I'm so happy to see this. I am working on publishing a book on leanpub, and leanpub disburses payments using paypal. Yesterday, I logged into my paypal account and I remembered that this happened to me and my funds and account were frozen since 2010 (something I must have put out of my mind :p).
I was searching for this issue and found this lawsuit and cannot wait to be part of it.
Dealing with Paypal during the time was borderline abusive and I felt helpless every step of the way. In 2010 when they froze my account they mailed me a physical letter with an activation code which took weeks, and when I called to confirm my account I was told that the code was incorrect...
I had very very little money in my account < $100 and I can't imagine how frustrating it would be for someone who needed paypal for their income.
I'm happy to be in a position where I can choose to never use paypal again and I hope they are punished for the way they treat their customers.
This is true, a long long time ago I linked my Paypal account with Yodlee just to view balances (it would poll my balances at automatic intervals) and PayPal limited my account for "unauthorized third-party activity" or something to that effect.
Now that account aggregators like Mint/Yodlee are more common, I'm sure they worked out a deal with Paypal. But automated login activity is still scrutinized.
This happened 10+ years ago and I don't think there was an activity fee back then.
But the account limitation was removed fairly quickly. Basically I got an automated or template message telling me to change my password and keep it secure. Shortly after I changed my password, the limitation was removed.
Is there really a marginal cost to holding more money? Presumably they can buy treasury bonds and earn some interest off the holdings. In terms of data storage, is it really more expensive to store a positive number vs. zero?
For over a decade I've heard tons of stories about PayPal freezing accounts for questionable reasons. I've heard of events that were cancelled because the organizers suddenly couldn't access the money people paid to the event, and PayPal wouldn't release the money until they could prove they'd organized the event for which people paid, for which the organizers of course needed that money.
I will never ever use PayPal. Everything I've heard about them makes them sound like an extremely unreliable payment provider.They're not an organization you should trust with your money.
Wire transfers have borderline predatory fees unless you're moving thousands of dollars, and there's still the issue of "oh you entered one of the numbers incorrectly, hopefully they give you your money back!"
I've used Zelle and it was easy. My bank is suggesting them (they have first class support), but I have no idea if they are otherwise better/worse than paypal. Most of the time if I owe money it is either credit card or I used my bank's bill pay (which sends a physical check if they don't have an electronic arrangement)
I did a wire transfer once, $15 in fees, but since the amount was from a house sale (to get from the bank where the money was deposited to my mortgage bank - they couldn't do this direct which was annoying). I wouldn't do it for normal things, but with that much money involved I don't blame the banks for some friction and the cost wasn't much. Hopefully I never do one again, and also I hope I'm an oddity for even doing it at all.
> Lena Evans, one of the plaintiffs who'd been a PayPal user for 22 years, said the website seized $26,984 from her account six months after it got frozen without ever telling her why.
Wait, what? They're actually taking the money? I thought the article was just being careless with the terms "frozen" and "seized".
On what power are they doing so? It's understandable when the relevant authorities (be it a tax authority, or a financial supervisory authority, or a court, or whatever) seize money, but they are not an authority.
Furthermore, if the money in question actually were illicit, then by what fantasy argument would they be allowed to keep it themselves rather than having to hand it over to the goverment? The entire point is that the money is dirty and nobody may keep it.
At the risk of arm-chairing this too much: did you contact the CSSF, who seems to be the supervisory authority responsible for AML enforcement in Luxembourg?
To highlight how insane this sounds: let's assume, for the sake of argument, that your 50K is suspected to be cocaine money. There exist exactly two outcomes: either you are exonerated and you get your money back, or you're eventually found guilty of something, and the government takes the money.
But Paypal? They have zero claim to the money, and they could be in hot water even for merely holding on to it.
But to seize it? There is just no way that any bank involved in AML enforcement can keep funds for themselves, and any supervisory authority who's handed evidence to such a practice would tear them apart.
They could plausibly return it to the people who paid it in, if their excuse is that it's believed to be fraudulent. Six months of float is enough to make a significant amount of money, too, especially if it's in an inflating currency (like the dollar over the last year).
PayPals parent company, Ebay, is not exactly innocent either.
> Federal prosecutors have said the harassment included anonymous deliveries of items like live insects, a funeral wreath, and a bloody pig face Halloween mask to the couple's home. The employees also sent pornographic magazines with the husband’s name on it to their neighbor’s house and planned to break into the couple’s garage to install a GPS device on their car.
There's nothing dumb about it. This is common practice when linking accounts throughout
the financial services industry. Like my stockbroker did it when I linked my bank checking account. By verifying the amounts on two small payments you give them reasonable assurance that you actually control the account. This protects against both fraud and accidental account number data entry errors.
It was the clawback of the hilariously low amount that I found dumb, not the verification technique.
In my experience, it’s 2x double digit amounts, not two single digit amounts. I guess if they’re clawing it back, maybe my low sums are out of randomness, or maybe they’ve really lowered the cap on the test deposits (less float/fraud loss but less security?).
