More Paypal nonsense
regretsy.com
regretsy.com
What else can we really expect from a product whose parent is eBay?
This company is a fucking fossil with all the hunger for customer satisfaction of a used tissue.
Is it convenient for users? Yeah. Is it worth gambling your entire business on? Given the lack of accountability these clowns enjoy, I'm going to say probably not. Neither eBay or PayPal has evolved in any meaningful way in the last decade. On the contrary: they've steadily declined in user experience and customer satisfaction. Why trust a business to such a stagnant concern?
On principle, on practicality, for the sake of all of our futures: just say no to PayPal.
There is not a payment processor in the world that wouldn't freeze someone under these conditions.
PayPal's customers are the people who use it. You, as a merchant, are not a customer of theirs, but a necessary evil to keep the customers coming. PayPal's customers love it. PayPal's merchants don't like it because PayPal has fraud prevention methods that are opaque and hamfistedly applied. That's a fine complaint, but this breathless "for the sake of the world don't ever use PayPal" garbage is pretty ridiculous.
If you want to do anything beyond selling tangible goods or simple subscriptions, you should probably reevaluate using PayPal to do that. PayPal isn't the best product for everything, and frankly, I'm sick of every merchant doing some crazy scheme (seriously, "give us money and maybe we'll send you a gift of some unspecified value in the future"? can you fucking spell "chargeback"?) bitching and moaning into the HN echo chamber whenever PayPal tells them to stop that.
You know, I've been working on my condescension. I really have – my last girlfriend hated that shit. And it's gotten a lot better. But you just had to use a cutely loaded little word like "histrionic," so there's really no other course...
So what I'd like to do now is offer a brief explanation of how quotation marks work.
Generally, quotation marks are used to attribute their contained content, verbatim, to a specific person. By including words in quotation marks you are saying, in effect, "this person said precisely this."
I did not say precisely what you quoted. What I said instead (handily, the text is right there), was that for all our futures, where we is a group of people who care about building things and getting paid, that we shouldn't pin our hopes on a company that can declare our money limbo-ed on a whim. The more who avoid PayPal as a result of their flakiness, the brighter the future looks for a sane payment processing landscape.
It's okay to have policies. It's okay to have business models you will and won't support. What isn't okay is to both handle large sums of people's money and make your customer service a recourse-free black box at the same time.
http://www.wikihow.com/Use-Quotation-Marks-Correctly
I think it was pretty clear that this was the case, when I read it didn't make me think that you said that.
Normally, yes. But the primary use of quotation marks is to quote - in a direct response to something someone wrote, you come across as either dishonest or stupid if you claim to be using them ironically.
Secondly, PayPal didn't simply say "stop that". They gave him the runaround, froze unrelated accounts, and stonewalled him when he tried to make whatever accommodations would please them. That they were rude and condescending during all of this only adds insult to injury.
"Don't ever use PayPal" is really a reasonable reaction to these sorts of stories. When a seemingly legitimate transaction can unexpectedly invite the fury of paypal's overzealous fraud protection drones, how could the reaction be anything but?
Second, you don't have to be a merchant to hate PayPal. Most of the time I will simply choose not to buy something rather than use PayPal. --The last time I couldn't avoid them was about 2 years ago.
Exactly. I refuse to use it more due to ethical reasons[1] than anything else, but there are a metric shit-ton of reasons for not supporting and using Paypal.
We need more (viable) alternatives. Paypal is a bit like Windows - it gained a monopoly because it was successful early on due to the lack of viable competition, and now we are at a point where we need to get rid of that monopoly, but it's difficult to do so - but we must.
[1] See the Wikileaks blockade, amongst other things. It's by far not the first time they pulled that shit, the WL incident just was the worst example so far.
For paypal those were legitimate payments, even when they were made from a different country, which they could check but were too lazy to try. At the end they accepted that there were a fraud, but do you know how much they refund? 5 of the 7 transactions of $1.
However, that's not the only option. Do you have an account on their merchant services support site? Have you talked to them about getting a dedicated account manager? Did you ever spend the time to calmly and happily explain to them your situation, and then get that information stored with your account details so others later will see it when they go to help you?
This experience of saying that PayPal doesn't respond is simply so far and away unlike my experience (where I am, if anything, I often feel inundated with communication from PayPal, having been dragged into hour-long conference calls with underwriting, or having to carefully explain my business model multiple times to different people) that I'd really like to understand what causes the differences.
Because there is no alternative and they fucking know it.
Oh if you're in the US for the US you might be able (and want) to gamble on an other younger service, but in the wider world? It's a fucking wasteland, it's either Paypal or Big Bank Merchant Account, and those are no fun at all either.
My card expired (and was renewed) recently, I decided to stop using paypal (so I did not update the account to the new card), by the third christmas gift I tried to get I had to re-activate it, because either the gift in question wasn't available from anybody not using Paypal (etsy merchants, for instance) or because the CC gateway alternatives to paypal were unusable to plain broken.
