What state do you live in? Do you do business through an entity, e.g. an LLC? If so, where is it registered?
PayPal is, varyingly, registered as some form of a money transmitter in many states . While your federal protections are probably limited to antifraud, protections you're probably outside of (PayPal has good lawyers--you agreed to surrender lots of privileges when you opened an account), there may be state regulations you can use to, if not force action, encourage it.
Going forward, I tend to consider any business using PayPal for mission critical processes as being negligent with important risks. If you can't avoid using PayPal for certain lines of business, set up a nightly sweep from PayPal to a proper bank account.
Disclaimer: I am not a lawyer. Only a lawyer can give you good legal advice. Don't take legal advice from Internet comments.
That is by far the best advice one can get, and it's not hard to do.
All the while, the funds in your account add up - yet you can't touch them - and you have to deliver product to customers.
It can get very uncomfortable, very quickly.
I thought I was safe with your advice, but still found myself recently with 6 figures held in a PP account.
Even ignoring the fact that I don't like paypal's business practices, and I believe paypal as a service should not be needed at all, I cannot ignore the fact that if I use paypal, I will lose access to my money and I won't be able to do anything about it. Even when using paypal purely as a proxy for buying stuff (with no money in the paypal account itself), I've had accounts locked for no particular reason (with payments denied to the seller, but me losing the money), which meant I didn't get my product and precluded me from doing business with the same seller in the future.
Paypal is a huge liability. Fortunately, it can be avoided for almost anything that matters, sans Ebay.
Sometimes I need some obsolete, unique product that is available on both Ebay and Amazon (3rd party seller), but it's more expensive on Amazon. I buy it from Amazon each time just to avoid Ebay.
That said, they do not make it prominent and I often have to explain to my users how to find it.
Paypal has historically sided with the customer close to 100% of the time, mostly because they are not a bank and therefore are pretty much powerless when a customer issues a chargeback. That's why fraud is rampant. If its trivial for an unethical person to steal things on a regular basis using paypal, because sellers have no reliable form of recourse, I can be pretty certain that as an actual honest buyer I'll practically never have to worry about getting screwed over by a seller.
I remember Marco Arment commenting on this.
The only safe mechanism is to close them off from the bank side (e.g. sever their access, close account, change account number).
Paypal gets "swept" into the sweep account at your bank, and then that account gets "swept" into another account at your bank that paypal does not have access to.
Your sweep account should get a very low balance, and only acts a sortof public-facing proxy for your bank accounts.
"set up a nightly sweep from PayPal to a proper bank account"
In other words, there is no mention there of any second bank account as a final depository... which is, of course, the best mechanism.
The money can be frozen for up to 180 days.. which is exactly the same as every merchant account I've ever seen.
If PayPal decides the money isn't yours, it goes back to who sent it. It doesn't become Paypals property.
If you're holding funds "in reserve" or otherwise "on deposit" with them, however, the rules are more flexible. For example, if they aren't certain you comply with their internal AML policy, they may have the power to indefinitely hold your funds. If they aren't certain you comply with their internal antifraud policy, they may have the power to indefinitely hold your funds. They may also be able to assess various fees, charges, et cetera against your "balances", whether free or restricted. I say "may" because this varies jurisdiction to jurisdiction.
If they hold your funds after that, that's breach of contract. Time to contact state agencies and/or go to court.
Search for the word "notwithstanding". It usually comes in the form "notwithstanding anything to the contrary in the rest of this agreement..." Remember that PayPal incorporates--and reserves the unilateral right to change--several policy documents into its agreements.
These agreements are necessarily complicated. They're also drafted by counsel working for PayPal. At least in the case of AML, I'm reasonably certain PayPal has to, under federal law, hold funds when it suspects money laundering. Unlike banks, which have their AML policies and definitions reviewed, PayPal is relatively free in constructing this policy.
PayPal's agreement requires 30 days notice of any changes, and they post the changes on their website: https://www.paypal.com/us/webapps/mpp/ua/upcoming-policies-f...
Paypal's anti-money laundering rules comply with the rules set by each state that money transmitters are required to follow. The funds frozen for AML don't become paypal's -- they're seized by the government.