I suspect it’s because they want to verify they can withdraw from the account, not just deposit.
Maybe they have deposit-only account links but IIRC the default is two-way. That’s because, for example, you can subscribe to various services using PayPal (if you have no funds in your PP account they will withdraw it from your bank account).
2 Small payments can provide a larger range of random numbers for an account verification at lower cost to you.
Let's say you want a random number between 0 and 91, you can take up 9c times 2, for a maximum of 18c, giving a much lesser chance you can guess the number on the confirmation. Otherwise, for the same range you would take up to 91c out.
This applies to a great deal of white-collar crime. As long as there aren't serious PERSONAL consequences for wrongdoing, just a fine that the company coffers will pay as the cost of doing business, nothing will change. We need to start to put CEOs in actual prison and to forfeit their fortune.
I understand what you meant to say, but realize that this is like some random bully stopping cars on the highway and issuing speeding tickets. Victims might play along for a while, but when actual law enforcement shows up, the bully is going to have a very bad time.
> this is like some random bully stopping cars on the highway and issuing speeding tickets
LOL, I've paid that exact "fine", the "bullies" were official, uniformed Mexican police. They were literally just flagging everyone on vacation at a specific resort, along the only road from that resort into town (with a big chain across the road to collect everyone) and taking $200 to be allowed to continue on. Nice work if you can get it I guess.
I've also paid bribes to bullies in Yugoslavia ("people with machine guns standing in the road") in order to pass by. I don't think they were official though.
I had to pay an extra $90 when crossing the border into Zimbabwe. I was a little slow and asked all innocently why I had to pay more then the official entry tax when the guy in front of me paid the normal amount. The guy just shifted his AK-47 a bit and repeated the request. I figured it out at that point and forked it over.
I don't know if this is still true, but years ago if you wanted to board your plane in La Paz, Bolivia everyone had to hand the police officer at the gate $20 USD cash (no substitutions) to board the plane. It didn't matter your nationality or where the plane was headed, just hand over $20 bucks or GTFO.
Indeed, this is an important point that I missed. So if I get this right, this isn't about actually AML activity, but a civil claim under something like ToS.
So I looked up the AUP, and indeed: they claim $2,500(!) liquidated damages per violation of the AUP, which is on average a ridiculously high amount. Selling 10 individual bottles of wine without approval will incur $25,000 damages under this scheme.
Given these terms, you have to be absolutely nuts to sign any agreement with Paypal.
> if the money in question actually were illicit, then by what fantasy argument would they be allowed to keep it themselves rather than having to hand it over to the goverment? The entire point is that the money is dirty and nobody may keep it.
I don't know what fantasy they operate under, but back in the 2010s I observed Google doing this numerous times with "seized" click fraud revenue -- one of my sites was a victim of a click fraud attack as an attempt to get my AdSense account banned, and my friend's site at the time was advertising on my domain via AdWords and he didn't see any kind of refund despite the $800 that was taken from me (which was the entirety of my revenue for that month). Google just keeps funds they seize I'm pretty sure, or at least they did back then.
EDIT: From PayPal's AUP in the Complaint.. yowch! "You acknowledge and agree that $2,500.00 U.S. dollars per violation of the Acceptable Use Policy is presently a reasonable minimum estimate of PayPal’s actual damages - including, but not limited to, internal administrative costs incurred by PayPal to monitor and track violations, damage to PayPal’s brand and reputation, and penalties imposed upon PayPal by its business partners resulting from a user’s violation - considering all currently existing circumstances, including the relationship of the sum to the range of harm to PayPal that reasonably could be anticipated because, due to the nature of the violations of the Acceptable Use Policy, actual damages would be impractical or extremely difficult to calculate. PayPal may deduct such damages directly from any existing balance in any PayPal account you control."
The problem is that usually anti-money laundering laws give the operator and the compliance officer an infinite protection even on a suspected money laundering. As long as the compliance process is followed, no matter how stupid the process is, there is no legal basis to go after account freezer and the company is protected. Thus, the company has no incentive to be reasonable with account freezes.
It's really and outrageous that this open stealing of customers' hard-earned cash for minor perceived user agreement violations is so freaking rampant, with PayPal. I wouldn't be surprised if it turned out that this literally was a strategy cooked up by the higher-ups at PayPal to buff up the company's gross profits.
AML/KYC laws are a travesty to a free society. Wealth transfer shouldn't be illegal. Prosecute the underlying crimes and let the judicial process seize proceeds of crime after due process. In the meantime, various electronic systems continue to provide adequate avenues for those seeking minimized exposure to KYC/AML.
Consider this scenario: current AML practices catch 1% of laundered money, but deter additional money laundering 100x. In effect, this means nearly all money laundering is stopped because of these practices.
That seems extreme to me, but it does seem possible.
> Prosecute the underlying crimes and let the judicial process seize proceeds of crime after due process.
At least a basic identity check (that's the "KYC" part) must be part of bank account onboarding for that to work though. Otherwise, how would a government be able to seize the bank account of a convicted criminal if they had no way to tie the bank account to a criminal?
