
Good riddance, PayPal - jenskanis
http://elliotjaystocks.com/blog/good-riddance-paypal/
======
dangrossman
The premise of his "vehemence" is untrue: banks can and do have the exact same
policy regarding terminating merchant services accounts. They can terminate
you at any time, without reason, and when they do so, hold any undisbursed
funds in a reserve account for exactly 180 days. There is no regulation banks
are subject to that PayPal isn't that would have an affect on that.

PayPal did not make up this policy; it's based on Visa and MasterCard's
Operating Regulations, which predate PayPal's very existence. I have first-
hand experience that not only is this in virtually every merchant services
contract at every bank in the US, but it's actually enforced, exactly the same
way PayPal enforces it.

8 years back I had a sudden influx of chargebacks from a single scammer that
used a bunch of different cards on one of my websites to buy services, back
before I knew how to spot that kind of activity. My real, regulated bank
(First National Bank of Omaha) terminated my merchant account and held several
thousand dollars for exactly 180 days with no recourse for me. They never saw
another chargeback against my account, but I still had no access to that money
for 6 months. Exactly the same as PayPal does when it terminates an account
for activity it deems high risk.

~~~
mattmanser
Just to note, the's author's not in the US, he's in the UK and Paypal's a
regulated bank over here.

I always have mixed feeling on these stories.

On the one hand, if you operate almost entirely online, you're in amidst a
mass of scammers and conmen, it's a much higher risk, hence everything being
more draconian. So there's always problems. Brick and mortar businesses are
much less as there's a real presence, etc.

On the other hand, this is a long established business. Are they really that
high-risk any more? Why are they treated like someone who's just started? Why
can't Paypal treat them more respectfully as there's plenty of trading
history. Why are there no mechanisms for establishing real identities that are
much stronger than what they seem to be doing?

~~~
DanBC
> On the other hand, this is a long established business.

8Faces has been in print since 2010. That's a great start. It's not a really
long time. Issue 5 is ready to pre-order. (Weirdly the author claims that they
don't really do pre-orders, but on the website there is a huge banner telling
people that they can pre-order issue 5.)

Magazine publishing is notoriously tricky, especially in the UK.

> Why can't Paypal treat them more respectfully as there's plenty of trading
> history. Why are there no mechanisms for establishing real identities that
> are much stronger than what they seem to be doing?

This is an excellent point. I can understand why Paypal don't have customer
reps for every little nickel and dime trader, but a magazine doing £15,000 per
issue is reasonably substantial amount of money. It'd be great if Paypal could
establish identities (interviews? documentation?) and build relationships with
the honest traders that use the service.

------
reitzensteinm
The customer service angle sucks, no question, and I'm worried about getting
into similar trouble (I sell downloadable games via PayPal).

But I actually think holding an issues worth of revenue in reserve is a decent
enough compromise. If the company goes bankrupt before an issue ships, for
whatever reason, PayPal themselves are going to be on the hook for refunding
every single payment, as well as chargeback fees that may apply.

PayPal's fees are around 5% - what's their gross profit on each transaction,
1-2% at most?

So if there's a 2% chance of an issue going awry and angry people starting
chargebacks, a magazine _50 issues old_ could turn into a net loss for PayPal
_overnight_ , which is why even merchants with long and clean track records
get stung by this.

PayPal's freeze on that money means their end is covered, and you can still
bring the sales to a bank and get a line of credit to cover the printing
costs.

The way PayPal handles the customer service end rightfully earns their
horrible reputation. But too many people act like the risk itself is not
there, or that there's a clear, obvious line between fraudulent businesses
that con artists start and solid trustworthy businesses that we start. If
PayPal wasn't as aggressive with their fraud prevention, they'd be skinned
alive.

And, as other people are pointing out in this thread, standard merchant
accounts are not immune from the same level of shoot first, ask questions
later fraud prevention.

~~~
jedberg
But yet somehow banks stay in business while being legally barred from these
same protections.

~~~
Firehed
Banks are not doing merchant processing for most people. Having some sort of
reserve to guard against chargebacks is incredibly common in the industry;
PayPal, however, is known for going completely over the top as the article and
numerous commenters indicate.

~~~
tripzilch
> Banks are not doing merchant processing for most people.

Well, US banks aren't. Dutch banks are doing it just fine:

<http://en.wikipedia.org/wiki/IDEAL>

Works very well and I trust this method a lot more than a payment processor
that's not my bank.

I'm not entirely sure what the rules are from the merchant's side, however.

------
davidmarcus
Hey, everyone — I'm David Marcus, and I've been running PayPal for the past 5
months. Hard for me not to comment on this thread. PayPal brought a lot of
goodness to millions of merchants, and hundreds of millions of users around
the world. But yes... as the company grew exponentially we were met with
growing pains. And developers, merchants, and consumers sometimes had to pay
the price for it. I still want to stress that when you manage money at such a
scale, you always attract bad people with wrong intentions. Our intention has
always been to protect our customers. Not to mess around with our merchants.

I want to share two things with all of you:

#1 — there's a massive culture change happening at PayPal right now. If we
suck at something, we now face it, and we do something about it.

#2 — you have my commitment to make this company GREAT again. We're
reinventing how we work, our products, our platforms, our APIs, and our
policies. This WILL change, and we won't rest until you all see it. The first
installments are due very soon. So stay tuned...

