"PayPal took $80k from me and banned me"
twitter.com
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The reason this probably happened is that their business was getting a high % of chargebacks from paying customers, paypal is not a specialist payment provider that wants to handle what they consider high-risk business like that, so they block your account and hold your funds for 180 days and during that time keep processing chargebacks.
After the 180 days, Paypal will give you the remainder of the money back, so the title is clickbait, they will get back their money.
The best thing to do if you operate a business which gets a lot of chargebacks is to find a payment processor that is okay with that, when I had this issue I ended up looking at which payment processors porn sites used and picked one of them, which had no problems. That was a long time ago, so I'm sure there's more options now.
And in an environment like finance, good communication of the status of the account should be the difference between an "oh okay that's fair" and a lawsuit for theft.
Collecting money for events is the archetypal high risk credit card processing business.
You get to spend all the money in advance, while the processor holds your chargeback liability that will only come due after your cash flow dries up
Every processor mentions this in their t&c. Events require special underwriting.
The last part has become increasingly difficult. A merchant might be honest, but if they don't have customer support and do not reply to issues, that's indistinguishable from dishonesty. For the first 20 years of having a credit card, I had to do one chargeback: an online "merchant" who was totally fraudulent. In the last 2-3 years, I've had to do about 4 chargebacks, and it's mostly otherwise-legit companies ghosting me.
That's a unique situation because the event organizer (or kickstarter inventor, or travel agent, etc) needs the money now to invest in something they may not be able actually provide. That isn't dishonesty, but a question of competence plus the uncertainty of life.
Those types of businesses rely on loans. The money has to come from somewhere, and be spent before the product is delivered. A payment processor is not in the business of giving loans.
The only problem is when the merchant is dishonest. Also too common, that's really a legal and regulatory matter, because there are always ways in which sellers can break the law.
To be completely honest, and while I only have a degree in Finance and don't work in the industry, it would actually be considered irresponsible of a financial services company to NOT put it into at least a Treasury bond of sorts.
In fact, the process should be almost automatic. Otherwise, I'd argue their system , and its management, as grossly mismanaged and arguably violating their fiduciary obligations to shareholders. As to whether the other party should hold claim over any interest, that's something courts would need to decide in the same way the interest from a security deposit account once went to landlords and I think all the courts changed so that it always belongs to the tenant. Bear in mind that the interest in these cases is typically just dollars and it was more a symbolic victory for tenants.
Although, I've been skeptical of Paypal practices ever since my sister asked me how to pay me using her Bitcoin through Paypal only to find out that the Bitcoin bought on Paypal can only be sold to Paypal. That one just rubbed me the wrong way.
“PayPal combines your balance with the balances of other users and invests those funds in liquid investments. PayPal owns the interest or other earnings on these investments.”
(I can’t seem to find a way to hyperlink to selected text on iOS, so I’ve also included a screenshot of this quoted statement instead, below [2])
I assume that (unless stated otherwise in their agreements / legal documents) PayPal continues to apply the same policy to funds that are held by them in accounts pending closure for high chargeback rates. I could be wrong though, I just ctrl+f’d for “balance” on the first legal document linked on their site. Also, only applies for Canada, since I didn’t check any other country’s agreements (but my guess is that wherever it’s not expressly illegal for them to do so, they’ll use whatever money they’re “holding” for you as a revenue generating investment vehicle).
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1: https://www.paypal.com/ca/legalhub/useragreement-full?locale...
If you use a credit card merchant that does more vetting of the seller side businesses, they're more likely to give you the benefit of doubt if you start getting chargebacks and not lock everything.
Source: https://www.chargeflow.io/blog/chargeback-threshold-limits
Having said that, I think these days there are ways to limit your exposure, for example requiring 3D Secure for every card payment, as well as tools like Stripe Radar that help reduce fraud.
https://news.ycombinator.com/item?id=343060
In this case a competitor used fake accounts and stolen credit cards to buy a competing app to get it delisted - Apple's apparent policy once the chargeback total hits some arbitrary figure.