As for the anti money laundering regulations: these are a very fine line to balance. Personally, I'd like for these to go away the earlier the better since I agree with you that the potential for dragnet-style abuse is way too high, but on the other hand, terrorism financing is a present and clear danger worldwide.
I'm supposed to give up my anonymity because of an entirely different person's crime? No thanks, I'm not a criminal. I'll keep using monero or whatever other systems limit my exposure to these unreasonable search without probable cause/warrant of my identity. I believe KYC is violation of 4th amendment, and that the government's ability to seize proceeds of crime is a lower priority than civil rights.
ZKs, bulletproofs etc are going to be working their way into btc and eth in the next year or two and i would expect to be ported to competitors. it will be impossible to prevent strong anonymity in transactions on any of the major chains in short order. even LND offers very good privacy advantages.
Yeah, that's totally cool. I'm doubtful that something like this will ever make it into Bitcoin but I'm really hopeful for what Ethereum could achieve in the long term. If these solutions prove to be better, I hope Monero will adopt them as well.
KYC laws are a tragedy that perpetuate the unranked I the digital age. without an ID you don't exist to the global financial system. Nevermind that some countries are too poor or lack the infrastructure to provide all of their citizens with IDs. Not to mention poor citizens in wealthy countries who don't have ID.
That reminds me on how ironically the shipping company with lowest exposure to having your package snooped on is probably USPS. Since they are bound to 4th amendment, generally probable cause is necessary to open your package.
agree with the overall conclusion, have to ask for some reason in the expression of it. That is, there are legitimate reasons to Know Your Customer, yet, those the least in control are unendingly required to jump through ever more hoops. It is easier to exert control on the defenseless, and they do it. Meanwhile, professional money handlers are seriously considering negative interest rates, since there is just that much money being moved around. A requirement for cell phone numbers closes the connection graph, and a reporting requirement of "every transaction USD$600 or greater" (less than one month rent in most places), to my mind, is the straw that breaks the camels back.
Am at paypal this is every year in compliance videos, there must be terrible and inept bureaucracy - not sure what is that side of the story. but i can see them no wanting to invite ire of regulatory punishments. go to small claims court if its a small sum. you should not keep large sums at any online outfit, paypal, coinbase or others. Even bank account is a suspect space, better stow money in money market funds for quick liquidity, its super easy to defraud it.
I went to visit the US and transferred just 500 Dollars to a friend for our shared Airbnb. The account got suspended because of "unusual activities" I called them and told them it was myself transferring funds and it still took them two weeks to reinstate the account...
When a bank places a hold on a transaction or account for compliance review, the law state that those funds are to be held in an interest-bearing escrow account to be returned to the owner when the hold is lifted.
It’s illegal for PayPal to treat held funds as an overnight loan— that’s a gross misunderstanding of what is going on.
Do you have a PayPal account? If so, I assure you that you signed an agreement. The complaint in this class action lawsuit says that the agreement is a 65-page PDF. You would likely have signed it electronically by clicking an “I agree” checkbox.
I mean that's fair enough because that (payment methods being stolen) happens frequently enough, but it should be just as easy to clear it up again.
Over here, banks have set things up so that by default you can't get money from foreign ATMs - you have to activate that first. Because lots of people got their bank card stolen and PIN code skimmed, only for the card to pop up again in eastern Europe or wherever to drain the account.
With my bank I explicitly have to announce in advance if I am going to use my card abroad and can enter specific dates and times online. It's quite easy to do. You can also call if you forgot but then you will have to go online and add days if you want to use it for more than one/a few if I recall correctly.
Recently I've been suspended from an "online bank". It's a traumatic experience, especially if you need the money held in that account.
Fortunately the amount I had there was not that big but the abusive procedure is trumatic. I can't imagine how someone would feel like to have all his rent money blocked in an online bank.
Basically you are told that unless you provide whatever documentation they want you loose the access to your own funds. Of course providing them documentation is no guarantee they will lift the restrictions. The support is via email only. The boarding and verification process it's really just a bite and switch scheme. I don't know how someone would feel safe to keep money in such a bank after they put your account/transactions on hold for days.
I start to like the "crypto currency" concept of owning your money more and more.
Very good news, especially the potential class action.
Something that I find very interesting is how the individual lawsuits will end. I remember (but can't find) a David vs Goliath case from some time ago, where a user brought Google to the small claims court. He won the case in that venue, but subsequently lost when Google followed up an brought a huge amount of documentation and won. The guy's conclusion was that Google knows _a lot_ of stuff and can leverage it; I think that the events could play similarly, here.
When I worked at PayPal, some of the execs would say "we don't make money by giving it back to people". These were the execs that worked directly with Theil and Musk and I'm sure they're long gone, but it was definitely Theil and Musk who pushed for these types of policies right from the start (well Musk agreed when he showed up, he wasn't a founder of PayPal despite what he wants you to believe).