It is complicated. For example, New York's Department of Financial Services "interposed no objection to PayPal offering certain of its payment processing services to New York customers without being licensed as a money transmitter" in 2002 . These rules are complex alone, complex in their interrelations and subject to competing regulatory interests.
I work in a regulated financial forum. I've seen, or been relayed through regulators, accounts concerning money transmitters needing to hold funds for more than 180 days to finish an investigation per their internal policy. At that point, the contract doesn't matter--statute trumps. This might be unique to New York, but I doubt we're the only state or territory with these rules (usually, our laws are the most cutting).
If it's customer versus compliance, the customer almost always has to engage regulators or sue to make progress. When using money transmitters like PayPal to not only move funds but also hold them you're giving up a lot of the regulatory protection and venue-provisioning you get with more sophisticated services. If a business relies on PayPal, its management needs to talk to a lawyer and do more research.
NY may have been ok with paypal operating that way in 2002, but that has clearly changed:
They probably won't do anything particularly nefarious as far as the law is concerned, but that doesn't prevent this situation from becoming an unmitigated disaster for the small business owner who doesn't have their own floor of lawyers.
In fact, nothing here would be out of line for any merchant account (except maybe the customer service issues).
2% chargeback rate is extremely high. It would get you shutdown pretty much everywhere. MSP agreements usually say between 0.25% to 1% for the chargeback rate limit. This is 10x what i've seen some banks specify as an acceptable chargeback rate.
And if you exceed it.. you get warnings, reserve lines and longer holding periods, and eventually the termination of your account. Exactly what happened to OP.
Each one of those actions should have been a red flag to the merchant tellling them they have a serious problem they need to address.
The number of times I've had an MSP call me to discuss fraud in the past 14 years I've had one or more merchant accounts: 0
The number of times I've had an MSP establish a reserve line for my account: 0
The chargeback rate for an ecommerce site I've run for 14 years: 0.1% (about 1 every 1000 orders)
MSPs don't normally contact their customers to discuss fraud. They don't normally require reserves.
Every time they contacted you about the chargeback rate was a warning. When they set the reserve line that was a warning. You didn't negotiate the right to the chargeback rate.. you negotiated how severely their anti-fraud control would impact your business.
These were HUGE red flags. Possibly the biggest red flags you could have gotten, short of a legal notice or the immediate closure of the account.
And while it sounds like PayPal should have been more direct with you about the consequences here... I can tell you that every MSP agreement I've ever seen specially talks about these actions as negative actions they may take to mitigate the risk of fraud.
1 in 1000 is 0.1%
In this case OP seems to be Canadian though so I guess he’s dealing with the US entity.
The cash is no longer yours, but the "money" certainly is. It's just taking the form of a demand deposit at a depository institution. We can quibble about the definition of "money". By the Federal Reserve's definition (and the bulk of international and American case law), bank deposits are your money . Claims against money transmitters aren't even M2.
> If the bank goes under, you're just another creditor
If the bank goes under, you're a super-senior creditor partially or fully insured by the FDIC. PayPal, itself, isn't FDIC insured .
> if the bank suspects you're a human trafficker or a money launderer, they will freeze your money even if they can pay you back
If a bank freezes your funds, you have regulatory recourse to ensure they're doing it per the law. If a money transmitter does this, you need to pay for your own lawyers and enforcement.
Thank god I am German, all that trouble is not my problem. If Paypal owes me, I can sue them. Simple as that.
Which security reasons I have absolutely no idea. There's no contact info on the email, just says it's a do not reply address.
If after one or two calls you don't get what you want, it is not worth retrying. I gave up after being placed in queue for an hour with Comcast. After finally getting ready to speak to a rep, I was informed by an automated message that they were closed for the day and to call back tomorrow.
Here is what I find works:
1) Least likely - Traditional customer support channel. Try once or twice at most.
2) More likely - Contact publicly on social media like Twitter (Comcast is actual great about this).
3) Most likely - Getting upvoted and written about here and elsewhere.
I would wait to engage with a lawyer as there is a good chance that someone from Paypal will popup in this thread. It is probably already surfacing in some internal emails at Paypal now. Good luck.
Or, dont treat or trust paypal like they were a bank. The OP seems to be canadian. Canadian banks have a stellar rep. Trust them, not some US money-moving website.