Edit: Immediately downvoted for no reason. Catching these sort of malfeasant actors was literally one of the USPs of former Irish yCombinator Winter 2014 participant Trustev, which was picked up by TransUnion for €44 million a year later : https://www.siliconrepublic.com/business/transunion-buys-tru...
In some parts of the world this is solved by mandatory 2FA authenticaton for online payments (3DSecure and similar tech). If the transaction is verified by 3DSecure or some other 2FA, you cannot chargeback because of "fraud", but you still can chargeback for any other verifiable reason (e. g. goods not delivered).
It really is crazy how easy chargebacks are in the US in comparison.
Let’s say your avg payment is $15, one chargeback means that not only have you lost the payment from the customer who charged back but as you now also owe the chargeback fee you technically lost the payment on a sale which wasn’t charged back.
Edit: just a quick note. Chargebacks are different than “PayPal Claims”, chargebacks are initiated by the card issuer, claims are initiated by the customer in the PayPal interface, so claims cost less than chargebacks, but PayPal will still ding your account if you get too many of them.
Edit the second: the 180 day hold is to cover not only chargebacks (which generally have a shorter period the customer can start one) but also PayPals own “protection program” claims which is 180 days iirc.
Chargebacks as they are intended are used only when all other attempts at resolving a dispute have failed, including the merchant refusing to issue a refund. It's the means of last resort and damages the credibility of both sides involved in the transaction.
This is one of the practical reasons why credit card processors generally don't take porn sites as customers.
Yup “buyer’s remorse” kicks in rather quickly when asked “Honey, what’s this transaction for xxx?” once the statement arrives.
Last year I asked my bank to chargeback a transaction, where I didn't recognize the merchant or the amount. They said it was paid in-person with a PIN, and unlikely to be fraudulent unless I'd lost my card. (It was genuine.)
Normally when I purchase on my card I have to authorize the transaction with a smartphone app. I can see the bank being reluctant to reverse an honest purchase authorized this way.
Also when I have seen cases in the news (this has been quite a while ago, so don't have sources to hand) where the bank have just told the customer "We know it was a legit payment, claim denied" but when pushed for copies of their proof its later turned out they didn't have any and were basically just saying that to get the customer off the phone.
EDIT: Trying to think back to my last few "NSFW" transactions, I think some sites did require SCA but iirc my last SubscribeStar.Adult (think patreon but for NSFW creators) subscription didn't, but that might be because it was just adding a new creator to my existing payments.
EDIT 2: For Chip and Pin, while the bank can say "Well the purchase was made with a pin, so you must have auth it", it doesn't prove that your card wasn't pick pocketed and the pin shoulder surfed from the last transaction/cash machine withdrawal.
I had only ONE charge back, in 2015 I think.
I would understand if they would try to cooperate or ask for more info to prove things. But they have too much power and it's easier to just limit accounts.
In times of high interest rates it's even better.
Not always, they can take it sometimes as "damages"
For me (e-commerce business, mainly in Germany), PayPal makes up around 70-80% of revenue and isn't easily replacable.
I'm sure some customers would whip out their creditcard (if they even have one) or enter their long IBAN bank account numbers for direct debit, but many probably wouldn't. The convenience of PayPal is unmatched.
The real issue is that if you start getting chargebacks - you will be liable for them. A bank might ask for payment, Paypal just grabs any money in your account and locks it. If you keep an eye on the level of chargebacks you should be able to sleep better!
Chargebacks are interesting in our case, since we barely get any and if we do, we solve any cases super quick. I remember a few years ago, I talked to some PayPal representative from their business team (so higher level, not normal support) and they mentioned how they had never seen an account with such a low amount of cases. Keeping that up is a big focus for us.
Not even close in popularity in Germany. People just don't use it. Would be surprised if more than 10% of transactions would move to that if offered while PayPal is still there.
Plus, as far as I can tell, Google Pay only works on mobile phones.
What do you mean? I regularly use Google Pay on various websites on desktop.
All jokes aside, I've good experience inside the whole EU with receiving money for (digital) goods. Just from one simple bank account to the next, inside EU. I think it is a really overlooked paying method.
