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Class Action Lawsuit Says PayPal Restricted Funds

Posted by timothy on from the paypal's-been-good-to-me dept.

trenton writes: "CNET News.com reports a class-action law suit was filed Wednesday in California Superior Court in Santa Clara County. The suit charges PayPal with illegitimately restricting customers' access to their money. The suit asks for an unspecified amount of damages. Have you been ripped off or locked out?"

7 of 275 comments (clear)

  1. PayPal is just bad news by Y-Crate · · Score: 5, Interesting

    The service they provide is excellent, but that should not be confused with the level of service they provide, which, I must say is sorely lacking.

    They have buggy software. This means on occasion, more money is withdrawn from your non-PayPal accounts then you authorized them to take. Giving them access to your checking account is a horrible thing to do, double-dipping is widespread and if you have any checks that need clearing, well......you are in trouble - assuming they haven't overdrawn your account in the first place (did it to me).

    Due to the sheer size of their user-base, and their inability to correct their problems, much less deal with the number of complaints generated by things that aren't their fault (action sellers taking money and running, for example) they've taken to a scorched Earth manner of dealing with problems.

    Any sign of trouble - your account is frozen - along with any money that might be there. Too bad if you're in the middle of a huge transaction involving lots of money that you really can't afford to lose.

    This is like using a nuclear device to wipe out an ant infestation. It causes much more damage to innocent users than you could possibly imagine.

    You have a problem, even if it is their fault they might not fix it. Wait more than 30 days to complain that they stole your money and guess what? The money is gone forever, you will never get it back. They will not allow you to file a complaint about their rape of your checking account if you wait more than a few weeks.

    To sum it up, PayPal provides a great service, but they have shown themselves to be incapable of actually providing that service with any great degree of reliability or accountability.

    This lawsuit has been a long time coming. More power to the plaintiffs.

    1. Re:PayPal is just bad news by Zeinfeld · · Score: 5, Interesting
      You have a problem, even if it is their fault they might not fix it. Wait more than 30 days to complain that they stole your money and guess what? The money is gone forever, you will never get it back. They will not allow you to file a complaint about their rape of your checking account if you wait more than a few weeks.

      Paypal may claim that to be the case, but Federal banking laws are against them.

      I have spent many years working on payments systems. I don't think it is possible to do what Paypal does profitably and comply with the banking regulations. I am not a lawyer, this is not legal advice, but I have spent very large sums on such over the years and my papers have been published in ABA journals (where B stands for either Banking or Bar).

      Like it or not, banking is a very highly regulated business. It really does not matter what Ayn Rand the Libertarian Party, Paypal or slashweenies think about whether that is right, Regulation E is the law.

      Paypal has been successful attracting merchants by transfering the risk that under Regulation E. rests with either the merchant or the bank to the consumer.

      The terms stated in the legal notices written by the Paypal lawyers are almost certainly irrelevant. The first recourse a customer has is to their bank, all credit cards are issued by banks, Visa and Mastercard are merely payment transfer associations (AMEX cards are issued by 'Centurion Bank').

      If a bank recieves a complaint from a customer that funds were withdrawn from their account without authorization a very specific and federally regulated complaint procedure begins. The consumer is protected against fraudulent charges over a $50 deductable if a signature is involved or in any amount otherwise.

      I very much doubt that the Paypal agreement is at all relevant to the issue. The alleged agreement has no effect on the federaly regulated relationship between the consumer and the bank. The bank can and will effectively reverse transactions that are alleged to be fraudulent, whether they take place by credit card or ACH.

      The specific case that the class action refers to appears to center on funds held in escrow for customers. The odd thing here is that it is difficult to see how Paypal can do this without functioning as a bank and being subject to regulation. The lack of FDIC insurance is irrelevant, FDIC insurance is not necessary to be accredited as a bank.

      Equally it is hard to see how the class action can possibly be successful. If Paypal loses the court case it is unlikely they will be in a position to continue operations.

      --
      Looking for an Information Security student project suggestion?
      Try http://dotcrimeManifesto.com/
  2. Re:bank accounts... by Restil · · Score: 5, Interesting

    Then if you use paypal regularly, set up a bank account for that purpose. If you only recieve money through paypal, withdrawl any money as soon as you are able to, then move the money out of your spare account, except for a token amount to pay fees and whatnot. This way, the worst that can happen with such a problem is that you lose the most recent transaction.

    -Restil

    --
    Play with my webcams and lights here
  3. never had a problem by OiBoy · · Score: 4, Interesting

    I for one have never had a problem with PayPal, and I've been using them for over a year and a half. I've needed to contact them for support exactly once (yesterday). Get this...I call the phone number and a REAL PERSON answers the phone on FIRST RING! Not only that, but they are courteous and helpful and resolved my problem in under 20 minutes. I've never had such a good support experience in my life.

    --
    `fortune -o`
  4. My experience with paypal.... by cheeserd00d · · Score: 5, Interesting

    ...has been anything less than fun. Somehow someone got my password and changed my primary email address, thus not allowing me into my account. Luckily I caught the e-mail that this happened (at least PayPal notifies you of that, even though everything else sucks....) and immediately transferred all of my money out of my savings account that PayPal was linked to, I then called the bank and they said they'd watch my account and I should open a new one to be safe. I also wrote to PayPal, but didn't get a response until 4 days later. By that time, someone has already tried to withdraw over $900 from my account. And guess what they told me to do in their support e-mail, they told me to log into my account and fix it! Hello! If the problem is my account was stolen and the username/pw changed then I obviously can't!
    Luckily my bank is being good about it and are not charging me for those overdrawn withdrawals. Needless to say, I will never use PayPal again, nor will I ever recommend it to anyone! Avoid it like the plague!

    --
    Two wrongs don't make a right, three lefts do!
  5. Once upon a time.... by macdaddy · · Score: 5, Interesting

    I had a seller back out on me after I'd already paid. Paypal was supposed to refund the $$ to me but refused. They said there was nothing I could do about it. I told the woman on the phone (after numerous calls) that there sure as hell was something I could do about it. I made the payment with me bank's check card. My bank's check card is a Visa Check Card and it affords all the same protection that any other card carrying the Visa logo carries, including fruad protection. I told her all of that and that I'd simply contest the charge and let Visa sort it out for me. She immediately told me to hold on the line and transfered me elsewhere. A guy quickly answered and was pissed from the word go. He was all but yelling. He spewed out some dribble about how if I contested the charge, their many lawyers on retainer would bring a suit against me and this and that and on and on and on. I laughed at him. Literally. And I told him I was contesting the charges immediately and a few other choice phrases. I contested the charges, my bank account was credited by the bank, and I never heard another peep about it. Screw me? No, screw you paypal.

  6. Re: or paypalwarning.com by Krellis · · Score: 4, Interesting

    Perhaps they're dedicating too many of their staff to providing "dedicated" account managers to their bigger "VIP" accounts. They have special phone numbers ("don't give this out to anyone else, it's just for our special VIP customers") and real e-mail addresses and everything. They seem to be staff at the same (or yet another) call center out in Omaha, Nebraska, anyway, though - the home of telephone support outsourcing!