They all processed quite a bit of money via PayPal and they all had issues with customer's requesting refunds which they disputed or didn't issue in a timely manner, and they all sold something which had the potential to be a bit shady. One of them sold aircraft parts to Iran, which may have had some legal restrictions that applied. Another sold guns.
Since I sell access to web based software I don't have to ship anything and the product is "delivered" instantly. I also process refunds immediately and without any question.
PayPal most certainly doesn't like getting caught up in refund issues. In my case most of the customers who've requested a refund contacted me first and I issued it promptly with a "Thanks for trying my software" note attached.
The few that have contacted PayPal first resulted in PayPal sending me a notice about the request for a refund and, again, I issued it immediately, but their notice makes it clear that is what they expect and if I recall correctly they put a time limit on that.
Take from this what you want but what I've taken from it is when a customer requests a refund issue the refund as quickly as possible and try hard to make that as easy as possible for your customers and to minimize the potential for them asking for one.
For example, they have a really simplistic implementation of OFAC regulatory compliance. Make a transaction that has the right strings in it, even in a comment, and it gets your whole account frozen. And some of these magic strings are very common names. Such that if someone named John Smith ends up on the OFAC list, any transaction with that string in it, anywhere, triggers chaos.
That's just one additional way they can choose to freeze funds. Many others exist.
Since I sell access to web based software I don't have to ship anything and the product is "delivered" instantly.
Shady is an understatement.
In the EU countries I do business with, that falls under sensitive hardware being send to a sensitive country.
Not only do you need to get extensive approval from the national-export-agency-thing, but it's also special goods that's likely to be used for military purpose, thus you are required to contact the feds on your own initiative to disclose the full details of the order and the clients and get yet another level of approval and background checks.
By "just sending the goods" you are in a very serious breach of regulations. Don't be surprised when your shipment is stopped at the border and the payments are frozen, because that's 100% guaranteed to happen if you get a control.
Even if you try to get away with it. The intermediate providers like the shipping company and the payment provider still have to follow the law and they take it seriously.
That would be the good outcome.
I would switch all of my business billing to stripe in a second if they had the ability to pay out to accounts in different currencies like I can do with PayPal.
Despite the fact that I run an Australian business I usually bill in USD but because I travel so much sometimes I'd like to have it in EUR or GBP etc for practical purposes. However with Stripe I am forced to convert it into AUD before I can do anything at all with it meaning I usually have to eat currency conversion fees twice before I can use it in a practical sense. Hence PayPal sadly....
Stripe only pays out in the same currency of the country the account is setup in. Rumours are this is changing, if anyone from Stripe reads this and is looking for beta testers please get in touch (contact details in profile)
(we also use Paypal and a couple of other providers - spreading billing between multiple providers is a good thing)
Paypal no longer allows users to make credit card payments without an account. Prior to this, paypal gave you access to an audience of anyone with a credit card. Now that they don't, your low-friction audience is restricted to people with actively used paypal accounts, which is pretty much 15-30 year old guys, and no one else. If you know anything about online sales, you'll know that any increased friction at checkout is a bad thing. Requiring people to make a paypal account at checkout time is probably dropping 20% of all customers and 70% of customers over 50. If you wanted to know why physical shops still exist, that's why.
You get a vastly wider reach with plain old Visa/Mastercard support, because anyone with a credit card can use it, no signup required. All adults have at least a Visa Electron (or regional equivalent), even if they don't have a real credit card, because that's what banks give out by default these days. Hell, most children will have them.
Normal credit card support is fine.
 By default at least. Paypals documentation states this is still possible, but I haven't seen it work on any paypal shop for around a year, so either it's broken and they don't care or maybe no one reads the docs?
> Paypals documentation states this is still possible, but I haven't seen it work on any paypal shop for around a year, so either it's broken and they don't care or maybe no one reads the docs?
From the last time I had to evaluate PayPal as an option, I seem to recall that they only allow people to make payments without an account a certain number of times. So if you have already made a payment through PayPal without a registered account a few times, you will be forced to create an account for any future payments. You've probably made enough payments that you've gone over the limit. I can't remember what the limit is, but I remember being surprised at how low it was.