We even built an 'internet friendly' website/webshop system around that fact (https://www.heyhomepage.com/?link=16)
Each payment is checked on your bank account. You can do that once or multiple times a day, whatever your situation requires. Can be easily done with the current banking apps in Europe. The moment you received payment, you can process/fulfill the open orders and mark them as such. Whether that's clicking a button to send a digital file, or packing the order in a box or envelope and sending it.
This might sound like a lot of work, and programmers probably only see the "this and that can be automated"-side of this webshop, but my clients with small webshops happily send their orders across Europe and laugh out loud when they spend only an hour a day on checking payments and shipping orders. They also don't have thousands of orders a day, of course. But they do have the margins to make it worth their while. And if their business grows, they can easily migrate off this webshop.
They are not afraid to put in a little work now, and know they can automate things later.
It seems that the burden of proof in the EU is much higher before an issuer will allow a charge-back — at least anecdotally, the credit cards I've used require you to prove that you tried to resolve the issue with the merchant first, prior to charge-back. Even then, charge-backs would negatively impact your account standing with the issuer, so are dissuaded.
Direct debit payments in the EU can be reverted within 8 weeks with just a few clicks in your online banking. Those cost around 8€ to whoever debited (I think thats cheaper than CC chargebacks?). I've never done it, but I think you don't even have to put a reason. That just starts the process though, so they might have to add more information later.
I use Paypal because:
- I don't have to enter or reveal card details
- I will not get rejected by the website because they can't identify me sufficiently
- It gets around the fact that I have US cards but I live in Europe, which tends to be disqualifying for most websites.
- I can ship to an address other than my card address without problems
- I can get a refund via Paypal within 90 or 180 days with much much less effort than doing a change back via my bank.
Always keep in mind that you're benefiting from these things as much as the buyers are, in that they give you revenue, you can always not use Paypal and reduce your risk, but then you lose revenue. You'll also suffer from more fraud using other payment methods, etc.
Such is business.
Every time I see PayPal, I hit the 'nah, just let me fill in my card details'. I think you're overestimating their worth, and underestimating both your customers and the competition. As someone already pointed out: "Stripe/Google Pay/Amazon Pay" are available, to name just the most recognisable ones. There are others with better fees!
Fees are a good point. PayPal's fixed fee (0,35€ per transaction on top of the percentage) is actually kinda painful, since we have relatively low average order value.
Do you have an exclusivity clause ?
It might be costly but I don’t understand scary.
What I would find scary is the risk that they ban you if you have only one payment processor.
We offer both credit card and direct debit payment outside of PayPal (through Mollie.com), but people just prefer PayPal for the convenience and added buyer protection.
Since 2021, normal credit card payments in the EU also require 3DSecure verification, which causes many people to abort the payment for whatever reason (maybe they don't know how it works / don't have it set up correctly).
Having multiple payment processors is extremely important and I'm actively working on that. For example having multiple credit card processors and integrations ready to go. If you are paying with your credit card without using PayPal, you don't tend to care which processor the merchant uses. PayPal is just a special case because its so popular.
As a developer, PayPal is the worst, so many horror stories of money frozen.
I guess I'm behaving this partly because I know PayPal can be hard against the vendors. For me this indicates that if vendor accepts PayPal, then they are probably not fraudulent.
Actually, how do people buy stuff in Germany? I'm in the Netherlands and everything uses iDeal, which was annoying at first but now I like it. I use a credit card otherwise. When I was in Ireland I used a debit card which functioned like a credit card.
The only downside is that it's only for Dutch consumers, and therefore international support is very spotty (Steam supports it, Lego does not). This weekend I heard a rumour that they might be making it international, though. That would be really nice.
The biggest problem to making it work for all banks is that at the moment, you need to select your bank from a list. That list is going to get enormous. The browser should probably remember your bank for you.
I think the big difference in Germany is that people here tend to have their bank account linked with PayPal, not their credit card (because many people in Germany don't even have one).
Compare that to entering your "up to 34 alphanumeric characters" IBAN bank account number manually while on your phone.
Most of the options I observed are either PayPal, direct debit, Giropay, collect on delivery or credit card.
I absolutely prefer direct debit. Just enter your name and IBAN and you are done. No 3rd party websites, no fuzz.