I've been battling dumb Paypal problems both on the end user and the merchant side so often that I'll never again use it if at all possible, especially in shops. It's just not worth the time and effort to try and trick them into doing their job.
For two of the three cases mentioned, I'd tentatively agree, but in that particular user's case they probably are free to keep the money for several months to a year after they freeze the account because she was running a business in a field that has a high chargeback risk.
Someone has to pay for the high level of consumer protection that people who pay with credit cards receive. Every entity that is in the chain between the issuer of the credit card user and the merchant that receives the payment arranges it so that responsibility of this falls on someone farther down the chain than them. There is no one farther down the chain that the merchant, so the merchant ends up being the one who has to pay for chargebacks.
There is nothing further down the chain than the merchant so it ends up on them. But a merchant that ends up incurring a lot of chargebacks often also is a merchant that ends up not having the money to pay for those chargebacks, and in that case the entity that the merchant was dealing with for accepting payments ends up having to pay.
Thus that entity will almost always have in its contract with the merchant that they can keep some of the funds the merchant earns in reserve to cover chargebacks. I doubt any court will find such terms invalid. They have a legitimate purpose of risk mitigation, the companies will have the data and actuarial analysis to show that the amounts held in reserve are reasonable for the level risk, and the ultimate purpose is to support the strong consumer protections that credit cards provide.
> Someone has to pay for the high level of consumer protection that people who pay with credit cards receive.
I, the consumer, does, every step of the way. If I understand their fee structure, Paypal takes about 3.5% of any transaction I make with them. (They show this to the merchant, but any merchant is going to have to consider this part of their costs. Some just directly pass it back to the customer. The point is: they make money from the good transactions, and should plan appropriately to deal with the bad ones. And there is CC & interchange fees, too, at those levels…)
It’s not PayPal’s job to investigate whether a particular game of poker is legal or illegal. That’s why they just ban all transactions peripheral to gambling. If you’re going to use PayPal for poker night, just don’t mention that word anywhere in your use of the application.
A lot of PayPal’s complex enforcement algorithms seem to be merely word matches. Someone I know as a joke said “Kim Jong Un” in the message when he paid for his half of dinner and got his account insta-locked for weeks just like that.
Well if that's in their T's and C's that's fine, to a point, but they can't just silently close an account and take money from people. They need to return the money - it's not their job to play police and judge and seize illicit gains, a court has to decide whether it IS illicit and what happens to it first - and to give an explanation as to why they no longer want to do business with them.
I mean not wanting to do business is every business and person's right. But taking someone else's money without a court order or mandate is theft.
Every time I've read about someone making a fuss about PayPal freezing their account, as you get into the details of their business, it quickly becomes apparent that knowingly or otherwise, they're doing something risky enough that it triggered something related to terms and conditions that they didn't bother to read. I realize that's just my anecdote, but when you're working with money, there's a lot of boring reading you should do. Quickly becomes apparent why that opportunity to fill a seemingly obvious hole in a market isn't the opportunity you thought it was.
For a time they are limiting our ability to transfer money out. We talked to support so we'll see what happens . We only open registration once a year for a month. With our event being canceled (pandemic) we did have a lot of refunds. But we've been using them 10 years prior without issue.
We are Europe's largest site for RFID and pentesting hardware (lab401.com)
We are in the exactly the same situation.
PayPal has conducted a personalised, manually executed war of attrition against our company and shareholders.
Eight months ago, PayPal froze our account, seizing 15kEU.
They refused to give any justification for the action, despite discussions with C-level staff.
After the 180-day "withholding" period, we were informed that they would not release the funds, for undisclosed reasons.
We immediately engaged legal counsel. PayPal refused to interact with our counsel, and so a C&D was issued.
Within one week of the C&D, PayPal did the following:
- Froze the account of our sister company (in Hong Kong), seizing 35k EU
- Froze the personal accounts of all shareholders of the EU and HK corps (~1,5k EU)
- Froze the business accounts of all shareholders by name search (different corporate entities, different businesses) - 5kEU
- Froze the business accounts that the shareholders held (again, different corps, different businesses) - another 5kEU
Our policy is to empty accounts on the 28th of each month.
PayPal froze and seized funds in all accounts on the 27th of the month.
Based on the time-stamps of the emails, and the order in which the accounts we closed, it's obvious that it was a targeted, manual process (2 - 3 minutes between closing each personal account, 15 minutes to find the next company account, 3 - 5 to close the personal accounts, and then 10 - 15 minutes for the next company accounts).
We engaged secondary legal counsel in Luxembourg (PayPal's EU headquarters).
Again, PayPal refused to disclose any reason, justification or proof, replying with typo-ridden copy-pasted document from a low-level legal peon, concluding that no funds would be returned, the businesses and personal accounts were deemed 'illegal', and as such, PayPal would confiscate all funds.
All KYC was performed. All accounts had been "audited" by PayPal (when you reach the 5k, 50k, 100k+ processing tiers).
