
How to Get PayPal to Freeze Your Account in Four Easy Steps - mariorz
http://blog.vayable.com/how-to-get-paypal-to-freeze-your-account-in-f
======
URSpider94
Some folks on this thread have suggested that you open your own merchant
account. FWIW, you're likely to face the same problems with that route if the
underwriting department takes a good look at your business model. If you're
selling "experiences", it's too hard to demonstrate whether your clients did
or did not receive the alleged service. You're likely going to open yourself
up to a huge risk of chargebacks -- remember, you're now vouching for the
performance of each and every one of your "experience vendors". A chargeback
rate of just a few percent would eat up all of your profits, and get your
merchant account canceled to boot.

It would also be incredibly easy for me to launder money or commit fraud with
your system -- I could just set up a fake experience, like navel gazing, at
$100 per, and buy up unlimited sessions with stolen credit cards, or give
myself a massive cash advance at purchase interest rates, with a small mark-
up. Maybe I'm missing it, but if your system doesn't include some way to
reserve the time for the "experience", then there's really no way to ensure
that your vendors are not double- or triple-booking their time.

To summarize, the financial risks of your business model run far beyond
PayPal. If you can come up with ways to hedge against these risks, you might
even be able to convince PayPal to take you on (though I wouldn't count on
it).

------
ErrantX
Hmm, this isn't a "Paypal horror story". This is a case of Paypal getting
around to due diligence on a new customer and realising that they are not in
line with the terms and conditions.

You _are_ accepting payments on behalf of other merchants (those offering
travel experiences) and that brings risk. Unfortunately this is not an issue
limited only to Paypal, many other payment operators will reject you for the
same reason; the fraud liability is just all over the place with such systems
and they won't want to take the risk.

It sucks, but there you go.

If you are really looking at 10's of Millions in revenue over the next few
years.... go to your bank and work something out with them, although it might
be initially expensive while the offset the risk.

------
guan
I know there are plenty of legitimate PayPal horror stories, but this I’m not
sure this quite qualifies. The first parts of the story are vanilla PayPal
evil, sure.

But at the end, PayPal accuses them of offering an aggregation service. They
say they are building a “a global marketplace” that “enables a brand new
community of merchants and transactions”. There is not a lot of detail, but it
sounds like they are taking money from customers and paying it to sellers,
which sounds like an aggregation service to me.

They compare themselves to Etsy. But Etsy doesn’t accept PayPal payments
themselves. You pay to the seller’s PayPal account.

There may be something I’m missing—it’s not entirely clear, so maybe they do
in fact operate more like Etsy—but from the account provided it seems like
PayPal has a case.

~~~
URSpider94
You make a good point, I'd agree that this would seem to align with what
PayPal is alleging in their letter.

However, it does also seem that Airbnb, which they mention as a comparison, is
doing the same thing -- Airbnb is serving as an aggregator for its individual
lodging vendors, and THEY offer PayPal as an option ...

Any Airbnb folks still here on HN who could explain if they've gotten around
this particular hurdle with PayPal?

~~~
rfugger
In the article, Paypal's letter doesn't say you're not allowed to be an
aggregator, just that you're not allowed to be an aggregator that lets
merchants get around Paypal's acceptable use rules. Maybe Airbnb has assured
Paypal that it does not let merchants circumvent these rules.

~~~
true_religion
Airbnb allows only one kind of "merchant"---the type who wants to offer living
space for you.

This product on the other hand lets anyone offer "experiences". To put it
lightly, you could have someone offer the "experience of sex" (illegal) or the
"experience of touring the porn studios of the San Fernando Valley" (legal but
against Paypal AUP).

------
sedev
I've stopped being surprised at this genre of story showing up - on HN or
elsewhere. This story basically serves to illustrate a couple of things about
Paypal that are definitely salient, but haven't changed in years.

* Banks are still shitty and unwilling to actually compete, so Paypal has its market all to itself.

* Because Paypal does not fear disruption or competition, it is _not worth their time_ to invest in good customer service. They know you're stuck.

This is pretty much the same as the stories about trying to get customer
service from Google. There are no effective competitors - so, their
accountants and shareholders say, who the fuck cares if customers complain?
What are they going to do, go to someone else? Doing so would harm the
customers more than it would harm the company that they are abandoning.

I use the phrase "not worth their time" even though it implies things about
the employees of the company which are not true - I use it because it is true
of the company itself as an entity. It's a corporation - it's a sociopath. So
it is basically incapable of providing good customer service as long as the
return on investment of good customer service is negative, epsilon, or
invisible. The employees, as people, probably do want to provide good customer
service! But when it comes down to the human, humane desires of a
corporation's employees conflicting with the sociopathic requirements of the
corporation itself, we only need a brief look at the history of commerce in
America. Put your money on the corporation's interests winning every time.

PayPal (and Google) will keep giving customers the finger until the thought of
customers leaving actually scares them.