It would be great if there was a popular app/feature so you could save your IBAN in your phone/browser and just fill it in with one tap. That would skyrocket adoption and let merchants move away from expensive payment service providers.
Can a company really "hold any funds in your account for up to 180 days" just willy-nilly?
And what does this mean:
Fun bonus, they hold $80,000 I won't get back.
PayPal has been seen using several jurisdictions, eg. Luxembourg, France, Germany. When maltreated customer try to sue and get their funds back, they will ping-pong people around in different orgs across these jurisdictions.
In the end you would need several very persistent lawyers across several jurisdictions, which is more expensive than loosing 100.000 EUR.
(There is a specific case on this that was shared on HN some time back).
If you are searching for Stripe or any bank you'll find an equal amount of horror stories which are of course always louder than the millions of accounts and transactions that go on without an issue.
Search for „Stripe blocked“:
- https://news.ycombinator.com/item?id=30705500 „TELL HN: Stripe STOLE OUR $159k“
- https://news.ycombinator.com/item?id=36967159 „Stripe is no longer a suitable payment processor“
- https://news.ycombinator.com/item?id=34614844 „Stripe Holding my money for 120 days“
- etc.
What's missing here is a description of what he was doing to generate that money. Maybe he was completely legit, but we don't know anything. Does he perhaps have a reason to think he won't get his money? Maybe he was getting a lot of chargebacks or some other negative metric.
https://www.headshotpro.com/ seems to be his business.
But then, in the FAQs, you can see the refund policy specifies they will only refund if you haven't downloaded any images. I imagine some people sign up to try it, then go refund if the quality is not as expected (textual inversion generators like this can be a bit hit or miss) and find they can't.
Doesn't mean they're doing something dodgy but there may be more to the story.
If we dig deeper we may learn something useful. If this guy wants unquestioning sympathy he should look to his loved ones, not the internet.
That is pretty strong evidence in itself, because everyone who isnt shady ties an explanation of their business into everything they talk about out of pride and desire for free marketing.
The problem is that PayPal isn't legally considered a bank in the US but a payment processor, which gives them a lot more freedom to run their service in the way they're infamous for.
In the EU, they are a bank, which permits you much more rights but you have to drag them kicking and screaming to enforce your rights. (Among other things, they're homed in Luxembourg and basically employ all the competent financial lawyers in that country, making it basically impossible to get legal representation without getting rejected on a conflict of interest basis.)
Like if even the fucking IRS isn't trusted enough to push money through the system then it's a complete joke.
Nevermind them changing their US payment details on a dime last year.
Great for moving funds through, but don't keep any money there.
I'm on the same boat as you, my bank wont take the check paypal sent when they limited my account, or they COULD take it but with a 25% commission and 60 days waiting for the "procedure".
Yes, speaking from experience. It’s been 22 years now and policies / laws have changed, so circumstances would certainly be different if it happened today.
On both ends of the spectrum of being an ebay buyer and seller.
Once I sold a WoW account, and as soon as the buyer got the account charged back the payment.
Another time I bought a piece for my motorbike. Never got anything. Asked for a chargeback. Got nothing.
Did not use their service and I am still livid for their lack of transparency, consistency and honesty.
If the buyer did a charge back on their credit/debit card, PayPal gets charged and passes it on to you. Likewise if you as a seller didn't get the chargeback isn't that on your card company?
So when I sold and the person asked for a refund, he got it immediately, even though he received everything.
When I bought and never got anything for months, Paypal refused to even put me in contact with a human for weeks.
So on both times I got screwed.
its not that rare of an story
I could set it to a lower threshold, but my AOV is ~$2,000 so I prefer to have enough for refunds - otherwise PayPal needs to debit my checking and then it takes very long for the customer to get their money back.
Before this one, your most recent comment on HN was written ten months ago, promoting your website. One person replied to that comment. This is what they wrote:
“I signed up on profilepicture.ai and paid, but have changed my mind before uploading photos. There is no way to contact you through the site for a refund because the live chat isn't working and there isn't a support email. Also, when I search the help desk no content is returned. How can I reach you?”