~~~
TomGullen
I have to say I do like the new business phone number which every time seems
to connect me to a friendly and helpful person each time.

That's where the positives end for me however. For Paypal, I fear it's too
little too late. You've done too much damage to yourselves. I get the reasons
why you do things, but the communication over the last years has been
atrocious.

We're in the UK and are just waiting for Stripe to come over. I think a lot of
other businesses are thinking along the same lines as well.

Your fee structure is pretty expensive as well. There's also a lot of hidden
costs:

\- We're on an upper tier so should have a reduced commission rate. However,
after scratching my head for ages as to why a majority of our sales are not at
the lowered rate I finally find the link about cross border fees or whatever
reason you use to charge us more. As an example, some of our $119 USD sales
have $4.35 fees which is ~3.7%. Our current rate it says on our account should
be 1.9%. Your fees structure is not as clear as it should be.

\- Have you tried issuing a refund in a different currency? You have to draw
money from your bank (even if there are available funds), which is converted
to the correct currency which because your spreads as so expensive means
sometimes refunds cost us money. I phoned up about this and they told me to
open different currency balances which I did and which fixed the issue, but
again, bad communication and a broken process

\- Related to the previous point, your spreads on foreign conversions are
high. I think they've improved a bit over the last couple of years but I still
consider them an expensive hidden cost. I contacted Stripe asking what spreads
they offer, and they told me they would consider it a hidden cost and they
offer customers the same spreads the banks give them.

Also, your website is mind bogglingly slow. See this support ticket I opened:
[https://www.paypal-community.com/t5/Access-and-
security/Why-...](https://www.paypal-community.com/t5/Access-and-security/Why-
is-the-Paypal-website-so-slow/td-p/415889?profile.language=en-gb)

The support person didn't do anything about it. I didn't expect them to
though, as Paypal is an impenetrable behemoth that doesn't seem to care about
these sorts of things.

Your website being as slow as it is, mind numbingly slow, is honestly enough
reason alone for me to move service. Trying to find transactions just is a
huge waste of my time waiting for each page to load. Try using your sandbox
with pages that load that slow.

> there's a massive culture change happening at PayPal right now. If we suck
> at something, we now face it, and we do something about it.

So can you make your website faster for a start?

~~~
jvrossb
Every time I've called PayPal I get connected to a real person. Once they even
proactively called me to warn me of suspicious behaviour on my account. My
account (which I've used to make thousands of dollars in payments for years
now) has been blocked by them several times and every time a quick call sorts
things out. I wonder if I am the norm and OP is the exception or vice versa?

~~~
TomGullen
We've never had our account blocked, but we've had a call every now and then
to confirm transactions we carry out which is appreciated.

I think if you process enough transactions you get good phone support. They've
been great every time.

All the other problems though cancel this benefit out and more in my opinion.

------
qeorge
Anecdotal, but maybe helpful: we had a customer purchase software from us
almost a year ago, who paid via PayPal but using their Visa. They've now
initiated a chargeback. When that occurs, Visa takes the money from PayPal,
who takes it from us, immediately - Visa presumes their customer is "innocent"
if you will.

It makes no sense, but if you don't like it your option is to not accept Visa.
They own the customer so they make the rules. It doesn't matter if its PayPal,
Stripe, or any other merchant - if your buyer initiates a chargeback, you'll
lose the money until its resolved (~6 months, usually).

As such, PayPal/Stripe/any other merchant account will hold your money for a
period of time, until they are comfortable that either:

    
    
        1) its been long enough that a chargeback is unlikely
        2) they'll be able to get the money back from you if a chargeback occurs later.
    

FWIW, all the credit card companies behave this way, and allow their customers
to initiate chargebacks for variable lengths of time (sometimes depending on
the card type - richer clients can chargeback later.) My understanding is that
AMEX has no time limit on chargebacks.

Also relevant to this specific case: its against the TOS of Visa/MC/AMEX/etc
to charge the buyer before shipment. You're supposed to authorize at time of
purchase and capture only when you actually ship the goods. The OP seems to
blatantly violate this, and I suspect they'll have to change the practice
regardless of their choice of merchant account.

