Slashdot Mirror

← Back to Stories (view on slashdot.org)

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?"

10 of 275 comments (clear)

  1. ANTI-PayPal Communities by Joe+Jordan · · Score: 5, Informative

    Visit PayPalSucks.com for an entire community pissed off at PayPal.com's practices.

  2. 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 This means on occasion, more money is withdrawn from your non-PayPal accounts then you authorized them to take.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/
  3. Not a problem for me... by truesaer · · Score: 5, Informative
    I always see a lot of angry people when these stories about paypal pop up. But I want to offer a bit of perspective....I had sold something and the buyer charged back against paypal, despite delivery of the item. I received an email from PayPal stating that they had received a charge back, but that they were absorbing the cost of it because I had accepted it from a verified paypal user and had satisfied their anti-fraud conditions (which really are very easy to follow). So, basically as long as this didn't happen often PayPal was eating the costs of fraud for me.


    Now, maybe this doesn't happen in every case. And maybe if you accept funds from unverified users you don't get protection. But I just want people to know that every fraudulent transaction doesn't result in Paypal seizing your account.


    On the other hand, they are very difficult to get in touch with except by email (which we all know is easy to ignore). This is somehting that should definitely be improved upon.


    Still, I like paypal. If you want complete control, I suggest you get a merchant account. Frozen paypal accounts are, I believe, rare. And I think they involve more than just a simple charge back in most cases.

  4. 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
  5. Use PayPal only with a Credit Card by Trepidity · · Score: 5, Informative

    Not a debit card or checking account. If they screw you over with an unwarranted credit card charge, your can call your credit card company and stop payment on it. If they pulled money out of your checking account (either directly or through a debit card), you're pretty much screwed (good luck trying to get your bank to do anything about it).

    FWIW, using a credit card for most purchases is actually good advice, because it avoids all sorts of frauds and other problems (for example, a restaurant in a foreign country once charged my card twice; I guess they thought since I wasn't from around there I couldn't come back and complain. The CC company removed the fraudulent second charge after a simple phone call...if I had paid with a debit card it would've been a real pain to try to get my money back). This is provided, of course, that you are disciplined enough to pay your credit card bill on time to avoid going into debt and paying high interest rates.

    --
    10 PRINT CHR$(205.5+RND(1)); : GOTO 10
    1. Re:Use PayPal only with a Credit Card by Zeinfeld · · Score: 5, Informative
      Not a debit card or checking account. If they screw you over with an unwarranted credit card charge, your can call your credit card company and stop payment on it. If they pulled money out of your checking account (either directly or through a debit card), you're pretty much screwed (good luck trying to get your bank to do anything about it).

      Your rights are the same in both cases and in fact you are dealing with a bank in both cases. The main difference is that with a credit card the dispute only affects your credit limit, if you are disputing a $500 charge your $2000 credit limit will be $1,500 until the dispute is respolved. If on the other hand you used a debit card you have $500 in your current account that you cannot use and is efectively deducted from your account for the duration of the dispute.

      I had a recent dispute with a hotel that had illegally charged for a late cancellation despite having agreeed to a 6pm cancellation (Sunnyvale Hilton had changed to a Sheraton). First time round AMEX corporate sent me back a letter saying they had invsetigated the dispute and the hotel had provided the 'enclosed information' that proved their case - absolutely nothing in the letter. I then sent a snotty letter telling them that 1) I am also a Platinum customer so don't mess with me, 2) a photocopy of the booking agreement made by telephone through through an AMEX travel agent and 3) required them to send a copy of a signed charge voucher as required by regulation E.

      The charge was refunded in full within a week.

      Citibank on the other hand in similar circumstances sent me a sequence of nasty letters, made harrassing telephone calls to the home etc. until they sold the alleged debt to a collection agency. Unlike Citibank whose customer service was dreadful the collection agency was actually helpfull and gave me a fax number to which I served a cease and desist disputing the charge a few hours later and never heard any more. They even took note of the clause in the cease and desist where I stated that any communication to a third party (read credit agency) allegeing that a debt existed would be considered libelous.

      One of the things I find frustrating about living in the US is that so many people are cowards who won't defend their rights against Equifax

      --
      Looking for an Information Security student project suggestion?
      Try http://dotcrimeManifesto.com/
  6. 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!
  7. Solution: Don't use PayPal. Mail it instead by Guppy06 · · Score: 5, Insightful

    If an auction seller screws you over one way or the other, eBay's complaint process is rather lame and PayPal literally can't do a damn thing for you (speaking from experience here).

    However, if you spare a little more money to mail them a money order instead, what they did magically turns into something called "mail fraud." Federal agents wearing dark suits and carrying badges begin looking for this person to throw them into pound-you-up-the-ass penetentiary for up to five years (multiplied by however many other people he's ripped off through the mail).

    Of course, if this is the first and last time they defrauded someone through the mail, there's a chance the Postal Inspectors might not have the time to really give it much attention. But just because they're not activley seeking the person doesn't mean there's not a felony warrant issued for the culprit, which will make employment background checks, driver's license renewals and plane ticket purchases a whole lot more interesting. And that's before we wonder how often he gets pulled over for traffic violations...

    I ask you: If you don't wholly trust who you're buying from, where can you get more entertainment for $1.24? Certainly not PayPal!

  8. 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.