Needless to say, operationally - we have shipped 50kEU of hardware to customers, and face losses of the hardware, and costs of replacing stock.
I agree with the standpoint: this is purely racketeering - an online equivalent of Civil Forfeiture.
For extra context, as the points have been raised in other comments:
- In a perfect world, no merchant would use PayPal. In our experiments, disabling PayPal cuts revenue by ~30% in our industries.
- Pentesting products could include illegal products: keyloggers, etc. We sell no such products for obvious legal and compliance reasons. All the products we sell are sold by countless other resellers that use PayPal. We have processed Visa/MC with Stripe for over 6 years with no problems (legal, chargeback, etc)
- We empty accounts regularly, to minimize fallout. However, you have to keep a healthy minimum in accounts when dealing with large volume, or accounts get limited automatically (presumably to avoid merchants pulling cash to avoid chargebacks / refunds)
- We have already 'invested' over 20k in legal fees. I justify this cost in (perhaps falsely) believing that we could establish some case law that could benefit other merchants.
It's unfortunate that we cannot join the class action in the US, or we'd be into it.
With that said, if anyone merchant in the EU has similar issues, it could be interesting to investigate if a similar action can be mounted in the EU. Feel free to reach out: simon at sn dot cm (not a typo).
Based on the advice given from our French, Hong Kong and Luxembourg lawyers, it's not legal. But the barrier for _proving_ that it's not legal is very high.
PayPal don't reply to account holders, and they don't reply in any tangible form to lawyers. PayPal forced us (and our lawyers) to sign three rounds of paperwork before they would even acknowledge correspondence from our lawyers, despite the fact that our lawyers were obviously retained and representing us.
Likewise, the delay between each step averaged 1.5 months.
At the end of all of the hoops, they gave a copy-pasted letter that said _exactly_ the same thing that their initial "You can no longer do business with PayPal" emails said.
They know that legal representation is expensive. They know that you'll have to get representation (at least in the EU) in multiple jurisdictions. They know that by drawing out the affair over months, you'll bleed money, and at some point, you'll end up saying: We've lost more money on lawyers than PayPal seized, and you'll give up.
The only recourse that appears to remain for us is actually going to court (and our claims won't fit in the small claims court). At which point, while they'll possibly return the stolen money, they won't re-open the accounts, so we still lose.
In any case, I feel we have a moral obligation to force them to court, with the hopes of establishing some case law for other merchants.
For clarity, we are not a publicly held company, the EU corp is owned by two entities 50/50.
The business accounts of the shareholder companies (in unrelated industries) were frozen, the personal accounts of the owners of the shareholder's companies were frozen, and any other account related (via email, name, passport, credit card, bank account, domain or corp name) were frozen.
We woke up to 6 "you can no longer do business with PayPal" emails, sent over the space of 30 minutes. You can clearly see the trail: corp one, shareholders of corp one. Corps of each shareholder. Accounts with the same email domain. Accounts of permutations above.
> In our experiments, disabling PayPal cuts revenue by ~30% in our industries.
I’m curious- have you considered adding other third party gateways (Apple Pay/Amazon Pay/something else)? I personally try to avoid entering my card number, so my general order of precedence is Apple Pay > Amazon Pay > Paypal > card entry.
We have Shopify's "Pay" and Apple Pay, crypto and regular Visa / MC gateways (Stripe).
We haven't tried Amazon pay - I'll try it as an experiment to see what happens.
However, the fact remains that removing PayPal means losing business.
Consumers are shielded from (most) PayPal's horrors, and just see the advantages: ease of use, ubiquity and "guaranteed win" claims against the merchant.
Dang. I try to avoid PayPal as a consumer because I'm familiar with these practices (I use services like Venmo but always withdraw immediately upon receipt). But if the only other option is sending my card number on a less reputable site, I'll pick PayPal over card entry every time.
Google Pay might be another gateway to consider as well. While I prefer to always use Apple Pay, it's not available in Chrome, even on a Mac or iOS device.
I'm happy that this is happening. Small buisness owners, Twitch streamers etc. can get their PayPal account locked pretty easily for "suspicious" activity (i.e chargebacks or a few thousand dollars). Then PayPal locks their account for 180 days with little to no recourse. The big Twitch streamers register an LLC which PayPals gives more leniency to AFAIU.
Yeah... I've been hearing these horror stories about paypal for a very long time now and it makes my blood boil knowing that nothing's ever been done about it. I really hope that a big change is about to happen.
This has been happening to folks for ages. I'm looking forward to understanding why Paypal thinks it can steal from it's customers without facing repercussions. I wouldn't do anything serious with Paypal for this exact reason.
Great to see this! Not to the same scale as seizure but using buymeacoffee.com for OSS donations PayPal would lock my account every month or two until I uploaded a bunch of documents (which were always the same docs each time). Each time it was a little uncertain if I'd be able to get my money out or not. Meanwhile PayPal would happily continue to receive money in my name that I didn't have access to.