Off the top of my head, https://payments.amazon.com/ is a great alternative. Not sure how the rates stack up, but I definitely trust Amazon more than I trust PayPal. I'm sure there are more alternatives available, I don't know why so many people insist on using PayPal. I think Amazon allows donations cause kickstarter.com uses it, and you don't necessarily get anything if you fund a project. I'm guessing the tricky part here is the "donations", but PayPal certainly has a poor customer satisfaction record.
Take Amazon payments, for example:
"Q: What countries and currencies are supported by Amazon FPS? Amazon FPS allows U.S. as well as international customers to use major credit cards to make payments on Amazon FPS-powered websites. ... All transactions are in U.S. dollars."
Emphasis mine, because that little aside renders Amazon worthless to me.
Source: http://aws.amazon.com/fps/faqs/
* Have a phone with a UK-based billing address available for our registration service to contact you. * Have a credit card (issued by a UK-based bank) * Have a current account with a UK-based bank. (Optional; you can set this up after registration)
http://www.amazon.co.uk/gp/gateway-eu
So unless in you're in one of the few countries supported by Amazon Payments, you're out of luck (as far us Amazon Payments is concerned).
I know people in India who order books from Amazon US and pay in USD using their India-issued credit card.
I think it's just a matter of UX to show the price in USD to a foreign audience.
There are risk implications from having to predict currency movements. Or I could take futures contracts, which is difficult and in itself a warning flag to banks if I have low income. There may also be complicating tax implications from trying conduct all my business in USD and then converting the profits.
It would be easier for me, by far, to conduct my business in my local currency. This is not an unreasonable constraint.
There are also a few services circumventing both money "escrow" (not sure if the term is applicable) and the credit card companies by interfacing directly with your bank deposits, either directly (using your PIN/TAN, which you have to give to them, which seems insane) or through cooperation with the banks.
Fewer people over here have credit cards, which has lead to a different landscape. For many things, simple bank transfers are a viable payment option, too, as they are typically very fast (with ever shortening legal limits to how long they may take).
As I said they're similar to PayPal. ;)
So that's like paypal, but faster, more secure, cheaper also.
Many use that. I know PostBank makes <1min transfers, as I used to be a customer not long ago, for example.
Even if you manage to mangle a statement like that into your offer, chances are the buyer simply transfers the money via Paypal because he did not read the text. Happend two out of two times. Made me jump out of my skin each time.
By now I hate Ebay and Paypal so much, I stopped selling my yardsale-stuff there. Will go to the next flea-market and sell there. Person to person.
Waiting for an alternative auctioning platform.
That's a bit like saying "I had to get a pay day loan at 27% per week interest, I had no alternative and they fucking know it".
It probably means you're doing it wrong.
If the business you're trusting to Paypal can't get a Big Bank Merchant Account, maybe you need to work out why (and whether it's a very good reason... it might be that your great idea is exactly the sort of thing Paypal _needs_ to shut down quickly before lots of people lose their money.)
Etsy merchants (and eBay sellers) all happily use Paypal, because for the "put it in a box, ship it by FedEx" businesses have _way_ less "trouble" with Paypal than everybody else.
It probably means you're doing it wrong.
Either that or you don't have enough starting capital to do it right.
Hopefully in a few years time when it's matured, Bitcoin will be that alternative.
Really? Then how did Aunt Martha ever get to trust some sketchy online auction site called "ebay"?
Goats-as-currency have very poor liquidity, fungibility, and divisibility.
Bah. Baaaah.
I phoned them multiple times and was always answered by well informed people that promptly provided me all the information I needed. Having lived in multiple countries and run paypal based businesses in more than one country simultaneously, I presented them with quite a few tricky questions which they always solved very quickly. It is also worth to mention that they were kind.
One thing I hate more and more is donations. Specially begging for donations. There's always something fishy with donations deal with big money. I would not be surprised if paypal would start to tighten donations policies which apparently seems to be happening. Donation buttons are epidemic anyway.
It's impossible to get ahold of anyone who speaks understandable english, or can do anything other than apologize and make excuses for shitty, shady business practices.
All of the power of the bank with none of the responsibility.
Just say no!
(bitter? me?)
I used it for years, mostly selling stuff on ebay. I never had negative feedback, never had an issue. I even used one of their two-factor auth tokens. Then one day, Paypal decided that they needed to review my account, and froze about $900 for 6 months.
The whole process was completely arbitrary and capricious. Haven't done business with Paypal or eBay ever since.
PayPal has been continually extending it's international merchant support. They may look like bloodsucking imbeciles in the US, but as an Estonian I am thankful for their support as nobody else cares.
I did just that, a few days ago. If I hadn't, the Regretsy story would've done it. http://www.shdon.com/blog/2011/12/06/bye-bye-paypal-you-suck
Personally, I think the conclusion should be: if you have an unusual business model or transactions that are not seller-to-buyer, don't use PayPal. It goes against their rules, and you will lose money and go through a lot of grief.
edit: wdewind as well.
People who have customer service nightmares with Paypal are generally doing something that no other payment processor would touch. I hear complaints from people who have been accepting pre-orders of a game or pre-registration for a conference, which is obviously a massive risk for a payment processor. If you found a merchant account provider willing to take such risky business, they'd demand a huge deposit and charge well above the odds.