~~~
idlewords
I've been through the PayPal wringer (account frozen, then limited) and
actually found the customer service to be stellar. I had a dedicated case
agent who gave me his direct line, and he was always available and always
polite.

There's a lot to hate about PayPal, but my impression is they have put quite a
lot of effort into customer service.

~~~
sedev
_The employees, as people, probably do want to provide good customer service!_

There are other good points in this thread about PayPal's risk mitigation
model. I think that this basically deepens the parallel to Google. When the
service works, it's genuinely great - that's part of why they're such a
dominant force. The problem is that when it breaks, generally it breaks in
horrid ways. People like the HN crowd, who are strongly disposed towards
trying to do new things that previous models may not account for, are the most
likely to find cases where the system breaks, and to suffer the effects of the
breakage.

------
patio11
For what it's worth, travel is a high-risk vertical and you're going to draw
the evil eye from any competent operator if that is your focus. See also
selling high end electronics or jewelry, among many other seedier business
types.

Also FWIW: Paypal has processed close to 100k for me without complaint, and
their review of my business for getting a merchant account was quick,
professional, and successful. (Partly because I knew to avoid risk-adding
activities like accepting yearly payments with a new business. Don't do that.
Don't do aggregation. Don't do anything which envisions customers routinely
receiving chargebacks or refunds.)

------
kondro
Sadly, for what you want to do, you essentially need to be a merchant bank
yourself. Your business model seems to involve collecting payments on behalf
of other people. Most merchant agreements from ANY bank or service provider
would prohibit this activity.

Without the correct processes and procedures in place you open yourself up to
issues involving money laundering and tax fraud. To do this right you need to
spend the money on the identity, security and conflict resolution processes
and procedures to ensure you mitigate this risk. The costs of real merchant
services will pale in comparison to what you will spend on these issues.

------
zavulon
> PayPal doesn’t want their cut of tens of millions of dollars of revenue we
> project in the next two years. Any idea of who does?

Get a real merchant account and a payment gateway. I recommend Authorize.NET.
Get it from one of the re-sellers, it's cheaper than getting it directly from
them. There are no shortcuts: you have to compare different vendors, do your
research on what all the fees mean and who offers the best value. You CAN
negotiate.

~~~
cookiecaper
This is still not really a good option. Have you looked at the contracts and
requirements on payment processors? The options suck. Credit cards are a bad,
bad system for merchants because the banks totally have everyone by the balls
and in typical bank fashion they are not afraid to put the squeeze on.

I hope one day someone comes up with a real electronic payment method.
Bitcoins are currently our best hope, but they're not a very good hope.

~~~
thinkcomp
We're working on it (see comment below). <http://www.facecash.com>

------
thaumaturgy
I have less than no sympathy for businesses with Paypal horror stories at this
point. Paypal's reputation is very well known, especially in startup circles,
and there are a ton of other services available that will handle payments for
startups. There have been several HN threads about them, and it's not too hard
to find those on searchyc.com.

If you're starting a business, and you're relying on Paypal to do it, then
you're foolishly adding totally unnecessary risk to your business.