40% of payments are still made through paypal.
How many of those customers would have aborted if we didn't support paypal? I don't know, but I'm sure it's a non-zero number.
People use PayPal from person to person for B/S/T forums. The PayPal user base is bigger in this community because anyone can accept payments without being a merchant, yet unlike dealing over Venmo there are still protections for the buyer.
Also, accepting payments worldwide is much more feasible. Stripe is in 25 countries ; PayPal is in 200 .
Customers can pay through Visa whether they have a credit card or not:
As far as I can tell it might be only USA banks that don't issue these kinds of cards as standard, in place of a bank card.
I'm not sure about other countries but in the US, it is possible to open a bank account without a debit card attached to it.
For instance, https://www.paypal-cash.com/index.html
People here get useless Maestro debit cards. You can only get Visa/Mastercard credit cards. And very few people do, usually only people who travel to the US bother.
Not having a credit card is the main reason I see for people requesting PayPal (they may also prefer it if they already have an account, but that's not a deal breaker).
Thats depends a lot on the country though. Not accepting PayPal in Germany would probably be the same as not accepting credit card in the US. In the UK however only offering credit cards might work.
There's 0 domestic use cases for PayPal there. Other parts of Europe I'm not so sure about.
Good to know, though.
Also, PP makes my accounting extremely easy. I use my PP debit card for all of my business purchases, so I just download a CSV of the entire year's transactions, and compute my results in a spreadsheet, for my taxes.
Given the horror stories, I realize it's a risk, and I periodically go out and look for alternatives. Best case would be to have two options for customers, so my business could at least take orders even if one of the two goes down.
Also, their ToS are pretty clear that they can do whatever they want, based on their beliefs, and there are no explicit limits how long they can keep your funds, or even obligations to talk to you. It might work differently in the EU, where they are registered as a bank (and so are regulated as a bank), but in US that's not the case IIRC.
The behavior is not all that unexpected - it's easier and cheaper to loose a customer receiving a lot of complaints than to inspect each of the complaints. So while I understand this is pretty damaging and dislike what PayPal does, I'm surprised that people are surprised.
I belong to the second category. Also, it becomes harder to avoid such companies at all, for example cell phone operators in Europe universally view their "customers" as billable addresses; some find it cheaper to settle billing disputes in court (and lose a great percentage of the cases) than to maintain a "customer" service.
With mobile the solution is to go prepaid.
I'm baffled by this. Paypal does not. 28 days ago I wrote this comment on HN: https://news.ycombinator.com/item?id=13624393. I'm sure that in the future I'll be reading another Paypal horror story from someone like you, who somehow thought, "It won't happen to me!"
E.g., I don't go to USA conferences because of the TSA risk, people find it funny, yet I keep hearing horror story after horror story. For Paypal, though, people take the risk unknowingly because they aren't aware of Paypal's reputation, which is more understandable.
For example, once you subscribe to a cable TV / cell phone operator / whatever, they'll keep you on that subscription until the contract ends, even if new customers can sign up for half the price. And even then it's a matter of how much you spend with them and if it's worth negotiating a better contract.
This has little to do with the corporations being intentionally 'evil', it's more about insufficient competition or even monopoly (how many cable TV operators / ISPs are in your area?). We have multiple cell phone operators over here, but they have little incentive to compete - the number of people leaving/joining each operator is about the same, and if one operator decreases the prices the others will do the same, eliminating any advantage.
Sure, and bottom-shelf plastic-bottle vodka says "PREMIUM QUALITY" on the label
Given the regs that paypal thinks it must abide, specifically the many vague US antiterror rules, anyone getting into bed with them runs massive risk. The internet is full of stories exactly like this. The only hope is to rally enough of social media, or a tv show, that a human being at paypal takes pitty in you.
No mainstream cc merchant account bank and payment processor will accept 1%+ chargebacks.
That type of account is categorized as "high risk" and you have to resort to processors that specialize in that area (e.g. adult, gambling, etc). One example says they can handle up to 3% chargebacks. They will definitely make you pay for that privilege in multiple ways: higher setup fees, higher monthly service fees, higher transaction fees, higher reserve, longer hold times before releasing funds to you, etc.
