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Online e-Commerce Issues w/ PayPal?
A concerned entrepreneur submitted this question for your consideration: "I run a very small online company and the main method we obtain payments for products is via PayPal. In this digital age having an easy way to accept payments for goods is critical to small business survival. Have you had problems with PayPal freezing your accounts, have you had any issues with PayPal harming any of your credit? Neither has happened to me but it
it still is a concern. Recently, I was sent this site, became concerned and wanted to ask Slashdot readers for their input on security and any problems they may have had with this service." If you send your money to a website for safekeeping, you expect it to be safe, and a large part of this perception is based on dependable customer support. According the warning site, it sounds like PayPal might be a bit deficient on this end. Have any of you experienced similar problems?
"I don't necessarily trust the website I linked to, nor PayPal's statements. PayPal requires you to register your credit card AND your checking account and could conceivably and legally(?) remove any and all funds and stop you from withdrawing a dime from your PayPal account as well as your own checking account at their whim. What is a small business to do?"
Just an aside, if you are signing up for a personal account, you only need your credit card. It's merchants who want to use PayPal's premium features who have to specify banking information as well.
The only problem I've had with PayPal was a looong delay in processing a bunch of payments for a group buy of webplayers. A lot of people in the co-op were highly irritated with the delay. They wanted the main buyer that we were sending our money to to prove his identity.. If anything this reassured me. I've also used it without a hitch to buy a few things off ebay.
I think the main thing to keep in mind is that PayPal is not a bank, and not FDIC insured.. I'd use it as a method to exchange money online, but not as a cash storage facility.
air and light and time and space
I paid to a "verified" seller, and PayPal refused to make good when he stiffed me. They took two months to even investigate my claim, and when they did, they responded that the bank account they had verified no longer existed. (Gee, no kidding). Since then, they've continued to send me spam, but won't do anything about the money. I look at using PayPal as being a step better than sending cash through the mail, but definitely several steps below using an actual credit card or even a check (since you can place holds on checks, and they take time to clear). I don't plan on using them ever again, and I steer clear of businesses that use PayPal as their only method of credit card payment.
Law is whatever is boldly asserted and plausibly maintained. -- Aaron Burr
I have never myself had a problem with PayPal, but others have had some. Some good advice:
1) Transfer all money out of your PayPal account IMMEDIATELY. This doesn't give them a chance to freeze it.
2) Tell your bank to not allow PayPal to withdraw from your account without your authorization. I've heard of them dipping into the checking account if the funds aren't in the PayPal account.
3) Having your customers pay with credit cards... that way if anything happens they can dispute the charges.
Hopefully with these precautions you should be okay.
-- Dr. Eldarion --
The problem isn't that Paypal is an online bank, it's that it's not a bank at all!
Real banks have state charters and are closely supervised, have strict documentation and recording requirements, etc. I don't give a damn about the physical appearance of my bank, I do care about that little sign on the front door saying "FDIC insured." This doesn't mean that I'll never have problems, but it (and the state charter required for that insurance) does guarantee that they keep sufficient records for problems to be resolved, that money in accounts won't go *poof* if the bank goes under, etc.
But Paypal is nothing. If it goes under, the money it holds just disappears. If it says it's never heard of me, I have no way of proving that I have an account with thousands of dollars. If they make a payment, they have no statutory requireemnt to document that it was authoritized or to refund my money.
I'm not totally without rights, but instead of strong local oversight I have to deal with a civil suit in the Federal courts for a contract dispute. If I could prove that we had a contract (did you ever get a signed document from PayPal?). If I could afford the expense. If I could affort the long delays before the case is heard. And all of that assumes that they haven't changed their "terms of service" to require binding arbitration by an arbitrator of their choice.
During the early days, this may have been justifiable. Not just because it costs money and time to do it right, but because the regulatory agencies wouldn't have known what to do with something like PayPal. I know, because I actually checked local laws and discovered requirements for things like a physical location open to the public, cash reserves, etc.
But not now - even if PayPal is completely honorable (and I have no reason to believe otherwise), the lack of oversight limits how much confidence we can have in them. If they are acting like a bank and being perceived as a bank, it's long past time for them to BE a bank. Until then, they're no different than trusting "my buddy Bob" to deliver you the cash promised the next time he's in town.
For every complex problem there is an answer that is clear, simple, and wrong. -- H L Mencken
Just an aside, if you are signing up for a personal account, you only need your credit card. It's merchants who want to use PayPal's premium features who have to specify banking information as well.
First of all, some corrections of what was stated above...PayPal requires only a credit card, but you can only make $1000 worth of transactions with the account. This doesn't mean that it's a $1000 per transaction limitation, but more like all of the money you can ever use with them. Once you give them a bank account, *then* this $1000 restriction is removed. I believe their single transation limit is $250, but this might be for accounts without a banking account linked to them.
About 6 months or so ago, I noticed a $250 charge on one of my credit cards from PayPal. It struck me as odd, since I had only performed a single $50 transaction. I contacted PayPal and my credit card company, and found out the following:
The card with the $250 charge on it had actually not been the card I registered with PayPal. The info had been stolen from some other online vendor, and the thief created a new PayPal account with my card. The PayPal rep I spoke to claimed that the name on the account has to match the name on the card, so, obviously, this person found a way around their system (or the rep was wrong).
