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Feds Rule PayPal Is Not A Bank
dthable writes "CNet has posted an article update describing the Feds latest ruling - PayPal is not considered a bank. The article describes the effects of not being a bank which includes the lack of government regulations."
Also, note that this doesn't get it out from under the couple of states that (correctly) think PayPal should be regulated like a bank.
I don't know what kind of crack this court was on, but it must have been some good stuff.
what are they then? a Credit card compny? Perhpas, for our safty, they should regulate, or at least clearly define paypal. Is e-gold considered a bank www.e-gold.com? they have online pay services, but they also have hard currency. I guess so. Anyways, what is Paypal??
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So when I do my taxes next year, I'll just ignore my paypal balance, because it's more or less in limbo, unclassifiable.
That doesn't sound quite right.
Thoughts?
I believe what he meant was that by the not insured by FDIC was that if PayPal was continuing to hold the funds, it does not seem that it would be insured, as they are not classified as a bank. Now that PayPal is depositing the funds into FDIC insured accounts, those user balances are insured.
I don't use an FDIC-insured bank. I use a credit union. They pay me better interest, I am insured up to $325,000 (by 3 seperate insurance companies internationally), and they loan money to the kind of people I want to see that money going to.
Banking regulations hurt consumers, not help. The red tape costs are VERY high, the government passes more and more laws requiring disclosure of deposits and transactions (snooping), and our wonderful federal reserve buys and sells gold and messes with interest rates making it more and more difficult to get value out of the fiat dollar.
I say give us more non-bank banks. If I could find an unregulated money-holder for me, I'd use it immediately IF they had good third party insurers, better interest, and less government big brother intrusion into my transactions.
You just answered your own question didn't you? If they never touched the money, they wouldn' be a bank. But they DO hold the transaction in their own acounts for weeks and sometimes months before transferring to your account. That's banking (Or at least Escrow) and in either case, since they are dealing with money they do not own, they should be regulated. Or otherwise "shadey" stuff is perfectly ok as long as most people don't find out about it.
Contrary to popular belief, coding is not all free blow-jobs and beer. Those things cost MONEY!
Also means that banks are probably at this very moment lobbying for a new set of controls to shackle PayPal in the "public interest." Banks have been trying to screw credit unions for decades, since they are in competition. PayPal if not already in competition, probably represents future competition for banks, and you know how seriously they take that.
A feeling of having made the same mistake before: Deja Foobar
Before long, he was sought after for other reasons.
Daniel has also created some articles of government and a logo .
It is interesting to see how fate chose PayPal over GenDex, at least thusfar.
Amazing magic tricks
20% inflation?
Do you have anything at all to back this up? Or is this a Montana Militia style "The Feds are out to get us, they're installing listening devices in people's heads and marking the backs of road signs for the oncoming military coup" style tosh?
What the hell went up in price 20% last year? Did the dollar lose that much in value, if so who to? My phone bill still seems to be the same, my electricity bill seems to be lower if anything, gas prices have been up and down like a yo-yo, but 2001 certainly wasn't worse than 2000.
My food bill barely changed and my browse through the supermarkets didn't notice anything rocketing by those kinds of prices. My rent went up a whopping 2.5%. The dollar is up against the GBP and the Euro.
So what the hell went up in price, not merely by 20%, but by the gazillion % needed to make up for the fact that nothing else was going up in price, and some things actually dropped?
KMSMA (WWBD?)
I like paypal.
I've used the service for probably close to a couple years. I've used to to send and receive money for ebay auctions, I've used to it transfer money between myself and friends, and now I've even got their MasterCard version of the visacheckcard (it works like an ATM or a mastercard, but draws from my paypal balance and doesn't actually have a creditline (and is not a creditcard)). I transfer a bit of money from each paycheck I get into paypal, and use my paypal card for a lot of day-to-day expenses like fuel and so on. I really like paypal.