Paypal provide an absolutely exceptional service in allowing pretty much anyone to accept card payments without a great deal of fuss. The flipside of this is that they have to deal with risky accounts retroactively, which means they have little choice but to freeze accounts that set off their fraud detection algoritms. If you prefer to know where you stand, apply for a merchant account - in most of the world, that will involve a long, expensive vetting process.
People continue to use Paypal because for many use cases, there aren't any better alternatives. This isn't because Paypal or the card companies are abusing monopoly power, but because payment processing is hard and fraud is expensive.
I've heard of dozens of stories about Paypal along a similar vein. "They locked my account for unreasonable reason X and now are keeping the money".
Most of these stories seem anecdotal. Can someone point to a rigorously documented set of cases where both Paypal and the customer's side of things are reviewed?
Over the last few years, all of these "Paypal screwed me" stories have sounded like all the complaints a few years ago about Apple seeming to reject apps arbitrarily. As far as I know, the complaints about Apple from devs have largely died down since we've had a fairly straight-forward list of do's and don'ts to work from.
If most of the people reporting problems with Paypal are doing things that are inconsistent with their policies and then saying publicly how they're being screwed, then that creates a negative reputation for other people who have never personally had a problem with Paypal.
If this discussion with the customer service rep did occur as written, it's the most ridiculous one I've seen yet, though. It's a major customer service fail even if the original reason for freezing the account was valid.
OP's situation is pretty weird. If that conversation actually occurred, it wasn't handled well at all, and PayPal may well have done a lot wrong here. That doesn't mean it wasn't a high risk situation when PayPal initially froze the account to stop it from getting riskier.
I also think the OP's wrong about losing fees on everything twice even though the payments were refunded. When you refund something through PayPal, PayPal refunds its fees to you, even if it was a credit card transaction.
Even if that was indeed the case, a simple investigation of the issue would have cleared things up. Businesses are supposed to work with customers, not fuck them over at the first sign of trouble.
I hate to come down on the side of Paypal, but it would be so easy to abuse the donation button by doing exactly this, and not sending out any gifts. There is no way paypal can test this.
(I actually spent a half hour talking to my PayPal account manager today about this very subject, presenting different charges and asking why fees were or were not kept in various situations; however, I do use micropayments, so my results are not going to be terribly relevant, and we are actually continuing the conversation tomorrow. ;P)
Also, the actual items being sold were "mystery" gifts, not actual items.
My guess is that paypal views this as high risk because someone is sending money to OP, and OP is sending "something" to someone else. It's not trackable through PayPal's system, which means there is a high potential for chargebacks, which cost PayPal (and everyone else involved) money.
This seems like an extremely reasonable freeze to me, especially given that the PayPal rep told OP exactly what OP could do to sell these items: ship to the actual buyer and tell them what they are getting, and do so under a different name than your original attempt. That's kind of the only way it can work.
Note that I'm not saying this is the case here, but this is the risk from the payment processor's standpoint.
It's like a page out of the "let me jam a pineapple up your ass" book of customer service.
Fraud of this sort of thing is a difficult thing to solve. I don't envy Paypal's position here. However, their approaches are unprofessional at best....
From one point of view, they're no more "unprofessional" with their customer service than Google. At least there was a phone number to call and a person to answer it - even if they were apparently not highly trained enough or authorized to solve the problem.
Paypal are trying to solve the credit card version of "web scale" - they've got their almighty "fraud detection algorithm", with the knobs inevitably turned towards "risk pissing off low value customers" rather than "risk letting through financial risk exposing transactions". When you want to let everyone with a hotmail account and a prepaid debit card become a "merchant", it's inevitable that there are going to be _lots_ of edge cases, and not nearly enough skilled customer service people.
If you can look critically at what you're doing, and it seems like it _might_ be an "edge case", you might want to think twice about using Paypal.
Given that in my case, IT services were an "edge case" I would suggest that we can just shorten that to "you might want to think twice about using Paypal."
More so, people can use paypal without having any amount of experience with alternate payment processing methods, so they have no yard stick of comparison. They just don't know that any payment processor in the world would stomp all over them to the same or greater degree, so they merely level a harangue at paypal for not living up perfection.
But it's my recollection they're not a bank, and so they have no real obligation to act like one. So when they do this kind of stuff, I'm not surprised.
And I wouldn't want to be them. They probably deal with fraud and schemes on the scale none of us could possibly imagine.
PayPal - the Mos Eisley of e-commerce.
I'm in the UK and one of my companies is in the typical start-up bind right now: we want to take on-line payments, heavyweight Merchant Account and Payment Gateway services are a bureaucratic nightmare to set up with lead times often running into months, but the cheap 'n' cheerful services like Paypal have terrible reputations for customer service and reportedly a tendency to steal merchants' money arbitrarily.
Does anyone here know anything about whether, in practice, such horror stories are mitigated in the EU by PayPal's registration as a bank?