I refuse to use paypal for any nontrivial amounts of money for this exact reason. I once had $10k frozen for no reason at all. I really needed that money back then. Was an absolute nightmare and took weeks to unfreeze.
The only thing I now trust for "quick" payments of larger amounts of money is bank wire.
Cryptocurrencies don't exactly solve this problem since you need to convert back to the fiat currency and you then have exchange rate volatility + withdrawal delays (and crypto exchanges also are notorious for freezing withdrawals).
I can recall reading many PayPal horror stories, but as I recall, they were all accounts frozen and then usually closed and paid out 6+months later. This story and others in comments suggest PayPal has decided not to pay out the frozen accounts anymore. Damages from freezing the money for 6 months are real, but may not be realistically legally actionable; damages from not paying the funds are clearly actionable.
This is devastating to those users affected by this, but I believe that the blame doesn't lie solely with PayPal. Unfortunately there are many laws they must comply with that delegate enforcement to private companies like PayPal rather than where is belongs - the government.
From the article:
PayPal allegedly sent his wife a letter that says she "violated PayPal's User Agreement and Acceptable Use Policy (AUP) by accepting payments for the sale of injectable fillers not approved by the FDA."
If PayPal DOESN'T freeze the account and hold the money, they can get in far larger trouble with the government. Why should PayPal be involved in this enforcement at all? If the FDA doesn't like what this seller is doing, let the FDA themselves go after the seller and leave PayPal out of it. But the law doesn't work that way.
I had $10k's in an account with BofA that was frozen and nearly killed the closing on a house I was buying at the time. Because they had a mailbox address on file for me, rather than my home address. It was horrible for me, but that's what the says that they had to do, and if they didn't the could end up in trouble with the feds facing huge penalties.
Let's try to empathize with all parties and think rationally about the incentives and constraints that they face.
I have (almost) no issue with accounts being frozen.
At the end of the day, it's a private company, they can chose if they want to do business with you or not. Likewise, holding for 180 days is aligned with most credit card chargeback limits, so they protect themselves. (There are other ways to go about this, which most other processors handle in a frictionless fashion, ie Stripe).
Having an account frozen is more than annoying, but it's their choice.
However seizing (stealing) funds is completely unacceptable, no matter how it's dressed up. Hell, even if they gave seized funds to charity it'd be slightly more palatable than lining their pockets from proceeds they deemed as "risky".
> It was horrible for me, but that's what the says that they had to do, and if they didn't the could end up in trouble with the feds facing huge penalties.
Except that most likely isn't true. The law does not require banks to have your home address. The law does require banks to verify your identity, but there are many ways to do this without requiring a "home address".
The "home address" rule is self-imposed by banks and is yet another way that our country makes life unnecessarily difficult for homeless or itinerant people.
Edit: This is regarding USA law, and I realized I am not where you reside. I assumed USA because of the FDA mention but I realized that was referencing the article so may not be a good clue.
No sympathy here. They've been steali..err..seizing funds for decades, and dodging the lawsuits by leveraging their clout. Sure, maybe they have some regulations to follow, but they willfully choose to ignore the folks they're stealing from, instead of helping them to understand the process of getting their stolen money back, and prevent money from being stolen from them in the future. I hope they're squeezed hard on this one.
I do this, but not specifically for PayPal. I have a checking account solely for using with third parties, writing checks, debit card transactions, account linking, etc. It has overdraft protection disabled. All my bank funds are in a “private” accounts that aren’t linked anywhere, don’t have checks, etc.
All banks I've using have strong 3D secure. One of the banks require biometrics approve with installed phone app. I have no issues directly use credit card on random merchant sites for years. Especially when most of them use one of the popular payment aggregators.
you have it backwards. 3d secure is not protection for you. it's for the merchant. it protects them against chargebacks. the merchants decides if it enables 3d secure or not, transaction by transaction. Most of them are using an external fraud risk assessment service. Accertify is such an example.
My credit card provider allows me to create unlimited virtual card numbers with any expiration date I want, that way every transaction can be its own number and any fraud is extremely easy to detect and prevent.
It's not zero risk; changing my card numbers after a compromise is an annoying process given the number of places I have to do it. Not having to provide that number to the random e-commerce site I'm trying to buy something unusual from is helpful, and reduces the risk of me having to spend an afternoon making sure I switched cable, internet, Github, Patreon, Heroku, kids' school lunches, music lessons, and fifty other recurring payments over to a new card number.
(I also get to skip entering card and billing details every time. Given the number of sites that see fit to use a special non-standard widget for the state field, that saves me time and annoyance on every transaction of this nature, too.)
Not universally but a lot of the ACH agreements you consent to have a clause allowing drafts to be initiated on-demand until you revoke that consent. This isn’t necessarily bad and can often be desirable, but then it’s often up to you and the withdrawing party to settle your disputes about what is authorized and what is not.
Paypal will issue physical checks if you want to withdraw funds. They charge $1.50 for this service, but I use it since I refuse to link any of my bank accounts directly. I have a credit card linked, but that's a safer (in my mind) way to deal with any PayPal shenanigans.
