I was contracting for the first half of this year and my employer preferred Freshbooks and Paypal. I was like, ok, I've had my paypal acct for years hooked up to my checking account, so I figured 'fine'. Luckily through the whole engagement I was able to get paid and money transferred without any issues.
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.
> 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.
>If your business revolves around selling on eBay, PayPal is the only viable choice.
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.
> or you need to follow the rules (i.e. no trusts owning an account) that you agreed to when you signed up.
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.
That anti-excuse reminds me of one of the recent cases where Paypal screwed over a business for using the "Donate" button, because it should be obvious that only registered 501(c) organizations are allowed to use said button.
I'm not blaming PayPal for this, I agree I was not aware of this ToS, I am just making the point that they are pushing away legitimate business because of this policy.
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.
>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.
As an individual? No. As a business, presumably an organization that has a lawyer on standby to translate the legalese? Yes.
So you pay a few hundred dollars and wait a few days to a week every time you sign up to an online service such as Pay Pal for them to read over the terms and conditions. The same with any Microsoft, Google and Amazon accounts? Did you get them to check over the Microsoft license or Apple license before you loaded your operating system on a computer you use for business?
You were fortunate that Paypal were 'kind' enough to let you have the money in your account before closing it, I wouldn't have expected that! I guess that says something about their reputation.
I've been banned from Paypal, I assume because my account has been hacked twice (they never gave a concrete reason) among 100s of legitimate transactions over many years. What is frustrating is "this limitation cannot be appealed" - it seems to me that the true scammers wouldn't even try appealing, so I think they are firing me rather than accusing me of acting maliciously.
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.
I have experienced support issues with PayPal as well. I once had a customer on a subscription that froze. It was a bug in their system and all I got from PayPal was "how are we sure they signed up for this subscription".
In the end they didn't help, I cancelled the subscription and had to ask the customer to signup again.
They are common for small businesses ($50K+ revenue per year into the millions) not so much micro businesses.
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.
yes it is. I did look into it further once I received the email. My own fault for not reading the ToS throughly but I am not the only one who has been through it.
Just remember than some of the issues merchants are facing stem from PayPal's customer protection policies (I say some, not all, because I'm sure a large part of it is human error or silly policies as happens in large organizations).
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.
I've had to go with paypal for a recent project, I've not run in to any problems like this yet but their automated payments system and API are horrible to work with, especially with it being a nodejs project.
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!
I would just recommend getting a payment gateway and merchant account. I am with eWay which only costs $350 per year + 50 cents per transaction. My merchant account costs a bit less per year plus a percentage of the transaction which is less than 50% of PayPal's transaction charge.
It takes longer to setup and I wouldn't really recommend them for micro businesses but they are certainly great for small businesses.
I tried to use Paypal for the first time in a year about a month ago. Tried to add funds from a bank account I had confirmed through their process years ago and which has been linked to the account for ages. This transaction caused them to suspend much of my account until I could provide them with photocopies of all three of my license, social security card and a utility bill with my current address.
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.
I feel like this is a poorly written article. It doesn't present any sort of position, and the initial anecdote about the customer service issues and the author's indecision regarding support for Paypal have nothing to do with the subsequent issue, which (as has been stated) was simply a matter of not understanding Paypal's terms of service in the first place.
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.
Thanks rquantz. It wasn't meant to be a hate piece on PayPal or anything else other than just my thoughts on what had happened and events surrounding it. As I updated in my article it was there to let my customers know what had happened and that it isn't such a big deal for businesses to move on from PayPal.
There seem to have been many of these horror stories over the past couple of years. And especially if you're a small business, not having access to your funds is just completely unacceptable.
Thats the part that makes PayPal unbearable. As mentioned above I have had questions asked from my merchant provider over transactions but at no point did they freeze my account. They called me, sorted out the issue and my business kept running as usual.
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.
My merchant provider is with my local bank. If you deal with a bank it suprisingly much nicer than dealing with merchants such as Amazon, Google or PayPal
The faster PayPal dies the better, those guys are real scumbags, imagine if a bank could just freeze your account like these people do, worse than that they are not even regulated like a bank!
Would you trust your money to a private company that acts like a bank but is not regulated like one?
Banks and PayPal are regulated to the same degree. Banks do freeze merchant accounts exactly the same way PayPal freezes accounts, for exactly the same reasons, for exactly the same periods of time. They have exactly the same policies because these policies come down from the Visa and MasterCard Operating Regulations that both banks and PayPal are bound to.
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.
I disagree. PayPal is NOT regulated as a bank in the United States. Here is an article from 2002 when they received the official word that they would not be regulated as a bank:
They _are_ regulated as a money transferral service. I work for a bank and I can assure you that the level of scrutiny by banking regulators is _far_ greater. As a single for-instance, the auditors have asked to see documentation of our software development methodology (presumably to ensure there were procedures in place to ensure applications were built securely and without an opportunity for an attacker to check in some kind of back-door).
Technically you can't assure us that banks face greater scrutiny unless you can also describe reliably the level of scrutiny that paypal falls under - or is it common knowledge that paypal doesn't get this kind of audit? I'd be interested in reading a good description of paypal security auditing, if there's anything available.
It is commonly spoken of in the banking industry (where I work). I do not recall speaking with anyone who had firsthand knowledge of audits at PayPal (I've never discussed this with someone who worked there), but I do know that the level of scrutiny of a money transfer service is much less than that for a bank.
Can you provide citations? I have read that paypal is regulated far less (in the USA), and I am fairly certain that paypal is not a bank in the USA.
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.
I have never had my merchant account frozen for any period of time. There was once an issue when I first opened it. They called me, I told them what transactions had occured and why. They accepted it and continued on. In no time during that process did they stop payments or funds from being received. It's a big difference. They check with the business owner before they do something, not after like PayPal.
It's really quite rude to publicly call someone a liar without evidence, and by saying it doesn't happen after I said it's happened to me, you're calling me a liar. Your single anecdotal experience does not define the entire industry, especially in the face of both experiences and plain contract terms that state otherwise.
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.
As it says, your account may be frozen, funds may be withheld, the account can be established unilaterally without notice. Standard merchant account agreement. It's not there for no reason.
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.
I think the important distinction is that banks will not open accounts without reasonable documentation of identity.
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.
That's seemingly the purpose of most temporary freezes. They ask for identification and a description of what you're selling with the account, and if the response is satisfactory, unfreeze the account.
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.
I think the point of confusion revolves around the definition of a (real) "business".
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.
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.