Why We No Longer Accept PayPal
binkd.com
binkd.com
Then when it was done, I decided to treat the family to a nice vacation (which had nothing to do with paypal). On this vacation, I read a book that made me sentimental for some tech I group up with as a kid, so I went on ebay and ordered a bunch of things. Transactions ranged from a few dollars up to $200; nothing gigantic.
After I got home (and vaca was sadly over), paypal sent me an email asking me to confirm my business buyer status. Of course, there's no way to easily contact customer service and replying to email wasn't very helpful. Buried in their help section was a way to submit a support request, which I did, explaining that I'm not a business, etc.
I got a response saying that they were closing my account. At first I was bummed, but then I was thinkin, screw it. Paypal's never been customer friendly and if this how they were gonna be, then I have no problems walking away from them. So, good riddance I guess.
Paypal have had their share of bad customer experiences. However it is clear in the Paypal policies that trusts are not allowed to own accounts. If someone was ignorant to not notice that, I believe it is unfair to point fingers at Paypal.
I have to agree. I can forgive a random individual for not reading a ToS, but as a business? That's unforgivable. PayPal might be skeevy, but you can't fault them when they follow their own written and publicly available rules.
This makes sense only in the context of choice.
If your business revolves around selling on eBay, PayPal is the only viable choice.
If PayPal wrote that they own your firstborn in their TOS, and every professional seller on eBay was made aware of this fact, their market share would not change.
Anyone who has used PayPal for any sort of volume (thousands per day), hates PayPal with a passion that cannot be described. And they continue to use it. Because they have no choice.
So, yeah, it's perfectly fair to point fingers at PayPal when they continue to make these asinine changes. Because when it comes down to it, for the majority of their customers, it's either use them or go out of business.
Then either your business model needs to change, or you need to follow the rules (i.e. no trusts owning an account) that you agreed to when you signed up. Those are the two options.
Whether or not paypal sucks has no bearing on the fact that the author was in violation of the terms of service he agreed to and had his account terminated for it.
Could they have handled it better? Sure. Are they under any obligation to? Nope.
Again, if this were a random individual person I would sympathize completely, but you do not, as a business, enter any contract without full appreciation for the terms you're binding yourself and your organization to. Just because he was ignorant of those terms doesn't mean they don't exist.
No. Not when you signed up.
It's anytime they decide to change the contract. They modify the contract whenever they want to, without any regard for continuity or business viability ... and if you don't agree, they disable the account. Maybe keep some of your funds too.
Is it legal? Gray area. Some courts don't enforce contracts of adhesion strenuously.
Is it ethical? No.
You treat your business partners with respect and don't change the contract whenever you feel like it, to their detriment, simply because you can.
It's abusive.
But I doubt you can call it unforgivable. You can't tell me you have read every single ToS to every single service you have signed up to in full and detail. PayPal makes it more clear on their signup about this these days but I signed up a few years ago. It wasn't as clearly spelt out.
As an individual? No. As a business, presumably an organization that has a lawyer on standby to translate the legalese? Yes.
They're chasing away the real business along with the fraud.
Fair enough - they are a business who wants to maximize profit, and I was being a 'bad' customer. But I think this is short-sighted; they are a social payment network and every lost customer is millions of potential payment links destroyed. I've already made a few people use competing services to send me money. Paypal has consistently thrown out the opportunity to be a de facto online payment standard in exchange for a higher margin.
In the end they didn't help, I cancelled the subscription and had to ask the customer to signup again.
Trusts offer additional asset protection and tax benefits for business owners. Most accountants recommend this structure when setting up a business for you.
There are more articles out there with PayPal and trusts however since Micro businesses are most likely the heavy users of PayPal, they are generally setup as a sole trader or Pty ltd hence comply with PayPal's terms.
http://forums.whirlpool.net.au/archive/1323826
It's also mentioned on Paypal.au's business page.
The fact PayPal has merchants on a short leash should help the confidence of its users, and with all the security breaches and database leaks going on, it's good to know my CC number is not out there in multiple merchant databases.
It just sucks that there's no real alternative in Australia yet, though pin.net.au is showing promise, hopefully they'll go live soon!
It takes longer to setup and I wouldn't really recommend them for micro businesses but they are certainly great for small businesses.
According to their instructions none of these documents could be older than 6 months. Somehow they expect me to have a driver's license and social security card neither of which is older than 6 months. I'm sure I could have called them and cleared up the matter after wasting an hour or more dealing with their support, but instead I just said fuck it and decided not to use Paypal anymore.
Fuck you, Paypal.
I guess I'm not sure what the point is. This doesn't seem to have anything to do with Paypal's poor customer service, nor does it seem to condemn Paypal's policy of not allowing trusts. It just seems to be another "me-too" article about no longer supporting Paypal as a method of payment, and it wasn't even a conscious choice by the business to discontinue that support.
