the Fed to resend them the correct item. We're both still waiting. Sooner or later I'm going to give up waiting :)

If it's a significant amount of money you should probably talk to a layer of some kind before you "give up waiting :)"

However, chances are this is one of those wait 7 years from the event then close the acount and keep the money.

That last part of what you write is what it is all about. This did make a difference to my bottom line.

The mistakes bank make are all backdated and your statement is adjusted, you'll never see the difference once it's all over. But what paypal did here created a mess that will take quite a bit of work to untangle when it needs to be explained to Her Majesties beancounters.

Indeed. Seems like PayPal is a good argument for the anti-regulation philosophy. Reputation on the free market is just as good a protection/guarantee as any regulation. Of course it would be even better if PayPal had stronger competition.

    Now, for me a BANK (which is what PayPal is here in
    Europe)

If they are a bank, I'd anticipate that you could call them and insist on speaking to a compliance officer. Keep a log book, if they fail to do so, complain to the regulator.

They are registered as a bank in Europe so they must comply with European bank regulations...

Just a tip for those who are looking for a US-based alternative. I have just done a study of various payment processors here for our startup (http://commerce.exorbyte.com). While PayPal may appear cheap with their low flat fees on all cards, their monthly fees, transaction fees, etc. end up costing you.

My conclusion was that there are much better rates and better service with the company that provides us already our accounting software (Intuit - QuickBooks Pro). Their rates are about a third of what Paypal asked in terms of monthly subscriptions, even lower if you are referred by Intuit Pro Advisor (just say you are if you know one - or look for one in their online public DB).

I trust much more a company that provides more than just payment services than one that does that and only relies on payment fees to enrich itself. Good luck, Dan

> Much to my surprise, about a half hour later, paypal reversed the charge, but the amount was paid in to the account of the recipient. Free money, or so it seemed :)

If I understand this correctly, double entry bookkeeping should have made this situation impossible (or, at the least, Paypal should then notice their net loss). It's a bit worrying to see indications that Paypal's internal systems can't keep track of money correctly.

Have you considered reporting this to your regulator?

> Have you considered reporting this to your regulator?

We're getting there.

I have plenty of stuff to do but if this is not resolved within the next 7 days or so (and that includes backdating all transactions so the effect on my standing with the bank and lost interest are corrected) there will be trouble.

I just want to be a lone voice for PayPal here. I expect downvotes but want to show a different point of view.

- PayPal is not a bank, you don't get the same level of customer service or regulations. However, you don't pay anything like the sorts of fees that you would with a bank for sending/receiving money, especially as a merchant. Try applying for a merchant, online only, account with a bank as a startup and see how far you get.

- PayPal processes a lot of transactions daily, globally, all with accounts that they know very little about. As such, their fraud detection is turned up a lot higher than a regular bank. They're obviously paranoid about any difference in patterns or strange occurences, and the usual response is to stop everything until it can be sorted out. In most cases it does get sorted out but that's after the anger has died down.

-Banks and credit card companies make mistakes all the time. My credit card issuer is always sneaking unjustified interest charges. I have to call and reverse them all the time. I've had banks bounce checks for no reason, charge me fees which cause the balance to go below zero, then charge more fees for it. That's stealing as well, but everyone shrugs their shoulders and says 'banks, what can you do'.

So my summary is : yes, dancing with PayPal is holding a Tiger by the tail, but there aren't really any alternatives. They can suck, but they're a cheap and reliable service.

But don't think that any amount of bank regulation would fix things. If they had the customer service of a bank, they'd have to charge higher fees. With the low fees, you should have low service expectations.

Another factor here is the "fear of the new". Which is worse, dying in a car accident or dying in a nuclear blast? Well, neither really. But which generates more fear in you? Dying in an accident can easily be a horrific, painful death, but everything else about it is familiar, so we turn down the knob on the fear-o-meter on the idea.

Similarly, banks treat their customers like crap all the time. But it's a crap that everybody has grown used to and come to expect. But when PayPal makes a mistake or has bad policies or poor customer service in any instance people will scream to high-heavens on the internet about it until the entire world has heard.

For myself, PayPal has treated me better than at least half the banks I've ever had accounts with (especially Bank of America), so I'm inclined to give them a little slack now and again.

Seems that you're from the Netherlands or from Belgium.

Are such "wrong" charges really an issue there? In Austria I would just let my bank cancel those charges (you can do this for free) if they are not justified.

As far as I know, going below "0" wouldn't be a problem either, because the bank then retroactively "recalculates" your account history without the charges in question.

How is all of this reflected (if at all) in the account history on the paypal website?

It shows 13(!) transactions in total, let me try to put something together that you could make sense of.

The paypal transactions do not correspond 1:1 with the bank stuff, which makes it a lot harder to follow.

here is the png with the paypal situation (I'll add it to the post too).

http://pics.ww.com/d/427289-1/paypal3.png

Voltooid = completed Verrekend = corrected Mislukt = failed

I wished I had a reliable alternative to paypal, a company that just does one thing and does it well, transfer money from me to third parties without all the bs that paypal makes me deal with.

On top of that they caused me a bunch of trouble with my bank which I'm really not happy about.

What you would expect, for 3 transactions is three entries on the paypal side and three entries on the bank side.

Instead you get 8 transactions on the bank side, 13 on the paypal side and in some of those the amounts do not even match up with the invoices that were paid, which makes for a huge problem for the bookkeeper at a later date when he has to piece it all together again.

I think the last transaction mentioned in the body text should have referred to dollars (rather than euros).

It says '$500' right ?

Or do you mean a different one ?

There are only 3 transactions, one E 550, one E 1000, one $500. That's it.

edit: Ah, my bad, that was not a transaction but an exchange rate calculation and I got the unit wrong. Thanks!

What would you be willing to pay in terms of transaction fee for a good service?

And I was reading this today http://tortoisesvn.net/howpaypalscrewsopensourceprojects ouch