We don't see them as a long-term prospect for handling our payments, but today we'd settle for something we can set up in hours rather than weeks so we can launch our service and get some sort of trading history going. If nothing else, that would deal with a lot of the headaches of applying for the more "serious" services, which tend to be very risk-averse if you approach them as a start-up with no trading history and wanting recurring payment authority on credit cards to implement your subscription model.
What I'm having trouble understanding, is how he even got through to someone who spoke English.
The issue in my case was not me. It had to do, iirc, with someone my wife had done business on regarding Paypal, and we were required to verify all info on all accounts that had ever been accessed from our IP address. In other words they froze my account because someone unrelated to me was arguably (though maybe not certainly) violating their terms of service. Since that included my brother in law's account and he was abroad at the time, it was too much of a headache.
I have basically taken up advocating to all of my customers not to rely on Paypal.
I'm pretty sure the process is much more straightforward now, which checklists and cheatsheets
Sigh. At the risk of pedantry, it's hard for my wtf filter to believe this without more context. Is this a direct quote?
Or put differently: If somebody is running a scam here, the "pet" scenario would mean that it is you. The "poor people" scenario would mean that it is somebody else, making the whole situation a lot more complex. I think this is simply a matter of internal risk assessment triggers.
strictly on a risk assessment basis, an organization not registered as a 501(c) taking in lots of money for a generic cause is more likely to be fraudulent than one specific person that paypal can easily identify taking a smaller amount of money to save his cat.
paypal is probably just as comfortable with "save walter white" as they are with "save mr. marbles", but not "save people like walter white" or "save cats like mr. marbles".
I ask this in the most constructive way possible... is there a set of use-cases that PayPal is still the best for? Is it a lack of awareness of alternatives? International availability? Something else?
BrainTree is awesome too.
If you're doing subscriptions, http://spreedly.com/ is good.
And Stripe looks cool but I've never used it. (https://stripe.com/)
You really need a true merchant account plus gateway.
On the first, I have generally recommended TrustCommerce both due to their emphasis on security (having reviewed their Perl and PHP API classes directly) and the richness of services they provide. They do cost more because Paypal gets a tremendous volume discount, but it's an option. For online payments also you have additional PCI-DSS worries that are burdensome for small businesses.
The second option includes solutions like Amazon Payments. I currently use Amazon Payments because I process 4-5 transactions per year. At that volume it isn't worth maintaining my own merchant account and certainly is not worth worrying about PCI compliance......
Universally, on all of these sites, customers choose to pay with PayPal more often than credit card. For the most part, my payment pages are a secure credit card form with a "or Pay with PayPal" button to the right of the form. More people choose to click through to PayPal than to just put their card in to the form already on screen.
The preference for PayPal is larger outside the US among my customers.
Paypal wasn't really designed to handle one off personal payments, it was designed to let small (and large) businesses accept payments, internationally and fraud free. This is ridiculously difficult (how many of you have ever written software that integrates with a bank? ugh.) PayPal does this exceptionally well and because of that many huge businesses are built on its back.
The reality is, in most of the situations that people complain about freezing their money, without paypal their entire project would've been a no-go anyway.
I do feel for people who legitimately have their accounts wrongly frozen (I am one of them, though mine was unfrozen after a few days), but you have to understand how small a percentage of people that is, and that you can't have a system without failure. Again, paypal's failure rate, when you consider what they actually do, is astoundingly low.
Edit: Just for absolute clarity - I work for Etsy and have zero affiliation with the blog from the OP, and it has zero affiliation with Etsy. Also these are my opinions not my employers etc.
So yes, they switched on that, but it's really not hard to see why. I wouldn't want to use it for personal transactions. (In Germany, we mostly use bank wire transfers for that.)
This is the heart of the issue. Based on anecdotal evidence, there is little to no transparency in the freezing/unfreezing of accounts. This makes PayPal a cash flow risk to any business that relies on it for funding. I wouldn't be comfortable if my employees' pay depended on cash flow coming in from PayPal unless I had other dependable sources of emergency cash flow that could be tapped for indefinite periods of time.
It's good that your account was unfrozen after a few days, but what if you needed the money to pay your employees, so that they could pay their rents? Getting lucky with a short freeze is not a business strategy.
Don't take that for granted. PayPal has 232 million registered accounts, and many more unregistered buyers. Even if 99.99% of PayPal account holders were completely satisfied and never had any problem, that'd 0.01% would still be 23200 pissed off people.
Is it right to wonder "does anyone still use PayPal" if 99.99% of PayPal users have no problem using the service?
So, yeah: if they don't want to deal with their customers, we can fix that by encouraging a situation in which they have no customers to deal with.
The Internet needs a good Paypal competitor.
I have never made a claim. I have never had a claim filed against me. My account receives maybe $500/year, tops. I send $500/year, tops. HUDGE risk of transaction issues.
Until Bitcoin is an established process, offering it means that you have to evangelize it. That means you are suddenly in the position of trying to sell both a service and a currency to a customer. That's more risk than most merchants want to take.