I'm frankly astounded that PayPal was willing to let a 2% chargeback go on as long as you said they did. All my previous reading about PayPal's contentious relationship with VISA/MC network & member banks was that they do not want to be associated with "high risk" accounts.
Those competing against PayPal? Not so much.
That's a very serious fraud problem.
I've run an ecommerce store -- the chargeback rate was 0.1% (seriously, I calculated this from actual #s).
Nothing in this story (except maybe the customer service issues) would be out of the ordinary for any merchant account.
Edit: fixed chargeback rate
EDIT: Oh I see, the original post is buried down in the thread, because it has been posted as a comment. Perhaps the mods could fix this?
Towards the end of January I myself realized I tired of the disputes (seemed to be a quality issue with the product which got hundreds of 5 star reviews on my site but still disputes were coming in at around 2%) so I slowly stopped the business meaning I stopped advertising and the only sales coming in were trickling in organically. My volume went down from $200k a month to about $10k a month.
On Wednesday I log in to my Paypal account and it says it's limited they need more information.
They asked for Photo ID, bank statement, proof of address, supplier invoice, supplier contact info and proof of delivery for the last 5 transactions.
I provided everything but the proof of delivery for the last 5 transactions. From the resolution center whenever I clicked proof of delivery it brought me to a page with no transactions so of course I could not provide proof of delivery for transactions that don't exist.
I contacted Paypal letting them know I submitted everything but proof of delivery since there's a bug in their system, they said no worries i'll get an email requesting the transactions they need tracking for and I could just reply back.
I never got that email, but I did wake up Thursday morning with an Appeal Denied automated email saying my account is closed and the money will be frozen for 180 days. That's $20k CAD in my reserve + $15k USD in my available balance. Keep in mind in the past 30 days I processed less than $10k usd on Paypal in total.
I reached out to a supervisor at Paypal and told him what his happening simply doesn't make sense, i provided everything they needed except for what their system was unable to request/receive and that if they had any issue with what I provided they should tell me what it is and help me resolve instead of giving me the hammer for no reason. He said he couldn't help me but opened a ticket for both his supervisor and a supervisor from the limitation team to call me within 24 hours.
The limitation department supervisor never called me back but the business support manager called me back a few hours later. He called me from an unknown number in the evening, told me there's been a mistake, they added a second set of eyes to my account and they agree with me the limitation was unnecessary and wrongfully made. He said he just has a few questions and I will either get a restored access email in a couple hours or a call asking for more information in order to get it settled but he said there's a small chance of that happening, realistically the account will just be restored within a couple hours.
I never got an email or call again, so I called the following day. When I called the rep basically told me there's no evidence of a call and there are no notes on my account from that person/call and nothing was moved forward for a review.
I told him that is nonsense and to look harder. He eventually tells me there's evidence of a call but no notes, they tried to reach out to that supervisor and he wasn't available so there's nothing they could do for me, the decision is final.
I'm being treated like a fraud and a criminal when I'm a legitimate entrepreneur who's processed 10's of thousands of transactions successfully. I also paid them thousands of dollars in fees, never had a negative balance or anything of the sort that would put Paypal at risk.
Now whenever I call they are extremely rude telling me the account is closed they're holding the money and there's absolutely nothing I can do.
They have been rude, lying, inconsistent, unfair and have made 0 effort to resolve this amicably.
They have 0 logical reason to hold $40k of my money for 180 days, the only reason I can think of is they do this on 10's of thousands of accounts and gain big money off the interest.
When I log in to my account there's a notification saying they need more information from me. When I click on that notification it brings me to a page that says the account is limited because they need more information regarding my recent sales, they do not say what information or how to provide information. That is straight up illegal and a complete abuse of power.
I know there are thousands of Paypal horror stories but I genuinely feel abused. I have expenses, a family and so on and need that cash flow and no one at Paypal can be consistent for more than one phone call or help me resolve my issue, it's pathetic.
Just had to vent and hopefully this will give them some of the negative attention they deserve.
What type of products do you sell? That also affects the triggers for reviews and freezes.
>but still disputes were coming in at around 2%
2% is really high. A lot of non-Paypal CC payment processors will flag your account when chargebacks exceed 1%.