If you move 50K a week you can engage a payment platform to accept other means of payment in addition to Paypal, then reorganize how people pay so that paypal is de-emphasized in favor of more secure, lower cost, etc means of paying you.
Hell, for that kind of money you can hire an accountant or a full dev team to do it for you.
In my (quite extensive) experience with the company, one should only ever use PayPal as an extremely temporary means to accept payment for clients who can’t pay any other way, and then immediately withdraw the funds to a real bank account.
The company absolutely cannot be trusted, and will do everything in their power to take your money and not give it back. I do not know a single person who uses PayPal regularly for a business who doesn’t absolutely hate the company, because they do this type of thing so regularly.
Recently, when you log into a business account, there is a giant alert that looks like an important warning, that actually says you’re “eligible for a business loan”. You have to dismiss it every single time with the little non-default no thankyou button. And then beg them to give you access to your own money, because apparently you can’t be trusted.
I for one would love to see a lawsuit like this land.
I would add that folks should have a bank account connected to PayPal (etc) that is separate from your day to day accounts.
Not only will it localize any problems but it will limit snooping.
 If PayPal wrongly deducts money from an account that has basically no funds in it you’ll be able to deal with the problem without having your actual funds locked up.
 Seems like basically every non-bank is switching from ACH deposit verification to a service called Plaid that requires your bank username & password, which then screen scrapes your financial details. There’s no reason to hand over your real life financial data when you can just use a dummy account.
I've been wondering about this as more and more services are asking me to do it via this same "Plaid" service. (I don't do it. I can't use some services. Cashapp mobile didn't want to let me withdraw cash without it; I figured out a way to on cashapp desktop).
Plaid is a company/service literally built around asking people to supply their bank username and password to a third party. (who then stores them (in cleartext, right?) for continued use!) I find it pretty astonishing.
(It's also literally training users to be phished, no?)
I'd be curious to see an article about it, with some details and context.
Not if it’s not otherwise illegal and disclosed in the terms you agree to. As part of a settlement they now have a “privacy-centric” portal so you can manage what they know about you, ostensibly. But it’s difficult to find, and I would wager that most people who use the service don’t understand what they’re getting into.
Everyone seems to use it now, and it’s increasingly difficult to link accounts using ACH micro deposits because Plaid can be configured to disallow manual linking if the routing number corresponds to a bank they support logging into.
I simply don’t do business with companies that use Plaid in that manner, it’s a hard stop for me. My bank’s customer agreement specifically prohibits disclosing user credentials to any other party, and when support is confronted by that, they typically have no idea what to do with that other than say “Plaid is secure”.
I’m not sure if they’re in other countries, but I’m referring to the US. As for who uses them: off the top of my head, for well known services: PayPal, Coinbase, YNAB, Truebill, Acorns, Venmo, Stripe has an integration, I think Mint?, the list goes on.
More often than not I encounter them when trying to link bank accounts to anything now, except with other banks.
They have a history of imitating bank login screens and not disclosing that they’re not your bank. They settled a few lawsuits about that in the past few years and are a little more upfront, but I wouldn’t expect the average user to reasonably understand the situation.
Visa tried to acquire them back in 2020 but dropped the plan.
Prior to going to work for a direct competitor (which I was also a heavy user of), I fed my family out of a Paypal account for approximately 10 years, and had good experiences throughout. Total processed through Paypal on order of $X00,000 mostly in $30 chunks; I don't own the business anymore so can't SQL the breakdown by processor.
The one time my account was limited was after moving $3k immediately following a new apartment move in Japan. Total time to resolution: 2 minutes after calling them.
Honestly, it is almost certainly the opposite. The vast majority of people use PayPal on a regular basis to pay for things they buy online without handing over a CC number. Those people generally have a perfectly fine experience and they never post about it. When people do post about their experience with a company, they are far more likely to post negative experiences than positive.
Putting that aside, I think PayPal should absolutely get reamed for this behavior. Even if they're only fucking over one out of 100k customers, it is still completely unacceptable and I hope they suffer for it.
I don't believe PP taking money is the outlier here. I know far too many people in real life who have had funds seized and never returned. I imagine it's happened to more people I know but who haven't spoken to me about it. I have had PP close one of my early accounts and keep the money.
As much as I hate Visa/MC/Amex et al they have never just stolen my money, or even left me holding the bag if someone got ahold of a number (as opposed to banks which have always left me hanging a la PP).
Governments need to ban 'shotgun KYC', which is where they let you put funds in the account before they freeze it and make you do KYC, rather than making you do KYC directly on sign-up. You're effectively forced to give away your info or lose the funds. Sites like Paypal don't want this to happen because registrations would drop off majorly if you had to KYC on sign up.
The concept of directly paying someone from your bank account seems completely impossible in America. There always has to be some middleman parasite- who conveniently charges a nice transaction fee for the privilege.