None of this excuses PayPal's lack of customer support. But Stripe et. all may
not be the panacea you're hoping for. Credit cards are where these crazy
policies originate, and unless you're prepared to stop accepting them, you'll
have to play ball.

~~~
petercooper
_You're supposed to authorize at time of purchase and capture only when you
actually ship the goods._

I also believed this to be true, but wouldn't that mean Kickstarter (and
therefore Amazon) are flagrantly violating T&Cs? I wonder if Amazon has a
special arrangement with the main card issuers in this regard.

~~~
ig1
Kickstarter isn't prepayment, it's patronage, the providers are under no
obligation to deliver the product.

~~~
petercooper
Kickstarter's T&Cs state:

 _Project Creators are required to fulfill all rewards of their successful
fundraising campaigns or refund any Backer whose reward they do not or cannot
fulfill._

<http://www.kickstarter.com/terms-of-use>

~~~
FireBeyond
When you fund a Kickstarter project, you're investing in the project.

If it does not fully fund, you receive a refund from Kickstarter.

If it does, your funds go to the project, who are on their best effort to
successfully launch the project.

You are NOT, however, directly purchasing a reward. You receive a reward as a
gift for helping to fund at a given level.

~~~
nemetroid
Are you unable to read? The T&C, as quoted, _very clearly_ states that the
project creator is required to fulfil the reward _or_ they must refund the
backer.

~~~
FireBeyond
And for those backers not at a reward level?

But you ignore the bigger problem. How are you, as a Backer, able to require a
refund because a Project breached its terms with Kickstarter?

------
robomartin
I fully understand Paypal's need to protect itself from scammers. I get it.
The loss potential is huge.

I think the problem here is that they really don't have any kind of a real
relationship with their customers.

As an honest business person --not a scammer-- when this kind of thing happens
to you it is horribly disruptive and demoralizing. As honest people we should
be spending time on our business rather than trying to get our money out of a
company that has totalitarian control over it. It could, and has, sink a
business.

That said, I feel the OP may have triggered the freeze by clearing the account
of nearly all funds a couple of days after the phone interview. If I were
looking at that data I would see it as a potential red flag. It would almost
be irresponsible not to interpret it that way.

I've had sales in excess of $20K (meaning, the invoice for that particular
purchase was $20K) come into one of our Paypal accounts and have never had any
issues. Then again, the money tends to stay in the account for months. I don't
think they've ever seen us clear large amounts of money out of the account
immediately after a large sale. That, I am sure, builds trust, even at the
algorithmic level.

~~~
nmcfarl
My company empties our PayPal account 2x a month, at which point it's well
into 5 digits, and we've been doing this for ~5 years. If emptying accounts is
a red flag, it's never hit us.

~~~
robomartin
> My company empties our PayPal account 2x a month, at which point it's well
> into 5 digits, and we've been doing this for ~5 years.

Right, but you've been doing that with regularity. It's all about patterns. In
addition to that, you are not doing this a day or two after having a probing
conversation with a Paypal representative who obviously called with concerns
about your account. Huge difference.

I can take almost any amount I want out of our Paypal accounts and it has
never triggered so much as a warning email. Our track record (~10 years) is
pretty solid.

------
kevinconroy
There's been a lot of PayPal hating on HN. I'm not trying to defend the
horrible things that I've heard, but I, for one, am a happy PayPal customer.
We've regularly moved thousands upon thousands of dollars a day for the last
decade without any major issues. #YMMV

~~~
jakeonthemove
They seem to really hate any and all pre-sales, plus they have a list of "risk
items" - if you're lucky not to fall into one of those categories, it's a
happy life with Paypal for you :-).

Then there's their automated fraud prevention system that is just too trigger
happy. As an example: I bought an item on eBay the other week and they refused
to process the payment. A couple of days later I decided to try again before
buying from another seller and it went through without issues.

~~~
kevinconroy
Based on what's said, it seems that businesses/groups that raise large sums of
money sporadically trigger the most problems.

If you're running an on-going business that has multiple to many transactions
everyday over long periods of time, then I suspect that you're less likely to
trigger these problems. But again, YMMV.

------
Lasher
Lots of comments here are focusing on the mechanics of credit card processing
and _why_ Paypal might have to hold funds, but to me the entire article was
really about the customer service angle and _how_ Paypal handle this. They
freeze accounts and make it next to impossible to get valid feedback on why.

He might have argued the point, but in this particular example a simple
explanation of "We are concerned about liability if you cancel an issue before
the physical version is delivered. The hold on funds helps protect us in that
event".

The Paypal model fits small transactions and small volume. As soon as you are
big enough to feel like you deserve / expect such an explanation it is
probably just time to move on.

------
shanelja
I refuse to deal with Paypal, 6 months ago, I had a charge refused by my bank
and before I had received a letter 5 days later Paypal had already backcharged
all the payments I had made since to my account, stating that my account was
now £65 in the negative.