Yes, 2% is insanely high. I do about 2k/month through paypal and haven't had a chargeback in years. I think the last one was a few years ago, and that was just because a customer had their credit card stolen and just charged back all transactions they didn't recognise.
Until you have a massive, public facing product that sells internationally across many facets of customer - you've probably never experienced the hell of CB management.
Typically, you'll get:
- Stolen cards (obvious ones)
- Stolen cards (very insidious ones - all customer information, proxies that match the customer address, etc). Typically the only way to catch these guys is to have a hugely expensive 'express delivery' option, and manually filter each order that comes through on this option.
- Dumb thieves (chargeback the day after delivery)
- Smarter thieves (chargeback the day after posting)
- Horrible people (chargeback months later)
- Idiots (Unable to use a product, so chargeback)
- Assholes (Weaponise chargebacks to blackmail you)
Words to anyone struggling to fight CBs / fraud:
- Use machine learning, ie SiftScience (or similar) to screen all transactions.
- If you use Stripe, use their Radar feature.
- If an order gets one flag, place it into a review queue, and manually process it 24 - 72 hours later. Emailing a customer smokes out the majority of fraud.
- If an order gets two flags - blackhole the order (refund the card, if charged)
The biggest thing is making your fraud processes opaque to scammers. If your site returns true/false responses, they'll just keep hammering until they find a combo of cards / proxies / etc that works.
The only way around it is to shadow-ban:
- Send blackholed orders to an approval page.
- Send blackholed orders an approval email. Train your customer service to know which orders were banned, which weren't.
If scammers have to wait 1 - 4 weeks to know if their order worked or not.. they will move onto easier targets.
I wonder if this is why a friend of mine had to call in over and over about an order that kept disappearing.
That or the company really didn't want to fulfill their black friday sales.
Which products have 10%?
>Typically, you'll get: - Stolen cards (obvious ones) - Stolen cards
Is this with Paypal? Paypal does a hell of a lot of work to prevent stolen cards being used. I've never had a single case of this happening since I moved to Paypal. With Worldpay I did have the occasional one.
I don't use woot anymore because they did this to me... and apparently had no process for removing it.
To the matter at hand: I think you'll eventually get the account back, probably within a week or two. (Just my personal opinion assuming the facts you have are true, I obviously can't guarantee anything.) Keep on calling, asking where to submit additional information.
If you're low on cash flow, figure out how much time you have. You will definitely eventually get the money, so if you can borrow to cover for some time at reasonable interest rates, do so.
Try not to argue with the people you speak to. Just keep on asking for what steps to take to get the account back.
The revenue seems to be winding down and they may want to keep enough in the account to process future chargebacks and or refunds.
And to repeat the question from jasode: what kind of products do you sell?
This was already forced by PayPal. Lots of details missing here.
?? People quit their businesses all the time.
All in all, they had over 6 figures locked away. I managed to claw it all back no less than three months later.
Hints are: call every single day, and get familiar with someone on the supervisor level. One you have a name, you can start bugging them personally on a daily basis.
Most supervisors are slave to the risk department, but they can escalate claims.
PP really, really hates:
- customer complaints.
- slow deliveries
If you have any of these items, expect a world of pain.
Once you can resolve them, expect a period of 2 - 3 months proving that you are consistant, and then living with a hold for the rest of your life.
Sorry to hear your story. This seems to be a pattern with Payment gateways. I had similar with experience Gumroad. Their Customer service is rude - i left a note here few months ago for their future customers.
I apologize but I haven't seen anybody else ask these questions:
How did you find out that your account had been frozen?
Did you find out after logging in or were you reacting to an email?
Did you click a link in an email to get to the resolution center?
When you "contacted PayPal" to tell them about the buggy form, did you email or call?
If you called, what number did you call? Did you find it in an email or did you Google it?
When you called the following day and the rep said there were no notes, did you call the same number as before?
Did the rep on the second day confirm that your account had been suspended because of transaction disputes?
Have you logged into PayPal from your another machine (like your cell phone)?
Even intelligent, tech savy people fall victim to scams. I just want to make sure you weren't too trusting of emails and phone calls you received because they seemed consistent with the history of your PayPal account.
I hope you at least get your money back after 180 days. Good luck.
Get a lawyer and get it resolved privately.