But, both PayPal and my credit card company handled the problem well. I wasn't accountable, and I had all of the money returned to me. The moral of this story is to make sure you check your credit card statements, because when mysterious charges start popping up, it's ultimately your own responsibility to catch them. How many people even bother to look at their monthly statements?
If all you have are silver bullets, everything looks like a werewolf.
I've been using PayPal for 3 months to sell a variety of items and I've been very happy with it.
My tips are:
1) Setup a "Firewall" bank account. This allows me to receive payments from sellers to my PayPal account, then have PayPal direct deposit the money into this "firewall" bank account. This bank account has no money in it and once money has been transferred from PayPal to this bank account, I use the bank's tools to transfer the money to a checking account or savings account. This way, if someone gets into my PayPal account, they'll have very little or no money to rob from my associated bank account.
2) Use a dedicated Credit Card for Payments. With so many Credit Cards offering me free cards with 0% interest rate, I have the ability to use one just for online transactions. When the bill comes every month, it is easy to review. Fraud, or simple mistakes like double billings, should stick out greater than they do on my primary card.
3) When making Payments, use an affinity credit card that provides you with some benefit instead of your bank account. Using a bank account is preferred by PayPal because the cost to withdraw money from your bank account is significantly lower than charging your credit card. But their savings doesn't give you anything, so turn this neutral into a positive. By using an affinity card you can earn points on each of your PayPal purchases. I even had one case where someone on ebay bought something for me from $300 and due to problems I had to refund it. His $300 went to my bank account, then $300 came from my credit card to refund it back to him through PayPal, then I used the $300 in my bank account to pay off my credit card. I lost a little bit of money in the process due to PayPal's receiving fees, but at least I got 300 frequent flyer miles out of it!
4) Withdraw money promptly from PayPal. ANY company can suddenly go bankrupt from bad financial decisions you don't know about. It is therefore wise to use PayPal as a payment service and not a virtual bank account. When someone makes a payment, transfer it to your firewall bank account immediately so that it's in your control.
5) Read the fine print on PayPal's website. They have some very good fraud protection services that will protect you from evil people. But these services require specific things like "advertising PayPal as the only electronic Payment service you will receive." This really isn't much of a problem, it seems, since 90% of my ebay electronic payments have been made through PayPal (other 10% are BillPoint/Ebay Payments or Money Orders.) But you need to realize that if you take them up on their fraud protection, they have many ways to disqualify you if you don't follow their rules.
6) Trust your credit card. If you're using Credit Cards to handle purchases, many states like Maryland have VERY tough credit card laws which protect consumers. If you're using a 'new' service like PayPal, hide behind more conservative, regulated things like traditional credit cards and bank accounts.
After visiting that same site myself, I decided not to use PayPal any longer. I had never lost any money through PayPal, though I've used it only a few times to buy stuff on Ebay. I went to cancel my PayPal account to simply be sure nothing would happen (it had zero, but it could have potentially be used). However, I could not log in on the site, and got an error message saying I did not have cookies enabled, even though I did (and confirmed it by logging in to here and a couple other places that use session tracking with cookies). I sent email to their various support addresses the web site indicated. The reply on those said I needed to submit the request on the website. But I needed to login to do that, which I could not. I called them on the phone but got stuck in menu hell and voice mail hell. No one ever returned my calls.
A few months later I got email from PayPal. It was promotional. Technically it was not spam, since my account was still active, but now I really wanted it canceled. I tried the web site again, and it had not yet been fixed. I tried mail again and got the same stupidity. I tried calling a few phone numbers. I actually got someone on the phone, but it sounded like the phone system redirected incorrectly as they were not expecting an inbound call. As soon as I explained what I wanted, they said I needed customer support, and forwarded me to menu hell. After spending at least $5 for long distance calls I gave up calling.
I then proceeded to "get attention". Since the email was on an automatic bounce, I set up an automatic system to send them email. It was adjusted to send every 2 minutes so as not to cause damage, but perhaps get attention. After a couple hours of this, it did indeed get attention. I got email back from someone with a direct phone number. I cut off the process and called them. Although this person was in the technical area, he did promise to get my account closed out. He was unaware of the technical problems, and I tried to convince him he needed to get them fixed, although I didn't know what the cause was. We tried a few things, but it didn't fix it.
It's a shame that the only way to communicate with a company is by tactics like this, but this is not the first place this kind of thing has had to be done.
I have since found the problem and I know what fix is needed on their server(s) to correct it, although obviously that's not my job to do, so I won't.
My whole point is, this is a company that does not give a damn about customers, only about money. If they cared about customers, they would have much better customer support. If they had better customer support, they might be able to deal with some of the fraud problems people have a little better. Instead, they seem to be trying to cut back on staffing costs by cutting out customer support and trying to discourage customers from calling them. I even read in one of the various news articles that were linked from here that the president of the company had actually said they don't want to deal with people calling in to complain. To me that means they don't want their service to get better.
This is definitely a company that needs to go into bankruptcy. Just be sure your money is out before that happens. And if you have any reason to send me money for anything, please read my /. signature first.
now we need to go OSS in diesel cars