I did consider using it, I have a business with a fairly technical audience, but for now, I have to wait until the legal issues (whether only perceived or actually true) are worked out.
https://www.paypal.com/us/cgi-bin/?cmd=_donate-intro-outside
I don't see anything on that page to suggest you have to be a nonprofit or somehow a worthy cause. They optimize their web page for encouraging people to create a donation button and then provide you with a shitty experience on the back-end if you make a mistake. They aren't trying very hard to keep you from hurting yourself. This is why government creates consumer protection laws, so maybe PayPal needs a big warning label next next the link encouraging you to create a donation button.
Meanwhile, often the person /accepting/ the donations doesn't understand this either. You cannot, for example, accept a $5 "donation" and then send someone a $5 product back to them: that is a "sale", not a "donation". You do not "donate" to Ikea in exchange for a chair: you "pay" them $5 for it.
In this case, this person obviously doesn't get it. "Why? These are my customers!" <- Right, which is why they are not "donating". These "customers" are buying toys, which are then being sent to other people on their behalf. These are /purchases/, like any other. This seller even goes so far as to state they are operating "just like any other retailer would".
At which point we ask the killer question: are they collecting sales tax? This is where the theoretical issues suddenly run right into the brick wall of reality, as sites that believe they are accepting "donations" on behalf of charitable work, such as handing out toys to children, put everyone in a position where they fail to realize that they are operating an online retail store where the receipts need to be reported (to the IRS), sales tax needs to be collected (for sales made to people in the same state), and the people buying the gifts can /not/ write off the expense.
PayPal is therefore very right to be wary of these situations, and often contacts people making the claim "only a nonprofit can use the Donate button", as the PayPal representative stated in this e-mail. I know this, as they contacted me once: I had a button "Donate to saurik.com" on the top of my website, which I ended up changing to "Contribute money to saurik.com".
That said, I am actually not 100% certain that that is their official "for everyone" rule. This author was correct when they said that "worthy causes" is mentioned in the PayPal PDF [1] on this feature: a more full quote being "for your nonprofit or worthy cause"; that said, the PDF also claims that when you sign up for your PayPal account you should do so "selecting “nonprofit” as the type".
(edit: Reading some more context of the story from Regretsy, including more responses from PayPal, I think that what PayPal means by "worthy cause" may actually be those "on behalf of verified non-profit organizations", not that that is made clear at all in that PDF.)
Their website [2], meanwhile, only ever seems to talk about nonprofits, but goes into detail regarding confirming non-profit status only for obtaining a discount on processing fees. I can certainly see that this is confusing, and I also believe I see a lot of websites around that /do/ use "Donate" in weird ways; certainly, if they really cared to limit it to nonprofits, they could actually enforce your account type /was/ nonprofit before letting you use it.
So, I personally believe that they simply contact vendors who seem to be running a for-profit sales business (even one that is losing money or breaking even "for the children") using "donate", rather than people who are simply using "donate" "without being a non-profit". How do they figure that out, you ask? My guess is that users are flagging the transactions as fraudulent, or complaining to PayPal using the dispute transaction feature (which some PayPal users treat pretty flippantly), using wording that indicates that they were buying something.
(For the record: I'm pretty certain that's what happened to me. I /also/ run a retail product called Cydia, which accepts payments through a separate PayPal account for SaurikIT (my company). People can contribute money to the cause I represent (open access to devices), or purchase things from Cydia. However, some users would just send my personal account (which I use for contributions to my work) $1.00, either by sendmoney or /my "Donate" button/, and then go on to say that they paid me $1 for some product in Cydia and that I didn't send it to them.)
In the end? While I think PayPal needs to be clearer on some things, I do not actually blame them for their reaction here. This setup seems "sketchy", was probably not handling the taxes on the sales correctly, was almost certainly handling the "extra money sent to the family" part incorrectly, and in the end went over the top with this emotional appeal (seriously? I have to have crying children surrounding this text?) rather than looking at this as an intellectual debate about PayPal's policies here (which might be interesting, and might cause everyone, including them, to learn something).
[1] https://www.paypalobjects.com/en_US/pdf/PP_Online_Donations....
[2] https://merchant.paypal.com/us/cgi-bin/?cmd=_render-content&...
Amazon will let you do this but people generally specify who they want the product to go to which makes it a gift purchased for friends/family. So it qualifies as a purchase there.
I agree it was a bad choice of words, though.
You seem to be confusing different things. After being unable to use donations, they tried to use sales. And paypal said no. That's the context of what you're quoting, after donations had been given up on.
Regardless, once the conversation started going farther in that direction, the issue did change (and I did not touch on that part of the problem); specifically, it became entirely surrounding "purchasing products sent to a different shipping address than the one the buyer specified during checkout", which is apparently against PayPal's terms of service.
(Note: I have not personally verified that it is against PayPal's terms of service, but I have no reason not to believe the employee of Etsy, a company that relies quite strongly on PayPal and certainly has gone down this road numerous times with them while determining what features they can offer to customers, who posted elsewhere in this thread [1].)
Because I think the sarik is talking about the whole idea itself, which according to what I understand from this complaint is
- 'Donate' money for the 'Give kids a random present'
- Blog author invests time to handle the flow of money, orders toys and selects/distributes to kids
What saurik is saying is that the first step, 'Donate amount of $currency to send a random toy of roughly the same value to a 3rd party' is pretty much a sale. The author itself is comparing his idea at one point with Amazon, purchasing gifts for someone else.