Otherwise, publish this on a website and promote it on twitter etc. to have them reach out to you.
Do you live in a state that allows one-party consent recording of conversations? You can sue them in your state. Too late now for the recordings, however.
* Look for other similar cases. Here is how one Redditor got $70k handled:*
Been a member with paypal for over 10 years now, done hundreds of thousands of dollars worth of transfers with them.
Recently launched a new product at a fantastic price point as a pre-order. Put it up on our website, did a big marketing campaign, sold around $65k in product (The remainder was money I kept in there because I used a Paypal debit card regularly).
They locked the funds mid last week, saying that i needed to provide invoices and the like. I did, then they requested more invoices and business information, which I sent them.
Now I got a email this morning stating that the money will be locked for 180 days. No way to appeal, nothing.
Our pre-order was quite short term, the customers will have all their products in their hands within two weeks or so, i have almost no product complaints and have delt with disputes typically within 24 hours of notification.
I'm at a loss. They just about ruined my company. We've done our best to offer what our buyers want at low prices, and doing pre-orders is usually the best for everyone because it allows us to buy in bulk from our wholesalers.
Will likely be calling a lawyer later today.
Edit : I ended up tweeting the president of paypal. He responded by escalating the issue w/ another paypal department. However one of the individuals who retweeted my status was subject today to a 'random account limitation and verification'. Odd, hunh?
Edit #2 - Thanks reddit and those out there. I got a call from a higher up at paypal just now and spent 12-13 minutes on the phone with them. We are working towards resolving this, and I feel there is at least some sufficient progress towards a quality resolution. Thanks for your help all :)
Edit #3 12/5/2013 - We just got in plenty of the pre-order products, ahead of schedule and should be getting out something like $25k-$30k of products in the mail to our buyers by the end of business today (Some went out yesterday). It will be very interesting to see how paypal responds to this.
Edit - #4 12/11/2013 - We had 72k, refunded the remainder, one guy had an order of around 7k and found our story on reddit, felt bad for us and ended up just wiring money to our business account so he could secure his place in line for pre-order. This took our account balance down to 65k or so.
Every time you call a company with a dispute or complaint, record it. May not always be useful, but better safe than sorry.
Perhaps I'm missing something here, but isn't proof of delivery meant to be documentation from a shipping company? Why is the OP trying to get proof of delivery from Paypal?
Edit - I now understand the resolution center does have a problem where transactions are not listed, so the form cannot be submitted. Still, he could find the transactions himself and email paypal the required documents. I would do that before coming to HN about it!
Something doesn't sound right about this story. The whole mysterious phone call in the evening etc.
That's sloppy of Paypal, but he could find the last 5 transactions himself from his normal history page, gather the required evidence and email paypal.
If you have promises in writing, then quote those in future emails and remind them of the problem you faced in resolution center. Don't say "bug", but just that you need an alternative way to send proof of delivery.
I wouldn't mind seeing a screenshot of that email they sent to you promising to send you a future email. It's odd they would promise but not do it, considering they also made promises over the phone.
Perhaps throw together a blog page with screenshots and a timeline to illustrate more substantially their incompetence and your innocence! Let us know how you go!
- "Some guy called and said you're ok with me."
- "We don't have any record of that."
Both are right but saying different things. (ie seller was -called-, PayPal don't have any record that -the OK- was given).
I don't buy it. This story shows signs of factual adjustment to make things look better for the OP. I'm happy to be in the minority on that position.
Took me 2 minutes to find your post on Twitter, and from there your old handle and submissions on HN and details of your business. Your story now has more credibility. I'm all for anonymous opinions and discussion, but when it comes to seeking support in complaints against another company, it's best to disclose who you are (in my opinion).
Most likely there is a race condition somewhere in PayPal's backend that results in a transaction being partially logged to the wrong account, and then the inconsistent data makes the fraud detection system flag it.
Seek legal help to fight your case. And in parallel, look into accepting and promoting Bitcoin payments for your business.
Heck, Bitcoin is even becoming more and more popular among B2B business suppliers (according to BitPay CEO https://medium.com/@spair/the-bitcoin-fee-market-4df1857d12b...). So if you start receiving BTC payments from customers you may use them directly to pay your suppliers without even converting to USD.