I'm curious because I've heard similar rants about many products that process payments for merchants- Paypal, Amazon Payments, Google Checkout, etc.. I'm interested how your provider is able to circumvent all this red-tape that larger companies seem to have.
Would you trust your money to a private company that acts like a bank but is not regulated like one?
Something I'm noticing is that most of the PayPal horror stories come from the USA. How much trouble do they cause to people across the pond?
PayPal is licensed in all 50 states and is a registered bank in more than a handful of countries. Whatever difference you think there would be if they were also a bank in the US, instead of just having their accounts underwritten by two banks (JP Morgan Chase and Wells Fargo NA), I don't think that difference exists.
@dkl: I'd like to reply to your comment but it's [dead] and there's no contact info in your bio. The answer should be fairly obvious if you think about it, and has been discussed on HN in virtually every previous thread about PayPal. I've had my own merchant account underwritten by the largest private bank in the United States frozen in the past.
One example I can think of: a bank's customers can be plaintiffs in a class suit against the bank, but as of next month paypal's customers won't be able to be in one against paypal.
http://www.ecommercebytes.com/cab/abn/y02/m03/i13/s03
So, even if banks and paypal freeze accounts for the exact same reasons, paypal will do it much more, because they have less confidence in the identity of the account owner.
Banks do their underwriting up front, PayPal delays it until some kind of event triggers it (whether it's a spike in processing volume, a change in average ticket size, or buyer complaints). Since we only read about an incident or two a month, most people probably never hit one of those triggers, only using their accounts for eBay purchases and the like.
When an account starts looking risky, or starts looking like a real business, they get treated like one -- the sudden need for documentation is the jarring part, and the sudden loss of the account if underwriting doesn't approve of the business the cause of the dissatisfaction.
I'd bet the whole process could be made a lot less antagonistic with just a change to wording -- better explanation of what's going on, why PayPal wants the documents now that they didn't ask for before, and the fact that a temporary freeze doesn't mean you're losing your funds or won't be able to continue processing.
If someone accepts paypal payments for a garage sale or transient lemonade stand, is that a real business?
People accept cash and checks for many things that might be considered commercial, and banks don't have a problem with low volumes of commercial-transaction-related deposits being made to personal accounts. It's primarily the account owner's responsibility to pay taxes and do any other necessary reporting. I believe banks do primary reporting for money laundering and terrorism purposes and back-up reporting for tax purposes, but none of that generally involves freezing accounts.
People expect paypal to work like an easier means of check or cash payment, and when it turns out it doesn't work like that and the account gets frozen, people are understandably pissed off. The commercial/private transaction distinction is fairly arbitrary to begin with.
Take a look at the contract you signed to open your merchant account. Look for the words "risk reserve" or "reserve account". That's where money goes when the account is being reviewed or is reclassified as higher risk but isn't being terminated. Frozen PayPal accounts that aren't being terminated can still accept payments, they just can't withdraw money -- it's the same situation as a merchant account provider holding funds in a reserve account.
Here's some verbiage I copied straight out of one such contract:
9.16 RESERVE ACCOUNT
In addition to the security interest and chargeback rights granted to Bank by Merchant, Merchant hereby authorizes Bank to establish a Reserve Account, with or without prior notice to Merchant, at any time prior to, at or after termination of this Agreement, to ensure Bank’s recovery of any liabilities owed it or reasonably anticipated to be owed it by Merchant pursuant to this Agreement.
Such liabilities include, but are not limited to, those arising out of actual and/or potential post-termination chargebacks, as well as any and all post-termination fees, including, but not limited to, costs for accounting, investigation and account management, charges and expenses due or anticipated to be due Bank from Merchant.
Merchant agrees that if Bank does establish the Reserve Account, it shall be in any amount that Bank, in its sole discretion, deems reasonable under the circumstances. The Reserve Account may be funded and/or replenished by Bank’s withholding or withdrawing from, or freezing all or any part of, the Commercial Account and/or accounts maintained by Merchant with Bank. Unless Bank agrees otherwise in writing with Merchant, the Reserve Account shall not bear interest.
Bank may enforce its security interest in the Reserve Account without notice or demand. Bank’s right to sums owed it by Merchant pursuant to this Agreement shall in no way be limited by the balance or existence of the Reserve Account. Bank’s rights with respect to the Reserve Account, as well as the security interest granted Bank under this Agreement, shall survive the termination of this Agreement.
Many businesses don't have a direct relationship with the bank that underwrites their merchant account. They get the account from an MSP/ISO and some bank underwrites those accounts. It's the underwriting bank that does things like establish a risk reserve without notice because a big chargeback came in and that flagged your account for a review. When that happens, there is no opportunity for the MSP/ISO to contact you and talk it through first -- the freeze isn't placed by them and can't be removed by them. They'll tell you about it, and perhaps help convince the bank to remove it, but that'll happen after.