The result of this is Paypal saying I owed them £65, but that once paid they
would not return this to the companies and the companies sating that I owed
them nominal amounts each.

I repaid the companies in cash through the post (I even converted it to the
correct currency) and have squared things with them, and Paypal is still
saying I owe them £65.

I have told Paypal that as they paid out £65 and then took it back, they are
currently level and are not owed any money and informed them to cancel the
outgoing payments as I have paid them myself, but they continue to persist
with the idea that I owe them money.

They refuse to let me add another card to my account to pay off this amount
(the card I originally used is Spanish and I don't use it anymore, the balance
on it is, however +£0.47) and I refuse to lose money having it converted over
to Euros.

As a result I have cancelled all existing usage of paypal and now pay from a
credit card instead and I refuse to either pay Paypal the money I supposedly
owe them or add more funds to my old account to have them take it away
(leaving them £65 in the green and me in the minus)

My experience of Paypal customer services is poor service and automated
responses, if it was possible to talk to a human this would have been sorted
months ago, but as a result of their ineptitude they have lost a customer who
was doing daily business with them in the order of £100 - £200 incoming and
outgoing.

It's not much income to them, but I will no longer use their service and if
enough people follow suit it will make a difference.

And for the record, the freeze they placed on my account over such a nominal
amount cost me around £750 in lost sales before I began re-routing to my
credit card, but I doubt very much they will offer to refund this.

------
tylerrooney
Perhaps someone who runs their own company can answer this question for me: If
you don't use PayPal, how do you receive payment from customers who don't have
credit cards?

Are your customers exclusively in North America? Or do you just write those
customers off (which is a valid option if PayPal integration would be that
painful)?

Adding PayPal as a payment option has been an enormous pain for us but a non-
consequently amount of our revenue comes from customers either without credit
cards or with cards which always fail on international transactions. I see no
alternative to PayPal for these customers.

~~~
adrinavarro
There are _debit_ cards out there!

In fact, everyone I know has at least one debit card (either MasterCard or
VISA), aside from the number of people who have an AMEX/VISA (credit type).

And debit cards work everywhere. I've used my VISA Electron (debit) pretty
much everywhere in the developed world, both online and travelling abroad.

~~~
brazzy
"everyone I know" is not a useful sample to approximate the customers of an
online business with international customers.

Where payment options are concerned, VISA/Mastercard branded debit cards are
the exact same thing as credit cards. And in many countries, the average
citizen has neither. They may have a debit card that's part of some national
payment network, they may be used to buying stuff online via their mobile
phone account, or in cash at their corner convenience store, or via wire
transfer from their bank account.

Paypal allows payment via a MANY such schemes you have never heard about. That
is their USP, and something no startup can easily "disrupt".

------
pytrin
Paypal to me is the classical example of the incumbent growing stale and
detached from its consumer base on which it built its business on. Sellers
like Eliot are the bulk of Paypal's business - small businesses who needed a
(relatively) easy way to start accepting payments online.

Paypal is just giving every opportunity for someone else to come and get their
market share. Hopefully it will happen sooner rather than later.

~~~
Irfaan
If PayPal is so very terrible (and I believe it), Is there a reason Amazon
Payments or Google Wallet haven't overtaken PayPal in this market?

If neither Amazon nor Google's brand recognition hasn't convinced folks
(buyers _or_ sellers) to start pushing it instead of PayPal for Internet
purchases, I can only hope it's because their solutions are equally terrible -
otherwise, I have a hard time seeing how a new player will make headway in
this space. And I'd really like a new player. :/

~~~
mattmanser
When Google Checkout launched it was in a right mess. I remember trying to use
it and it silently crashed without an error. It was bizarre, all over the
forums, no Google response.

It also had an even worse payment flow than paypal. Which is saying something.

You can't ignore early adopters like that so no-one switched.

Also seem to remember it didn't take payments from a lot of countries. Could
be wrong.

~~~
coopdog
It's hard to believe but Google merchant accounts still aren't available
outside of the UK and USA. Even Stripe is still USA only.

------
andr
Does anyone have insider knowledge of why PayPal has been causing merchants so
much trouble? It sure looks bad on the outside, but I'd be interested to hear
their rationale.

~~~
patio11
To the extent this perception represents actual reality:

You know how every time a new payment provider comes up and people kvelch that
it isn't available in their country and how no provider is? This is because
every payment provider which attempts to hit as many countries as Paypal does
_dies_. They're killed by fraud. (Fraud kills domestic ones, too, all the
time, but it's marginally less frequent.)

Luckily, Paypal is an anti-fraud AI company which also happens to run credit
cards sometimes. When in doubt, they will always come down on the conservative
side. This is why they still exist. (Early in their corporate history they
lost -- no kidding -- _one hundred million dollars_ to fraud.)