I'm sympathetic here and don't like the outcome, but I think your comment is incorrect: Saurik didn't confuse different things here. We might argue about whether these 'donations' should be considered sales, but - you misunderstood the argument, I think.
1) You can't prove bad bookkeeping practices without an audit and
2) I am not consenting to an audit if that removes me from 4th Amendment search protections (meaning the auditor can be compelled by the government to turn over info without a warrant, when they'd normally be required to get a warrant to search my business).
No bank I do business with is going to just decide "oh you might not be collecting sales tax, so we are suspending your account and keeping your money for six months." There's no ethical justification for that. I am sorry.
Remember: this money they were using for these purposes is actually /not/ their money, nor is it PayPal's: you don't really own money transferred over credit or ACH for six months, which is the window of time during which the money can be nearly unilaterally taken back.
This is a high risk transaction class, and if they had a normal merchant account they would have been required to do all kinds of paperwork verification, accept super-high fees, and pay massive retainers, and in the end likely have a hold enforced on their money anyway until they were considered a good credit risk (and we really are talking "credit risk" here: PayPal is loaning people money until such point as it clears).
Claiming that PayPal should not be looking into these things is about as silly as claiming that you shouldn't be denied a post-pay phone contract just because you don't ever pay your electric bill: this company is exactly as much of a risk (in dollars) to PayPal as PayPal is to this company.
Only when PP blocked their use of the "Donate" button--which would have been acceptable for helping a sick cat??--did Regretsy resort to "reselling" already-purchased toys to recoup costs and continue the program. But again I cannot conceive of any reason that use tax would be due here...
Regretsy is in the EU, not the US, but I don't believe that changes the point. In the EU, everything that is traded, whether it be a good or a service, is subject to a "value added tax". (Note: this applies to you even if you are not yourself living in the EU; if you sell products to EU customers online, you must collect and remit VAT if you are above their threshold.)
These taxes can be quite high: up to 25% of the receipt. You are only responsible for the "value added" (so you subtract your costs), but the way you subtract your costs is very similar to expense structure in the US: the cost you declare has to be to another VAT-registered organization, and you need to keep whatever receipts and documentation is required to defend the costs later.
I am simply having a very difficult time seeing how this specific setup was, in the eyes of the law, any different from Ikea selling chairs: they were selling products, and selling products is a highly regulated business with a large number of taxes that have to be considered. You cannot just throw up a website and willy-nilly throw money around.
As far as I know, Paypal has no legal or even formally self-elected responsibility to enforce that "donate" buttons are used only in the context of a registered charitable organization, or to play cop for the calculation, collection, and remittance of federal, state, local, or international taxes and tariffs, etc., etc. Paypal does not even have any way of determining what is taxable and at what rate--it is so thoroughly beyond their purview that I don't know why we're discussing it.
Paypal may or may not have any legal responsibility there, it makes no difference.
I think a lot of people overlook the underlying business model of Paypal. They're betting they can do a better job of fraud prevention than the entrenched credit card processing industry, and by doing so they can offer credit card facilities to more (read "higher risk") people.
What that means is that if you do _anything_ that might be even tangentially related to things that look like credit card fraud, you're opening yourself up to all the well documented risks of having them stop you withdrawing money from your account for 180 days.
If you're doing anything other than delivering physical goods to credit card billing addresses via 3rd party trackable shipping, you need to make sure you're fully aware of the risks you're choosing to expose yourself to using Paypal. If you're using Paypal for donations, preorders, digital goods, downloads, conferences, consulting - anything where you can't give them a FedEx tracking number (or equivalent), you're opening yourself up to a world of hurt in the dispute resolution process.
Surely I'm not the only one who looks at almost all of these Paypal "horror stories" and thinks "Yep, I could have told them they had that coming."?
As an aside, most of those laws were put in to use against the lower class people who were begging. They have recently (thankful) started to be applied in a non-discriminatory fashion (i.e. to rich kids aswell as drug addicted adults), and this is the consequence.
The most damning evidence against PP in my opinion is that they specifically stated (accordion to the author) that the same scheme was acceptable when raising money for a sick cat but not for needy kids. Unless the Regretsy folks were purchasing toys with a business account and skipping sales tax I don't understand the logic. The PP reps subsequent attitude seals the deal: eff PayPal. If he isn't authorized I dole out financial or legal advice regarding the use of the donation button or wrt raising money for needy kids he should just say that instead of being an obstinate jerk.
tldr: tax presumably was paid, PayPal rep is a scumbag, screw PayPal.
The sales tax issue is a red herring. Regretsy was (presumably) buying the toys at a rate that included sales tax, and if the operation was not-for-profit then there was no financial value added, and no need to charge the "donors" any additional sales tax.
The sales tax is a red herring. The issue is probably one of a computerized algorithm being tripped somewhere.