~~~
hardy263
Unfortunately, most of these payment handlers only allow US companies to use
their services. I'm in Canada, and I've been trying to find said services, and
every one that I've found using searchyc only accepts US companies. Some of
them say that international services is "in the works" or "available sometime
in the future", but business cannot wait.

~~~
otterley
Have you contacted your own bank to ask them what your options are?

~~~
nolite
parent is right.. you might have to use a less agile or easy to integrate
solution, but many countries should have standard bank-level methods for
allowing you to accept online payments, some way or another

------
noonespecial
Paypal is a classic example of a fossilized bureaucracy:

1) The departments within Paypal are unable to share information, alert each
other of status, or become aware of what they are each doing. The first clue
that this is happening inside an organization is the requirement to submit (or
resubmit) the same information multiple times.

2) Complete inflexibility. If you don't fit a pigeonhole profile of previously
defined customer models _exactly_ you can't use the service.

3) No humans. There were people once. There aren't anymore. The people you
talk to on the phone seem human, but they are actually part of the machine's
broken user interface. They can no more influence what goes on inside the
machine than you can. They can't tell you why your account was frozen because
literally _nobody anywhere actually knows_.

4) Insistence that you are wrong (or a criminal in this case). The customer is
always _wrong_. Enough said.

Add to all this a moral hazard so large it almost completely guarantees it
will never be fixed: when the system breaks, they just keep the money, and
you're got a perfect recipe for perpetual fail.

~~~
encoderer
The most valuable part of Paypal is the systems and strategies they've
invented for risk mitigation and fraud prevention.

Before they developed those systems, online payment aggregators were a
nonviable business.

Many people in the late 90's and early 00's felt that it was a failed
experiment and that the risks were just too high. This after a long list of
failed startups and failed infinitives at existing banks.

Yes, it can seem very obtuse. But they are in a risky business. Without their
anti-abuse measures (which every other merchant aggregator has cloned to some
extent), this niche would not exist. You would have to get your own merchant
account if you wanted to sell online.

------
thinkcomp
I've been resisting the urge to market my startup as a PayPal alternative,
because we're really focused on payments for in-person retail sales (largely
to avoid competing with PayPal), but this is probably the fifth or sixth
PayPal-froze-my-account posting I've seen on Hacker News and they all seem to
garner enormous amounts of sympathy from readers. We've also built all of the
infrastructure you'd need to do internet payments. As an aside, my non-
profit's account was frozen once but I got it unfrozen in fairly short order,
and at worst it was a minor annoyance. I gather that people have had much
worse experiences, however. So that leads me to wonder:

\- Would people really consider signing up for a payment startup's services
they'd never heard of? Everyone complains about PayPal, and I'd argue rightly
so, but at the same time everyone is also quick to say that they don't trust a
company they don't know with their information.

\- What's the most important service that PayPal offers that people are
looking for? Just plain, vanilla, pay-me-through-my-web-site? Something else?

\- Are these accounts that are routinely frozen related to international
transactions somehow? Because we can't do business internationally and most
payment startups can't. The regulatory and risk barriers are serious.

If there's a market for U.S.-based services that we can offer, maybe it's time
to think more seriously about starting to compete.

~~~
zaidf
The most important service: instant money transfer (mostly) irrespective of
physical location.

I had one use-case this week where paypal would not work. I needed to withdraw
the amount I was to be paid by my client and paypal has a $400/day ATM limit.
So I asked the client to see if he can pay directly to my bank.

The obvious solution is wire. Of course, my client happens to be in a state
that didn't have his business bank so wire was a no go. You have to visit a
bank to wire.

In order for him to send me money he had to write a check from his business
account to his personal BOA account, then withdraw from his BOA account and
then run to a Wachovia and deposit into my wachovia account--all before 2pm
cuz' after that the funds wouldn't be available until the next day for me.

After I got the money, I was to deposit it into a friend's account. I couldn't
do it online through my bank's interface even though we share the same bank. I
ran few blocks to Wells Fargo to withdraw cash I just received from my client
and transfer to my buddy.