This perception does not actually match reality, though: most people bitten by
this are unaware that similar activity would get them shut down by the fraud
department at e.g. a bank. See comments by dangrossman, etc.

~~~
CamperBob2
_Luckily, Paypal is an anti-fraud AI company which also happens to run credit
cards sometimes_

The thing is, it shouldn't take much in the way of "AI" to recognize that a
company that has already been doing business for several months or even years
is probably not going to wake up one morning and start defrauding people.
Criminals are lazy, and running a business is a lot of work. It would take
about 30 seconds' worth of review time on the part of a moderately low-paid
staffer at PayPal to avoid most of these PayPal Media Debacle of the Week
stories.

I simply cannot believe that it's that hard to distinguish between a
fraudulent user and a real one, given the presence of a significant
transaction history. New accounts opened by people with no discernible
history? Yes, they should freeze/ban/lock first and ask questions later.
Accounts that are clearly used as part of a business? Give the customer the
benefit of the doubt, or at least a 5-minute phone call.

~~~
ig1
You're wrong. A common type of fraud on ebay is for an account to build up a
reputation buying/selling low cost items (or high cost items between a group
of criminal partners) before using the account to scam on high price items.

Criminals are perfectly willing to put time and effort to create fake accounts
or just buy stolen accounts.

~~~
CamperBob2
To accept your statement that I'm "wrong," I'd need to see some examples of
false business fronts that were not obviously bogus from day 1.

On eBay, yes, it was pretty easy to play the "Sell a bunch of stuff for 99
cents and then pull the big scam" game. But none of the widely-publicized
cases where PayPal has basically attempted to wreck the lives of startup
founders fall into that pattern. These people have all had independent web
sites selling actual products, and/or a background in other ventures that
could be checked if PayPal were to spend 5 minutes doing due diligence on
them.

~~~
mryan
It's a relatively common thing for criminals to do, and is known as a 'long
firm': <http://en.wikipedia.org/wiki/Long_firm>

1) Run a legit business for a few months

2) Build up credit history with suppliers

3) After a while, buy a huge amount of stock on credit

4) Sell all of the stock for cash at massive discounts

5) Disappear with the cash, leaving a pile of unpaid debt in your wake

~~~
CamperBob2
Sure. Someone does that when they are looking to steal hundreds of thousands
of dollars, or millions of dollars.

Someone looking to put one over on PayPal is not going to do all that crap.
Sorry. I need to hear some actual examples if I'm going to change my mind.

------
milesskorpen
In Europe, PayPal actually is incorporated as a bank, so all normal rules
apply. Merchant accounts for digital goods are subject to a lot of risk!

Stripe et. al. are the credit unions of the card processing world -- they can
offer more personalized service. But they also can't really scale and meet all
demand, or handle the very largest accounts, without putting many PayPal-esque
structures in place.

------
ryguytilidie
Had a similar experience with Paypal about a year ago. I reported them to the
Better Business Bureau for unethical business practices and Paypals response
was basically "well its not illegal so we're going to keep doing it".

Great, and I will keep not using your site, and I will keep filing complaints
through every forum possible until we eventually end up on a new site and the
circle of life of

useful startup--->gets an ego and stops caring about customers--->replaced by
new useful startup

continues.

EDIT: The best part was they accused me of three things: 1) Being a newer
member (I opened my account in 2000 so I'm not sure I agree.) 2) Not having
enough account history. (In the 12 years I've been a member I tend to make 1-2
transactions per month). 3) The transaction being "abnormally large". (I get
paid rent and pay rent through the account for thousands of dollars at a time,
the transaction in question was for $400 dollars)

basically paypal can diagf.

------
verelo
Thank you for writing this, reiterates everything i feel about Paypal as well!

We use Stripe and I couldn't be happier. Started with Paypal, wanted to shoot
myself on a regular basis.

~~~
axefrog
Unfortunately for Elliot, myself and the countless other non-Americans in the
software development world, Stripe is not available (yet) outside of the USA.
Stripe have stated that they're working very hard on breaking out into other
countries, but I suspect it must be an immense job, what with all of the
various existing bureaucracies and regulations present in each country.
Hopefully we'll get some good news in the not-too-distant future...

~~~
lbarrow
<http://www.braintreepayments.com/> just expanded into the EU and Canada!
(Disclosure, I work for Braintree.)

~~~
Silhouette
Could you please clarify this? We made contact with Braintree just last week,
resulting in an invitation to join the EU beta programme. We read over the
provided docs and sent back a few follow-up questions, but haven't heard
anything since. Now the whole site seems to have changed around, suggesting
that the service is out of beta.