It gets really complex, in fact: the warranty replacement is only tax free if the warranty was a taxed line item during the original sale. If you make repairs to something, and you pass through the costs of the object to the person hiring you, you are generally considered to be a "retailer" and are responsible for collecting sales tax (which explains why you see wholesale discounts being given to large classes of professionals, from plumbers and carpenters to interior decorators).
That said, I am not claiming that the sales tax is the issue here: I'm claiming that this is a complex situation with a lot of intermingled laws and service terms, and that it is not at all clear that these people are running something that was entirely kosher and should de facto be supported.
People seem to have a thirst for PayPal's blood, and are totally ignoring (or, more favorably, simply not realizing due to lack of knowledge) that this was a somewhat sketchy, certainly risky (from a credit fraud perspective), and probably even illegal operation; and it makes no matter whether it involved feeding children or sick cats, or whether this is a computerized algorithm that flagged it or a person: the reason for the flagging, and for the blocks, actually makes a lot more sense when you examine the whole issue.
Walmart doesn't pay sales tax to their suppliers.
As for wanting Paypal's blood. No. I was a victim of similar freezes and for really convoluted reasons according to Paypal. I don't want their blood. I just don't want there to be any more victims.
Incorrect. I own an Estonian (an EU member) company that can sell stuff and offer services without VAT. VAT is actually optional until a certain revenue threshold.
(PS: the coolest one I've seen is that bound physical books often have much better tax rates than other goods, leading to hilarious situations where shipping someone a physical pamphlet that includes base64 might be much cheaper than selling them an expensive piece of software on CD. ;P)
Effectively the same I know...
For example, admission to a charitable event is VAT exempt in the UK, while goods sold at a charity shop are zero-rated.
http://www.hmrc.gov.uk/vat/forms-rates/rates/goods-services....
Only if you have a point of presence in the same state as the person you're transacting with. The US does not have a national sales tax; all sales taxes are collected by the states. Currently, transacting with a person in another state is considered interstate commerce and is therefore exempt from state sales taxes. There are efforts in Congress to change this, but, for now, you don't have to pay sales tax on a sale you make across state lines.
It was a mistake for Regretsy to phrase it that way and it devolved into a mess from there. It started as a real donation to pay for the "cause" of giving toys to kids. Paypal's first complaint was that the recipient of the donations (the Paypal account holder, not the kids) was not a non-profit, yet their policies don't state this requirement.
https://thegreengeeks.wordpress.com/2011/12/06/why-paypal-is...
Not my blog, and I apologize for the embedded rant in there, but the case is thoroughly presented and debunks this whole "donate must be a charity" misconception, using Paypal's own documents.
Edit: direct link to paypal policy containing the following sentence:
https://www.paypal.com/helpcenter/main.jsp;?locale=en_US&...
"Donations that are not associated with a charity or nonprofit organization are not subject to these requirements, but all donation transactions are subject to review and must comply with all of PayPal’s Acceptable Use Policies"
https://merchant.paypal.com/us/cgi-bin/?cmd=_render-content&...
"If you are not a 501(c)(3), you can still accept donations with our standard pricing."
I also disagree with your position that "donate" implies that it can be written off (or that it implies anything tax-related, for that matter). I don't think many people assume that. Anyone who has written off a donation knows that they can only do so with an associated donation receipt. This is why many charities often specifically note when a donation is tax deductible - saying, for example, donations in excess of $20 will be given a donation receipt.
If a layperson is not familiar with the difference, they aren't writing this off. Additionally, there are several types of organizations for which donations cannot be written off.
Reserve accounts at any merchant account provider I've ever heard of are non-interest-bearing. It's probably a requirement of the Visa/MC Operating Regulations to de-incentivize creating them without cause.
Thus, I would also like to echo this sentiment that Bitcoin is worth pursuing.
I'm not sure why anyone would downvote Bitcoin.
All these "use bitcoin" responses are as useful as "let them eat cake".
Those that want to donate with bitcoin can easily google how to buy it, and will discover it's easier than ever to acquire. (in some cases, using paypal!)
No. The downslide took considerably longer than that.
The root issue here as far as I can tell is that regretsy is promising some kind of action (in this case buying a "mystery gift" for an unknown family) and Paypal has no way to verify that this is actually happening.
You are fine as long as you don't explicitly promise something. There's no way to claim you are running a fraudulent service if the money is out of goodwill for no purpose. There will be very few chargebacks to Paypal that claim "I gave jfruh a tip for nothing in particular, and he used it for something in particular."
For a kicker, you MUST be based in USA otherwise according to their terms, they'll hold the money like PayPal does.
That the site would accept "donations" for a fraudulent reason?
1) You're going to tell me that those customer service interactions were perfectly normal?
2) You think that at the end of this the customer should be forced to sign something admitting wrong-doing? "I tried to take donations, but really it was all a scam and I'm a scammer. Paypal was right to freeze my account." Even when PayPal's own documentation was not straight-forward enough to let people know that they should not be doing what the OP was trying to do?
Anyway, you are also factually incorrect; we deal with princes and inheritance, not children toys. :)
With all of the different competing solutions out there these days, I don't know why anyone continues to use Paypal.