My story is probably one of the extreme cases in terms of urgency but it does
point out all the hoops you have to jump to do a simple bank-to-bank money
transfer just within the US.

~~~
URSpider94
This is what Western Union is for.

~~~
zaidf
Paying $90 for an inter-US money transfer is a bit outrageous so they priced
out.

------
InclinedPlane
If anyone thinks they can set up online payment processing system that accepts
payments from credit cards, debit cards, echecks, and direct debit transfers
worldwide easier and with less hassle than paypal then they should do that. As
it happens there are some very real niches where paypal has almost no
significant competition.

------
dikbrouwer
I'm almost falling of my chair laughing (I do feel bad about this), but we've
had so many similar issues with PayPal it is just crazy to think they once
were the small guys fighting the establishment.

What you are trying to do is indeed very likely against their TOS, but the
whole process is just appalling. I highly recommend looking at WePay. They
might be a much better fit for you anyway (not just credit card payments, but
also very low cost bank transfers).

Try to get a regular merchant account, but if I understand your business model
you'll likely be rejected, or face unrealistic high fees. Maybe when you can
show them some transaction history you'll have more luck.

------
Lucadg
I cash several tens of thousands Euro every year in Paypal, since 2003 I
guess. I have legitimate business in Germany and the money is deposits for
apartments reservations. I have never done anything illegal, never had a
dispute with a customer, never, ever created a problem for them. Nevertheless
they freeze my account once every 2 months. They ask me a few papers, I send
thema and if I'm lucky in a few days it's restored. If I am not lucky it goes
one one month. I would have many nice stories to say, this is the last one:
since I log in often from many different countries (since 2003), they block my
account. So I asked them to write down somewhere that I travel a lot and give
me a break. They told me this is not possible and I should use only my iPad to
login, not a computer.

~~~
lsc
if you travel internationally, _always_ log in to a VPN that makes you appear
to come from your home country before logging in to paypal. Preferably a VPN
hosted on your own infrastructure that makes you look like you are logging in
from the same ISP you always log in from.

The only time my paypal has ever been frozen it was because someone who worked
for me logged in from Vietnam. I set them up with a VPN, and never had
problems again.

~~~
Lucadg
Thanks for the tip!

------
mckoss
I'm confused. PayPal offers a 3-party payment product, where you can accept a
payment and split the proceeds between yourself and another seller. They call
it "chained" payments.

[https://www.x.com/servlet/JiveServlet/download/1044-1-1033/p...](https://www.x.com/servlet/JiveServlet/download/1044-1-1033/pp_dev_Datasheet_APC_R3.pdf)

Why doesn't this work for your scenario?

------
toddwahnish
Wow, incredibly timely- this is EXACTLY what we've been going through for the
last two weeks. EXACTLY.

The problem with PayPal is that there is absolutely "0" real customer support.
We were labeled as a "money transfer service"- even though that's not our
business- and had our acct suspended. Our site isn't public yet, we were just
testing live payments as opposed to the already completed sandbox tests. We
thought we'd be ok since we modeled our pay structure similar to a few others
we had seen.

When you call PayPal, you get a nice enough customer service rep- friendly but
really doesn't know anything. They put a "note" on our acct to have someone
higher up call us back...and that's when the real fun begins.

If you're lucky enough to have the rep call you (we're like 2/7), you can get
some limited info. If you miss the call, or have an additional question after
the fact, you have to go through the first level of general cust. service and
hope that someone will call you back. No left messages, no other phone number
you can call, definitely no dedicated rep. it's taking weeks out of our
production dev time.

What makes this mockery of service so severe is that our business depends on
buyers paying sellers. We got a form email letting us know of our general
"violation", but no specifics. It's up to us to interpret what exactly
violates their policies. Thanks to this article, and everyone's comments, I do
understand some areas where we possibly made an error- which I take
responsibility for- but without a definite response we won't know if we
accidentally violate it again when we spend more to retool our system.

It's ridiculous.