The payment volume over Zelle, which is instantaneous, free, bank-to-bank transfers, was about $307 billion in 2020. For ACH transactions, it was about $62 trillion (not a typo). Wire transfers are also a thing. So are, for that matter, checks, which by ancient custom are free for all parties but the banks (at least for retail users).
That the payment industry exists when all of the above is true is a fascinating topic. I should probably cover it in a newsletter sometime.
Differently from Paypal though, the last time that there was a suspected fraudulent transaction in my bank account, I had a physical and factual meeting at a bank branch, rather than having my account frozen and given a stock answer.
Why doesn't this fall under the CFPB? The money is held in a bank account which ultimately belongs to the PayPal customer.
When I was in the prepaid card industry we held money for people in our bank account just like PayPal does. The bank held us to account for each of our customers. We accidentally prevented some people accessing thier finds for a few days due to a software glitch and had our asses handed to us. As we should have.
One lady was prevented from accessing her $200 for a few days and her lawyer extracted our maximum arbitration amount of $8000 from us.
Who said it wouldn't? Government action to vindicate consumer rights is generally complaint-based and not exclusive of private rights of action, so a private class action isn't evidence that a thing is not also within the enforcement jurisdiction of a government agency.
The thing that's surprising to me isn't that big corporations will do their damndest to rob people blind, it's that within minutes/hours/days after reading this thread, there will be a horde of people who read this article and smugly decry crypto saying there's no use case or purpose for it.
If you're a big enough customer they give you your own personal account manager and he'll make sure your account stays open and running whatever happens. I had millions coming through PayPal when I was running a private tracker and I could speed dial our PayPal man if I needed.
My account was permanently suspended this week, along with some friends I used to share a studio with (they paid me their portion of rent via PayPal), my girlfriend, and the record store a close friend of mine works at. It seemed like my account flipped some automated trigger and it took out my whole payment network. There’s of course no information from customer service. I hope this becomes a class action suit and we can join
I had a total shit thing happen with Paypal. Someone, I had no idea who, sent me $80 for a supposed transaction (which I think may have been legit they just did the wrong email address). Then they asked for a refund when they realized it was in error. Which PayPal wanted me to pay a fee for. I filed a dispute they auto refunded and charged me $20. So I refuse to use it now. They won't let me close the account either.
Yes, I'll join too. They froze one of my accounts with a cryptic message of "You can no longer do business with paypal" and included another "In six months we'll contact you to let you know how you can withdraw your funds"
By reading on the experiences of people in this lawsuit, I doubt I'll see my money even in 6 months time.
I'm all for it, but my overall experience so far has been that if something happens to a small percentage of users - like 1% or less - then overall it won't gain traction or matter much. I am interested if this class action gets an support because I will for sure join it out of spite for how poorly they handled the situation and how they kept my money locked up for 6 months.
Now when can I sue Coinbase for doing the same thing? I've got a couple hundred dollars tied up in their little trading business, and they won't let me withdraw until I verify my info; when I try to verify my info, I get an error.
What gives? Why am I allowed to put money in without verifying, but I can't take money out?
I've also seen scenarios where they undo bank account transfers without notice to clawback funds they're suspicious of.
I finally created a separate bank account that I connected Paypal to and never leave more than $30 with them and zero in the account. Trusting them is a quick route to losing everything they can touch.
I was a customer for 16 years until they decided I couldn't use their services anymore. I had to fill out a bunch of forms and provide a lot of info to a financial services company who'd had a massive breach. I no longer use PayPal.
As bad as it can be, PayPal is so easy to use for purchases and sending money to anyone anywhere for free. Why anyone would use crypto is confusing to me. We already have the tools we need outside the crypto world and they are creating broken copies.
When they freeze customer accounts they're essentially taking away people's livelihood and right to live. In a way, it's like killing someone, but slowly and non-violently. This is definitely unjust and deserves a class action lawsuit.
Are they still using pandemic as an excuse for not having live customer service? Paypal is simply the worst. I’ve once had to reach one of their execs to get a problem resolved only they couldn’t get it resolved.
It sounds like these lawsuits are used to bring the confidence back into the company (PayPal) to keep their unicorn status so US government can benefit from this. I might be paranoid or just crazy to think like this.
If you're a company and wish to use Wise, you need to create an Enterprise account. When doing so, not every country is listed in the dropdown. I've personally been waiting for Brazil to be added for almost 2 years at this point. It's a great service that would help me out a lot.
As far as I know it is simply not allowed to make any sort of business-related transaction on a personal account, regardless of the size of your business or anything else. I asked them if that was a possibility when I saw it wasn't possible to open a Business account for a brazilian company, and they very clearly said no.
I received $50 last year through Payoneer for a quick freelancing job and completely forgot about it.
A year later, last week, I remembered and decided to withdraw it only to find out that I was deducted $30 for not using the account. Shitty, but I decided to just withdraw the rest and be done with it, only to be faced with the fact that they have a minimum withdraw amount.
I then proceeded to send them an e-mail requesting immediate termination of my account as they literally stole money from my account. I do not recommend this service to anyone.