I'm in Australia, and I don't know of one (have checked out WePay, Stripe, Samurai all mentioned in the comments here.)
The thing about PayPal that appeals to me for collecting funds is that it doesn't have that barrier to entry.
Once you start doing something that could be interpreted as even slightly non-standard then it's more trouble than it's worth and the odds are that PayPal aren't going to play ball.
https://www.thepaypalblog.com/2011/12/regretsy-issue-resolut...
For example, suppose PayPal think that Regretsy is buying cheap toys at cost, marking them up for profit, adding the cost of shipping, then selling them to customers as part of their ordinary business model (perhaps not even paying sales tax on them), but of course agreeing to send them to poor kids instead of the people paying the money.
PayPal would have every right to block such transactions, and I'd expect it. It wouldn't be charitable on the part of Regretsy nor would it be donation to a worthy cause, but a partial "donation" to Regretsy, a for-profit company. It would be ordinary profit making on the part of Regretsy in the guise of charity work!
I think Regretsy should just clarify with PayPal what it is they are actually doing. If Regretsy are honestly doing this for needy kids and not for their own profit, then I cannot see how it would be a win for PayPal to not accommodate this in some way.
Earlier this year, Paypal notified me that they required more information about my personal account - namely confirmation that it wasn't a business in disguise. Due to my mistranslating from American English to British English, I accidentally declared that I was a charity (non-profit of course has a specific meaning), and Paypal promptly froze my personal account.
It took one phone call to the UK helpdesk, and about 20 minutes to get this fixed, and my experience with their customer support was fine. I screwed up, they were polite and helpful, no problems.
What WOULD help is if their UI translated their terms for the benefit of non-US customers (if they'd said "charity" instead of "non-profit" I'd never have chosen that option) and gave you an obvious way to say "I am not a business" (if they'd had that I wouldn't have been on that page in the first place), but I can't fault their customer support.
Paypal wins still?
http://www.somethingawful.com/d/news/paypal-fiasco-summary.p... (slightly nsfw)
I don't see anything about this story that makes PayPal look bad. Not objectively at least. Subjectively, we'd like the fundraiser to have worked out, but it's the processor on the hook if the fundraiser is a scam...
We may share data with the following third parties: WHOEVER WE FEEL LIKE. IF A RANDOM BUM OFF THE STREET WANDERS IN HERE, WE'LL PROBABLY GIVE HIM YOUR IP ADDRESS IN EXCHANGE FOR A HAND JOB. These third parties will use the information as follows: EMOTIONAL BLACKMAIL.
Now I just think "The definition of insanity..."
I guess I'm just an elitist prick though?
In my eyes, PayPal is just another corporation, with all of its bureaucracy, both processes-wise and the way how they handle their customer care.
My bank is not making it easier to get started (otherwise I would have merchant account), so why would I expect PayPal would handle edge cases otherwise?
EDIT: jdietrich already made this point http://news.ycombinator.com/item?id=3319045
For whatever reason, it seems that they'd rather be known for having terrible customer service than own up to the fact that they are hog-tied as to their policies on what kinds of transactions they can process.
In addition, the business courses I'm taking all (in the text books and case studies used in classes) point to how eBay is trying to transition away from the auction model and turn into fix-price sales as some sort of discount Amazon Marketplace. Making life miserable for smaller retailers and auctioners is part of this goal.
So if a merchant understands these relative risks, they can opt in to a high risk warning category, in order to make sure accounts don't become locked, and buyers can then fully understand what they're getting into via the warnings.
I mean really this is all about liability right...or maybe is it that I'm expecting too much...?
The OP's story says they got "thousands of $2 payments". Let's say 3000. PayPal could, potentially, see $6000 in chargebacks, $900 in transaction fees, and $45000 ($15 * 3000) in chargeback fees assessed by the card-issuers.
If the fundraiser disappears or doesn't have a spare $45000 sitting around PayPal is on the hook for that.
They're not going to file 3000 court cases to recover it, no matter what warnings were on the site.
The problem is that AlertPay is not accepted by many online services. Once that is solved, I believe that it could probably compete with PayPal.
Abusing "donations" on paypal to avoid paying fees and taxes is not a good business practice. Either own up to the fact that you are indeed selling something or incorporate as an actual non-profit, neither is particularly onerous.
I allege that what Paypal is doing here (holding funds over 10 days) is illegal.
In order to do what Paypal does in the USA, you need licensure. They point out that they are not a bank. Indeed, they aren't: in many states they are classified as a money transmitter. In 8 states, they have no license to operate.#1
And, Indiana also requires licensure for money transmission. IC 28-8-4-20 (a) A person may not engage in the business of money transmission without a license required by this chapter.
What is this money transmitter stuff? In essence, the law in all the locales I have checked (I have not gone through every one), indicate only a short holding period (5-15 days) and only allow holding of money of a known crime. So indeed what they do is absolutely fraudulent. In other words, if you have a patent troll corporation with many lawyers, target Paypal for their illegal behavior. #1 Source: https://www.paypal-media.com/state_licenses.cfm
PayPal may very well be exceeding the holding period threshold in some states, but someone would have to bring suit to push the issue.