Can I safely assume at this point that our reply was "lost" and we should
start over? Not exactly a promising start on the customer service front, but
perhaps we can call it teething trouble. :-)

~~~
philipsflat
My apologies. I can say that's highly unusual and there's no excuse for it.
Can you email me directly at rob@braintreepayments.com so I can straighten
this out for you ASAP?

------
rockynate
My business also suffered many of the same indignities, concluding with the
freezing of my account and a 6 month hold on thousands of dollars. Our paypal
account had an 8-year track record of perfect customer service - all issues
handled immediately. We sell website construction software and marketing
training services. We were taking in 28% of our income via paypal, with the
rest through a standard merchant account. Losing this much of our business,
along with having the funds held, was enough to collapse everything. The
company is now in the process of being sold. I'm not saying it's all paypal's
fault - we obviously should have had contingencies in place for such a
circumstance - but they obviously had a huge part in the failure. I'm no
longer angry about it; I'm just really sad. We posed no risk to paypal (years
ago they placed a $5,000 reserve on our account which I was happy to comply
with) and they couldn't give any reason for why they were doing this to us. 8
years of successful business is an eternity on the Internet. That track record
seemed inconsequential to them. Causing this level of pain and heartbreak
"because our TOS says we can" seems nothing short of... evil.

------
jcjc
Just my yow cents...I received 3+k in my PayPal acct around 3mon ago. I was
shocked next day that my acct was freezed and when I called PayPal I was told
to provide PROOF OF DELIVERY to have mt acct unlimited...ok, so I did...the
misery just started...a week later my acct was still frozen and I decided to
call again...another chick with a distant,lazy voice stressed I would need
PROOF OF RECEPT to unlimit my acct...you know how long it takes for a sea
freight from china to the states I escalated to a inexperienced
supervisor...to no avail of course...so I have to wait another month for the
shipment to arrive, and then I called again in urgency...guess what? No luck,
I went thru a few more chicks only to realize they never wanted to be honest
with me to unlimit my acct because THEY WANT THE MONEY FOR FREE FINANCING! My
acct was still frozen 45days after receiving the payment...I had enough...I
refunded the money and closed my acct last month...I ask all my friends,
partners,and biz associates to stop using PayPal...this is what I tell you
PayPal you do not suck, that doesn't apply to you,you are sleazy cheap

------
superjesuspants
I had PayPal freeze my merchant account while I was registering it. I didn't
even get to sell anything, because their broken, confusing interface made me
fill out something wrong, and when I tried to correct it they froze the
account. I believe every word of this article.

I've been hearing a lot about Stripe lately, but haven't used it yet.

------
emilysviolins
I hate PayPal with a vengance. I used PayPal with my small online music
business a few years ago. But when there was one dispute by one customer, they
froze my account, not just for that one transaction with that one customer,
but for all transactions with all customers. And they refused to answer my
calls or help me resolve the problem. They sided with the customer, even
though she was wrong (it was about a disputed shipping charge), and I ended up
not only losing the sale, the cost of shipping and insurance, but subsequent
sales and deals with other customers. My rating on Ebay went from 98 to 65
over night with angry posts from other customers. It was a horrible scene. I
ended up refunding everyone that had their money frozen, even though PayPal
never refunded me! I switched eventually to Google Wallet and have been happy
ever since.

------
mratzloff
I don't think this guy realizes the extent of how correct he is. PayPal is not
a bank. They are basically a giant merchant account. Wells Fargo backs them,
even while they compete with them (clearXchange.com).

So PayPal doesn't have to operate by the same rules. When you use PayPal, you
are putting money into PayPal's bank account and hoping they act in your best
interests.

A reasonable person (I feel) would conclude PayPal is a _de facto_ merchant
acquiring bank, especially given the volume, and therefore should be required
to operate under those laws.

Of course, PayPal knows the real money is in becoming a card scheme, so it's
only a matter of time before we see that (not co-branded with MasterCard). At
least they'd have to operate under existing card scheme laws, but I sure as
heck wouldn't use one.

~~~
onli
That is not true in the UK, where the OP is operating in. Paypal is a bank
here and subject to regulations.

~~~
Silhouette
Whose regulations, though? They're not a _UK_ bank, and it doesn't seem clear
that UK courts have any practical ability to help if a UK merchant has a
dispute with PayPal and feels they need to resort to legal action.

------
joe_littlebiz
OMG! I thought I was one of the Only ones this happened to!!!

I had nearly $40k (ALL of my upstart company's capital) held for 180 days, and
I almost went out of business. My products unexpectedly sold better than we
had planned for, and we received a few chargebacks, that we had asked Paypal
how we should handle before they occurred. The chargebacks were a very small
amount, but they held the ENTIRE BALANCE. I couldnt pay for any of the
inventory, which led to a chain reaction of chargebacks.

What made it even worse - THEY NEVER REFUNDED the customers on time and did
not allow us, the merchant, to process the refunds --- IT WAS THE ULTIMATE
BUSINESS NIGHTMARE!!! We started out as victims of our own sucess. Instead of
helping us, we almost became victims of Paypal!

------
hkolk
Small nit-picky thing: Paypal has bank-status in Europe.