They've never fucked me, and they've never fucked anyone I know, or anyone who knows someone I know. They have, allegedly, fucked some people I don't know, however. But I'm skeptical of the claims of frozen accounts; I'm sure it's happened on occasion, but I don't think the messageboard posts I read told the whole story. All the same, it's made me paranoid enough to not keep any large ammounts in my account, but to me the convenience of their unique service makes the slight risk of a small ammount of funds worth it. And until I see some solid proof of wrongdoing, I'm going to go on believing they're an OK company.
So bravo for the (possibly) beneficial "not a bank" ruling from the FDIC. I hope the states follow suit.
__
Choose mnemonic identifiers. If you can't remember what mnemonic means, you've got a problem. - Larry Wall
This seems *amazingly* short sighted. Sure there is some regulation and the requisite overhead and hassle. However, if I were in charge of Paypal I'd be screaming for getting legitimized as a real bank. How many people who do not use Paypal already due to security concerns would if it carried the legitimacy of being labeled an official bank. Also, how many current users would use it with more money on deposit? Since Paypal already has an established customer base of people who are accustomed to dealing with online money, why NOT pull out all the stops and offer real banking services? Paypal checking accounts, Paypal brokerage services, Paypal mortgage, Paypal etc, etc, etc. There is serious money to be made in these endeavors!
I too haven't been hosed - yet. However their per transaction fees are beginning to get onerous. Frankly from your description of how YOU are using the service it does sound to me a nawful lot like a bank. An electronic one that never handles paper money to be sure but a bank nonetheless.
Try this, have someone send you money using PayPal and a freshly stolen but not yet reported-stolen credit card. After you've received the money have the card reported stolen. what what occurs to YOUR account even though you weren't involved in the theft. By all accounts YOUR funds and those of the person who sent you money will BOTH be frozen. Ouch.
For fun try this - goto PayPal and try to find a phone number that will lead you to a real live living human being that can help. It used to be, and migh still be, somewhat hard to find a phone number on the site. I tried something over a year ago whe nstories first seemed to be filtering out about problems with the service and had a hard time fincing a number. That did NOT bode well IMO.
I DO use the service, somewhat often (sent the roller coaster guy money today:-) BUT I do NOT keep money in there. These guys are apparently being ruled "not a bank" so protections I'd expect from such a thing don't exist never mind the crap they supposedly pull. They're just too shaky for me to trust using them as you do - I've got credit cards and debit cards for insured accounts already thanks. YMMV - just please be careful and wary. Claims of thousands of dollars being frozen are WAY too common IMO...
Build it, Drive it, Improve it! Hybridz.org
I have actually been wondering why banks don't adopt a paypal-like service. Pay-pal is a good idea, but I have never been overly enthused about giving them access to my bank account routing numbers because they are really just a company. Maybe a good, nice, well meaning company, but how do I know?
That is one of the main purposes of the FDIC insurance of banks is to provide legitimacy to the accounts they maintain so that I can trust that if I want my money back, I can get it back. I would really prefer to have my bank acting as PayPal than have PayPal acting as my bank.
-Rothfuss
I don't know a lot about how banks work, however, so I'd be interested to hear the opinions of some bank-smart people.
-Miko
Miko O'Sullivan
That is not correct at all. If your example was true, there would be no bad loans at all. Suppose, person A defaulted, so bank A is out $5k. All it needs to do is go through that scheme several times and the invented money covers the bad load. I don't think so.
The reason why that doesn't work is that the banks have to borrow money to lend person A! Suppose, person C took out his $5k and wrote a check to Home Depot. And, Person A took his $5k loan and wrote a check to Home Depot. When Home Depot comes to collect on those checks, where does bank A get the money to pay the $10k bill? That money has to come from somewhere. Other banks, that's where! Banks borrow money from other banks to cover your loan! In your example, bank A would borrow $5k from bank B @ 5% interest (prime rate). Lend it to person A @ 10% interst. When person A repays the loan, bank A pays back its loan to bank B, and pockets the difference. If person A defaults on that loan, bank A must come up with the money from its own money supply to bank B. If enough people default on bank A, bank A will default. That might cause bank B to be in financial trouble, which might affect bank C, D, etc. This is the exact situation that caused the Asia financial crisis years ago.