This in addition to it being virtually impossible for ordinary users to even get bitcoins. People here are talking about losing double-digit percentages of their purchases from Paypal forcing users to create a Paypal account, which takes like 30 seconds. What percent of your customers do you think you'll still have after you force them to do a wire transfer to a moderately sketchy exchange website, wait 2-3 days, set up a Bitcoin wallet somewhere, figure out how to do Bitcoin transfers, etc?
That said, it is becoming easier than you think to purchase BTC. There is no need to wire money anymore. In the US bitcoins can be purchased instantly with a credit card via Coinbase, as easy as signing up for Paypal.
The caveats being a 3.75% surcharge and the fact that many of the big banks will not authorize bank card transactions from Coinbase. You might have luck calling up your bank and getting them to release the hold on Coinbase transactions, but that's already more trouble and more expense than paypal.
What I meant to say is that Bitcoin eliminates chargeback fraud, because payments are irreversible. That plus Bitcoin eliminating the need for a payment processor who may freeze your money are 2 real problems that Bitcoin solves.
Theft is also solved by storing bitcoins in a hardware wallet (or 2 for a backup) like Trezor, Ledger, etc. To date no credible theft of coins stored in a hw wallet has ever been reported.
And I don't recommend to only accept Bitcoin payments. As you point out this would severely limit sales. At least sabslaurent could accept it as an additional payment option, which would provide an extra revenue stream not subject to Paypal's risks.
First, you need to be VERY careful about using VPN or letting remote team members access Paypal. One misstep with, say, Hong Kong account being accessed from Ukrainian IPs, and you're blocked for a security review which drags for days and weeks.
Second, they completely neglect any special international shipping methods' unique constraints. Sometimes when you ship from China, the tracking will only appear when the package reaches destination country. This is considered an outright fraud by Paypal, which promptly returns money to the client and you're left with a loss.
On top of that, they will impose 3% commission for currency conversion. Did you ever hear of a bank taking 3% to convert between your multi-currency accounts? Well, "Paypal is not a bank".
Add to the mix their robotic support with that condescending tone.
No. I wouldn't touch Paypal with a ten-foot pole.
I dont think it "works" though. paypal can withdraw funds from your linked bank accounts too. I think you would need to create an LLC , open a bank acct under that LLC, then sweep funds out of that LLC account to be "safe".
That being the case, I'm calling bullshit.
It's also a business he no longer wants to deal with. But he still doesn't want to share it 'for reasons'.
Also, at a 2%+ dispute rate he'd probably get shutdown on any other payment platform as well.
I'm also inclined to believe there is a lot more BS going around.
PayPal is similarly bad, takes around 5% of my received income, but sadly 2 of my vendors don't accept any other payment solution and i can't afford to lose that income
also don't get me started they steal 5% of my income and don't have live chat service to resolve issues and their FAQ is referring to website layout from years ago with most of the steps wrong
sadly still two of my vendors don't offer to me other payment solutions (well one does wire transfer but only for large amounts i can collect in months) so i still have to use this horrible service to not lose income
So I just let Mrs BusError loose on a shopping spree immediately! that usually clears the balance in no time at all.
One case where it's especially frustrating is Etsy. There are many vendors on Etsy who refuse to accept any payment other than PayPal. (One can't use an Etsy gift card.)
Edit: add etsy note
When I opened up my account at the BOA, it seemed to be a very well used and smooth process - they mentioned that the number of Canadians holding accounts at that branch (close to the border) was a significant percentage of their total. I really doubt it raises any red flags on it's own - there are a lot of legitimate legal reasons for the arrangement.
"Learn from profitable businesses and side projects."
People like you get interviewed to inspire those who want to do side project or start a business.
(this is sarcasm, for people who actually never heard of this happening before)
If you explain to them what youre doing and come up with some proof, they will release your money. They do not want to steal it. Almost all these cases revolve around someone not communicating with paypal and then acting surprised when they freeze funds.
Any bank would do that. If my bank is hit wit ha 100k transfer and I don't say a word about it and then appear at the local branch and demand to cash it all out without an explanation of whats going on, they will refuse that, as well. And probably call the cops just to cover their asses. Seriously. Talk to them.