~~~
chris_wot
Also in Australia.

------
eslachance
I'm happy to see that someone is not only standing up to PayPal and going
another route, but also that a very good alternative is being set forth. It's
not just another "Paypal sucks", and I appreciate that.

------
Shenglong
_From my experience and that of others who’ve suffered the same, it’s clear
that PayPal are interested in buyers, not sellers. Why else would they provide
customers with refunds at the drop of a hat, but withhold money amounting to
thousands — literally thousands and thousands and thousands — from buyers
without any valid reason, when not even your bank is legally allowed do that?_

The best part about them giving buyers refunds is that if you, as a seller,
want to dispute their chargeback, you have to pay Paypal an administrative fee
^_^

------
happywolf
One of the reasons why PayPal so paranoid is to prevent money laundering. In
fact this could be _the_ factor because any mis-step would land PP itself in
big trouble and could be fined a lot of money. My guess is PP would rather err
on the side of its own safety.

Another cause that it will freeze an account is when it suspects the account
is used for illegal activities (e.g. selling fake goods).

Please note I am in no way implying the OP is involved in any of these. I am
just making some guess on why PP may shut down/freeze accounts.

~~~
Daniel_Newby
I doubt it. Money launderers never do chargebacks and never make complaints.
They are _the_ ideal banking customer, which is why the tax man hates on them.

~~~
dennisgorelik
Money launderers launder money from stolen credit cards.

Chargebacks are filed a month or two later by owners of these stolen credit
cards.

~~~
Daniel_Newby
You are describing fraud. Money laundering is the redirection of the proceeds
of illegal business to make it look like legitimate income.

~~~
dennisgorelik
Fraud IS illegal business. Purchasing goods using stolen credit cards is part
of a process of making it look like legitimate income.

------
jusben1369
PayPal charges substantially less than a traditional merchant account and
payment gateway. Particularly in the UK. It would be interesting if the OP
touched upon that. They're also easier and faster to set up than a merchant
account/payment gateway.

In return for being cheaper and faster there are trade offs. As stated in the
article, this person's business model is a "high risk" one in general and to
PayPal in particular. This is a great example of where a merchant account with
a bank really is the better option. They need to met you, understand your
business and why it works the way it does. Once done, you're less likely to
have ongoing issues. So, you can keep your "higher risk" business model and
change from PayPal or you can change your business model to better fit with
PayPal. I don't think you can have both.

PayPal is a family sedan. This guy is lamenting that his vehicle doesn't
perform the way he wants it to at high speed on twisty mountain roads. Seems
like an unfair car review in that sense.

As others noted - it would look very strange to PayPal if you basically pull
all your funds two days after that call. Who knows what else he inadvertently
did to raise suspicion.

------
54mf
"Yeah, but, merchant services are hard!"

Bullshit. If you're going to process payments, you have to solve hard problems
like fraud prevention, and PayPal is doing a dreadful job solving them.
Freezing accounts isn't the problem; the problem is that PayPal is a giant
black pit offering no way to resolve any issues. This is customer-hostile
behavior. Shoot first, ask no questions later.

------
unkoman
Any good alternatives?

~~~
54mf
Stripe. <http://stripe.com>

~~~
eloisant
That's US only, so it wouldn't help the OP.

------
code_duck
Unfortunately, PayPal has reached the point in the market where it is truly
useful. A merchant account solves one angle of the problem of finding a
replacement for me - the other side is paying people, and I've been finding
more and more lately that almost everyone I encounter or hang out with has a
Paypal account - if I wanted to pay by CC, it's difficult - even most of my
small business friends can't do this conveniently - but when I offer to settle
up with someone by Paypal, they almost always have an account and it takes
only a minute.

Square would solve the problem for many, but... would the average person carry
around a hardware device so their friends can give them money by cell phone?
Probably not.

------
tit4tat
I agree whole-heartedly. I have a personal and business account. I stopped
usin PayPal when it froze my account after they made a refund to to an eBay
customer who stole my merchandise but demanded a refund after claiming to have
not received the item. I produced the receipt signature from the USPS but was
simply told that it was not good enough. I told their customer service rep
that I would never use them again and that I look forward to PayPal suing me
so I could have my day in court. they never sued me, but they also never
unfroze my account. Totally unprofessional! -G. King

------
foxylad
One of the comments in the article mentions gocardless.com for UK payments.
This seems suspiciously good - an end run around credit card companies and
much lower fees.