You ignored that person.
It’s no wonder you are getting lots of chargebacks.
Hiding behind KYC/AML laws makes these bans completely opaque in every possible scenario.
Whether or not you think Danny is innocent or not, the point is not even he could know why there's suddenly a problem. There's no recourse.
We all suck it up and move on so we can make money, but that doesn't make it any better.
We don't know the details in this case. But we do know that millions of companies manage to work with and trust payment providers and financial institutions, because those providers are regulated and protections exist for customers and merchants. That's not to say that payment processors and banks never do anything wrong, or screw up, or freeze and close accounts arbitrarily. But that's clearly not the norm -- we're focusing on the relatively rare shark attack rather than the millions of swimmers who don't encounter sharks.
I have multiple customers using Stripe and PayPal (or PayPal-owned Braintree). The only times I've seen a processor take any action against a merchant had to do with fairly clear terms of service violations: excessive chargebacks, and operating a business that appears to skirt the law or the processor's allowed merchant types (it was consumer financial "services" in my experience, basically marketing shady lenders). So if I have to guess what happened, I'd guess chargebacks, because that's the main reason things like this happen. When I've seen that the merchant was getting a lot of chargebacks, and the processor sent multiple notices about that -- they didn't just shut it down with no warning.
There's literally no reason to blame the victim here when HSBC can launder money for the literal cartel under the same legal regime that deputizes financial institutions to demonize transactions instead of a government agency demonizing an actual behavior and investigating that actual behavior. The party in power made a choice they shouldn't be in a position to make or shouldn't chose to do that way, the predictability of that choice occurring is not a factor at all.
PayPal is terrible and unreliable and should be avoided, but if they confiscate your money, I would expect you should be able to sue them for it.
A well written letter can get things moving pretty quick.
Real outrage: how can a company take $80K of someone else's money ("I won't get back"). Decline to do business, sure, hold until an investigation is done, why not? But this is outrageous. Did they refund it to the buyers at least?
As an American, I only used PayPal to send and receive money to/from dad. I have seen a few pushes to use PP, but mostly in the e-commerce space for some promotion. “Use PayPal, get extra X% off price!”
Personally, I am not a fan of the debit/credit world. I will use them simply out of necessity and “cashless” society. But there are much better ways to pay people and businesses that don’t involve a sea of middleman siphoning off percentages or pennies of each transaction.
Google Pay & Apple Pay helps with this now (and the fact they're implemented as a payment type like VISA and not a processor like PayPal helps a lot to prevent lockout cases like this) but they're nowhere near as widespread as PayPal, at least from my experience.
Payment gateways process your card, not the app.
"Paying without giving my card" is not what that feature is, but rather "card details are saved so you have a lower barrier to spend more".
Compared to PayPal that are a clear redirection in-browser and result in the vendor getting (at most) a "payment cookie" that can be completed to transfer X USD from Y to Z. Or Apple Pay where your (ephemeral) payment details are E2EE to the payment processor's server, even if they go through the vendor's website/servers.
e.g. the swiss use TWINT for almost everything and it works great
Not only is it interesting that this keeps happening, and successfully. But we're like 25 years down the line since Paypal started, and Paypal is still acting in ways that you wouldn't expect a bank/payment processor to be allowed to behave by regulators.
Like, if I were a regulator I would seriously be considering just going through Uber's behaviour since the company started and prosecuting every single violation they committed. Let's see how well that business model holds up. It's not good enough to say "Oh we're all billionaires now and we floated on the stock exchange so I guess now we'll think about abiding by the law".
There is nothing in banking regulations that stops what PayPal is doing here. Any credit card processor will not hesitate in putting a hold on your payouts if they want to investigate your business. Heck one of our credit card processors wouldn't even pay out before 90 days as standard.
Nice idea for a business, by the way.
This is an isolated case, do not expect Paypal to solve your issues if you don't get this level of visibility.
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Well PayPal is known to do that for two decades now, it would take a huge amount of self-confidence to keep $80k there.
Mind blown. FAFO.
If he really was doing 6 figures in sales then roughly 10% being withheld is in the ballpark of reasonable.