Comment by geuis | Hacker News Reader

Comment by geuis | Hacker News Reader

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At the risk of being perceived as the devil's advocate, let me ask a question.

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.

I've yet to see a "PayPal horror story" that didn't fit into one of the "any payment processor in the world would consider this high risk and temporarily or permanently freeze the account" slots.

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.

I have a client who is a payment processor who specializes in high risk transactions. Paypal is not. The problem though is that Paypals definition of risk can be overinclusive to the point of being arbitrary. When I had my account frozen, I was told it was because my wife had sent money to someone else who was accused of violating the ToS. So here we have an account suspended because someone from the same IP address sent money to someone else, and that third party was accused of violating the ToS. I wrote them a nice nastygram, stopped taking credit cards for a while, and later started up again with Amazon Payments instead.

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....

"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.

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."

Yep, if you do anything except put things in boxes and ship them via FedEx directly to billing addresses, you're not really part of their core business.

I'm curious as to why this person would be told "oh, you have to do this," only to be told, "oh, you're not supposed to do what we just told you, and it's your fault that you did that."

It's like a page out of the "let me jam a pineapple up your ass" book of customer service.

Some of this is paypal's own fault. They've created the expectation that transferring money from anyone in the world to anyone else in the world should be painless and frictionless. For many cases paypal lives up to that (really quite amazing if you think about it) level of service. But the world is not a perfect place (nor is paypal of course) and a lot of people run into problems and their instinct is to blame paypal for both of those imperfections.

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.

Absolutely: that every other payment processor in the world would do the same thing is hugely relevant. Paypal is just the only one it's easy enough to set stuff up with, so they get all the bad press.

Can you explain how the OP's situation is high risk?

Because the gifts given will ultimately be going to someone other than the billing address. This is really the issue in the TOS OP is coming up against, from what I can tell.

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.

Any change in average processing volume and ticket size is a red flag at any payment processor. An individual/business suddenly getting a ton of "donations" is going to look suspicous. An individual/business that hasn't told their processor their plans, and gets a ton of "donations", is going to have to convince that processor the donations are really donations and are going to end up going towards what they said they'd go towards -- because if they don't, all those donors may charge back the payments, the fundraiser may disappear, and the processor is on the hook for all the costs.

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.

The problem didn't seem to be that the volume/value of transactions suddenly went up. The Paypal representative didn't say that at any point in the conversation.

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 am sorry, how are you privy to the conversation? Or are you just looking at the bits posted on the blog? There is no way you can draw such a conclusion form that.

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.

The conversation in the article. Or didn't you read that?

The official policy is actually that the "fixed fee" ($0.30) is kept, and the "variable fee" (2.9%) is returned to you, but in practice in many situations the fees are fully refunded. The situation is somewhat different for micropayment transactions (which are 5% + $0.05), but this vendor was probably not using them for this account (in most situations, unfortunately, this is an "all or nothing" account flag).

(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)

Because there may be no kids or gifts, just some bills due that need to be paid somehow. And if people figure that out, chargebacks ahoy!

Note that I'm not saying this is the case here, but this is the risk from the payment processor's standpoint.

A lot of us have similar experiences with Paypal. When something like this has happened to you personally, it's a lot easier to accept that it's true.

What I'm having trouble understanding, is how he even got through to someone who spoke English.

My business account was frozen by Paypal for a similar non-reason. I am not going into the details here but I chose to simply wait it out ($2 balance at the moment) and take my business to Amazon Payments.

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 can't. I replied elsewhere in these comments that it happened to a client of mine. I made a lot of money in one weekend doing emergency "I told you so" payment gateway switching for him so he could take reservations.

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.

Actually, Paypal's European operation is officially registered as a bank in Luxemburg.

Thank you. I didn't know that before.

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.

The problem isn't so much being cut off as having no recourse. PayPal didn't just freeze the assets temporarily, pending investigation. They arbitrarily decided that this organization shouldn't be allowed to access the customers' money. No appeal or review is offered. That's the horror story.

Of course you have recourse. It's called "District Court." Unfortunately you have to sue them where the court has jurisdiction, which means hiring a lawyer where they are located.....

A friend of mine down the street tried to sell an online account via PayPal. The would-be buyers sent the money to his PayPal account, got the online account credentials from him, then took the money out of PayPal. The money was lost but the admins for the software he used the account on reinstated it to him since this happens a lot. There are scammers with deep penetration into PayPal.

I have also experienced one such scammer when selling software using Paypal. Now for me it was nothing important since no physical object was lost. But that time I learned that Paypal chargebacks are an excellent way to scam vendors, and that the conflict resolution tools of Paypal are a joke.

A lot of dev complaints toward Apple was that there was no strict guidelines. Applications seemed to be rejected for stuff outside the boundaries of the actual terms.

I'm pretty sure the process is much more straightforward now, which checklists and cheatsheets

Also, have any of these people contacted paypal before using their services? I'v spent around an hour waiting for and talking with paypal support to make sure that I'm able to use paypal for my new project without any problems.

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