Has anyone used it? Is there a catch? How do customers react?

~~~
Silhouette
We're looking into it at the moment. They seem like decent people. Their
integration set-up isn't bad.

As far as we can tell, there is only one catch, but it's a big one: you can
only take payments from bank accounts within the reach of their direct debit
system. That means UK-only today, and they've announced their intent to expand
across Europe in "mid-2012" [1], but it's not clear when they might go any
further.

[1] <https://gocardless.com/faq>

------
redm
"PayPal have all the power of a bank and yet none of the responsibility."

That is precisely the problem, PayPal is on the hook for any credit card
charges for 6 months so they are much more willing to protect themselves then
to try to understand a specific situation. They are a black box when it comes
to these types of issues, you feed lots of information in but you get almost
nothing in return.

Banks usually transfer funds nightly and they don’t hold subscriber
information hostage.

It would be one thing if PayPal was amazing to use but they are just one
technical or customer service blunder after another.

~~~
milesskorpen
No, its not. PayPal _is_ a bank in the European Union.

~~~
redm
From a purely end user perspective, PayPal does not operate like any of the
Merchant services I've worked with. I'm sure its partially related to the
additional liability PayPal takes on for processing a CreditCard that they do
not issue but, in the end, the way they operate is not pleasant in any sense.

------
mherdeg
Does the oft-lionized "PayPal gang", famous for their successes in the tech
community, bear any responsibility for the company's customer experience being
sometimes so terrible?

Maybe this just happens to all payment companies at scale, but it seems like
PayPal has a lot of stories from ordinary-sounding, reasonable-sounding people
who were _just trying to sell something_ and ended up losing all their money.
Who's responsible for those service delivery failures?

------
Safarijack
I wrote about my experience with Paypal a while back.
[http://mydl.itweb.co.za/index.php?option=com_easyblog&vi...](http://mydl.itweb.co.za/index.php?option=com_easyblog&view=entry&id=1061333&Itemid=350)
What a truly horrible and useless company. I've informed every online merchant
not to use them since and make sure all my friends know.

------
simonswords82
PayPal do themselves no favours by not coming forward with explanations
similar to those that see in this thread. Their deafening silence plus the
bullshit automated responses are what appear to be driving customers away in
droves.

I certainly wouldn't set up any of my businesses to rely on PayPal to take
payments, and I expect many others feel the same way.

------
EGreg
[http://reviews.ebay.com/Paypal-Loophole-SELLERS-
BEWARE?ugid=...](http://reviews.ebay.com/Paypal-Loophole-SELLERS-
BEWARE?ugid=10000000000071688)

------
kristianp
Great article, but does anyone else have the irritation of the links looking
like the words have been crossed-out with green line through the middle?

------
brutuscat
Last night I was thinking, how many of you/us would take a PayPal insurance
policy that cover cases like this?

------
noirman
In Asia, you have no alternative (at all). You either use PayPal (which suck),
or 2CheckOut (suck less).

------
eBam
Lately its been all about PayPal horror stories...

Many merchants are just simply turning to the ACH Platform.

------
Greynum
This is why Bitcoins was created.

~~~
Karunamon
No it isn't. Bitcoin's killer feature is anonymity. It has no underwriting, no
risk prevention, and worst of all, no ubiquity.

Once you pay someone with BTC, your money is gone. It's that simple. Unless
you involve a third party of some kind, and then it's PayPal all over again...
though I assume it's a great deal easier to become a BTC middleman than a
middleman of any established currency, due to lack of idiotic government red
tape to jump through.

~~~
mrb
From a merchant's viewpoint, once you receive coins, NO ONE can take them away
from you, which actually solves the exact problem the guy have.

~~~
Karunamon
From a customer's, it means you have precisely zero assurance once you've paid
that the other guy will follow through. It's just like sending cash through
the mail, except with no chance it won't get there.

~~~
mrb
It is much easier build merchant rating services/databases than customer
rating services/databases. Proof: compare (1) buying from a high-rated eBay
seller which is pretty much riskless, to (2) the complex consumer credit
rating industry which is doing a poor job at maintaining fraud at constant
levels (fraud increasing year over year, small merchants going out of
business, etc).

Therefore I assert that the Bitcoin model is superior: solving the fraud risk
for merchants is more important than for customers. If a merchant start
delivering poorly (or not at all) with purchases, he will quickly receive poor
reviews and go out of business, hence self-correcting the fraud problem.

Of course another option with Bitcoin which you are not thinking about is to
use escrow services as third party between buyers and sellers.

------
thomasyuen
we have the same problems on amazon.com Amazon have all the power of a bank
and yet none of the responsibility.

AMAZON, you are the scourge of the internet.

Please see :

<http://joeyuen.posterous.com/good-riddance-amazon>