------
cabalamat
I have heard enough horror stories about Paypal from others, and had enough
hassle from them myself, that I never use them whenever there is another
payment option.

How easy would it be to set up an online transaction site that was actually
easy and hassle-free to use? One where:

(a) costs of transferring money to another account are low, and similar to the
cost of performing the transaction, not the 3-5% of transaction that Paypal
and credit cards charge. The only thing that might be expensive is getting
money in and out of the site, because you'd have to go through the traditional
banking industry.

(b) where there is no distinction between merchant accounts and other
accounts. Why should there be? All accounts should be able to send and receive
money.

(c) the site started off with some ways you could spend/get money, e.g.
something like flickr, adsense/adwords, and web hosting.

(d) there would be no credit protection; if Alice give money to Bob and then
isn't satisfied with the goods the she received from Bob, she should take it
up with him not with the transaction service.

(e) the service would have apis that made it easy for other companies to build
services around.

I'm assuming it would be difficult to impossible due to banking laws -- does
anyone know better?

~~~
cabalamat
Erratum: by "flickr" I meant "flattr".

------
dwynings
How to get PayPal to Freeze Your Account in One Easy Step:

Open a PayPal Account.

~~~
mickeyben
Another easy way :

1\. Create two paypal accounts ; one on your american account, one on your
french account

2\. connect to both from the same computer and make a transfer from one to
another

3\. Wait and enjoy !

~~~
HelloBeautiful
I don't even need to make any transfers. Log in with account A, log out, log
in with account B (same browser, without clearing paypal cookies) - accounts A
and B locked.

------
imx
Take the same approach as grubwith.us and groupon did, avoid the PayPal risk.

However, if you believe there's a significant advantage of having PayPal
(doubt it), then you may want to consider setting up an eBay store and handle
all payments for reservations through BINs on ebay pages... vayable.com would
then become a "wrapper" around your ebay store. Additionally if you get
significant traction, you may get $10-40 for every person who registers with
ebay through your links.

------
listic
Can anyone please explain what's why PayPal (and other payment processors?)
cannot afford accepting payments on behalf of others?

~~~
systemtrigger
The intermediary has little control over the quality and delivery of the
product being sold, and must be trusted to pay the third party. The risk of
chargebacks and fraud is higher thus PayPal cannot afford to underwrite the
transactions.

------
oemera
Hey guys seriously is there any "real" alternative to pay pal? I'm getting
sick about these stories.

To be honest my account got never frozen but I also never sold anything with
Paypal. I don't want to support this insane service.

What about using Amazon payment? I payed once with Amazon on kickstarter and
was surprised how smooth it was! Is Amazon a valid alternative?

------
bl4k
> "PayPal doesn’t want their cut of tens of millions of dollars of revenue we
> project in the next two years. Any idea of who does?"

If you makes you feel any better, I offered them a cut of a projected billion
dollars and they still didn't take it.

More seriously though, just go to your bank and open a merchant account.

~~~
djg38
They won't open one either. It's standard Visa/MC operating regulations. You
can't accept payments on behalf of others.

------
ernestipark
My dad had a small eBay business several years ago and his account was frozen
for some very illegitimate reasons. I was too young to really understand then,
but in light of this and several other similar cases I've read about online,
I'd stay away from PayPal.

------
sireat
With all these Paypal horror stories(this one you could see Paypal's side at
least) of inflexible bureaucracy, what I find most ironic is that it was
started with highly idealistic libertarian aspirations in mind.

Somewhere along the way something important was lost.

------
ffffruit
I also find the fact that the official email from PayPal is just signed
"Julie" with no surname and just comes from a generic sink account, thus
eliminating any chance of actually following up the problem with a human being
rather annoying.

------
spyrosk
Slightly OT:

I've been looking into paypal alternatives but there really wasn't anything
available, besides setting up a merchant account, for non-US businesses.

Does anyone know of any similar service available internationally?

------
HelloBeautiful
Once the coolest startup, now a part of a greedy mega-corp, run by MBA suits.
Paypal has no respect for it's customers whatsoever.

