PayPal Settles NY Probe, But Faces Others

Coneasfast writes "PayPal, which is owned by eBay, has admitted misleading shoppers into believing it offered credit-card-style protection and has agreed to pay $150,000 to settle charges. There are many sites out there which are dedicated to the problems of paypal, including PayPalSucks and PaypalWarning." Reader ipandithurts links to this related Reuters story, pointing out that the New York investigation isn't the only PalPal probe: "PayPal's practice of suspending users accounts while investigating suspicious transactions continues to be review by the FTC. While the rate of fraudulent PayPal transactions is less than one-half of one percent, the volume of more than $12.2 billion last year keeps Paypal caught in the middle of many disputes."

Comments

I'm done

[mod_critical]

People I know have told be about nightmares with PayPal, but until this post I didn't realize it was so prevalent. I just closed my account, I really dislike the idea that PayPal can simply choose at will to freeze assets in any associated account.

Re:I'm done

[Vancorps]

Its worth noting that they don't freeze just any account.

I think at some point we all just need to re-evaluate what we consider a bank in the modern age. I continually fail to see how Paypal is not a bank and thus regulated by all of the same government policy.

I've heard the arguments and they just don't make sense. On the Internet some things do need new definitions since they don't reflect world realities.

Re:I'm done

[Bob C. Cock]

I wouldn't close my paypal account just based on this. You have other payment options when buying stuff off ebay, you don't have to use paypal. If the seller only accepts paypal try to work out other payment terms or bid on the same item where the seller does accept other forms of payment. The article claims that less than .5% of all paypal transactions are fraud. That's pretty damn good considering how many transactions go through paypal in a day. If it weren't for paypal, I'd have to mail my rent checks to my landlord every month. (shudder)

Re:I'm done

[LostCluster]

Its worth noting that they don't freeze just any account.

Of course, any fraudster is going to claim "I didn't do it!" and demand that PayPal send him his money immediately when he's found out and his account is frozen.

Re:I'm done

[G3CK0]

I am currently in a dispute with paypal. I sell classified automotive listing software http://mycars.jaredeckersley.com . I had a purchase made on 3/4/04 and sent the required login information for the download to the e-mail address of the purchasers paypal account. I did not get a response from the buyer. I did not think anything of it until the 3/7/04 when I got a notice from paypal of a reversal of payment request. The buyer sent a request for reversal of payment and at the same time, they logged into the secure download section and grabbed a copy of my software. PayPal has frozen my account until it sorts the matter out, but I am stuck in the middle. I do not qualify for seller insurance from PayPal because I sell a virtual product. On their seller protection page (https://www.paypal.com/sellerprotection), they list qualifications for protection ... but the main one that excludes virtual products is this:
Ship tangible goods
Since comparable widely-accepted proof-of-shipment methods are not currently available for intangible goods and services, the Seller Protection Policy does not cover digital goods and other electronically-delivered items.
So what do I do now? The buyer never responded to my e-mail upon purchase, they did in fact download the software (server logs prove it) ... and I even have an e-mail with their admission that they downloaded the software to see what it was someone was buying on their account. Does it seem reasonable for PayPal to suspend my account? Does it seem reasonable for the buyer to have downloaded a copy of my software and claim that they just wanted to see what it was?

Re:I'm done

[Lumpy]

as a seller I only accept paypal. Money orders and cashiers checks are EASILY counterfitted and I was passed one once.

if you dont have paypal, you don't get to buy from me. they give me protections as a seller that nobody else can.

I have never bheen screwed on paypal, but I know their rules (read them before signing up and read them 2 times a year) most people that are pissed at them didn't bother to read the rules or were stupid and tried to use paypal like a bank... they are NOT a bank.

I attribute the small percentage of "pissed at paypal" the same as a seller with a feedback of > 5000 but with 50 negatives... it's what happens when you get big.

Oh no3z they friezed my account!!!11one

[Brandon One]

How about terrorists using PayPal to transfer money? The feds don't have the right to monitor those kinds of transactions as it is a private bussiness.

forced upgrade

[Roger Keith Barrett]

My big problem with paypal... forced upgrades.

I have a big problem with the fact that after using paypal to pay some set dollar amount that the account is suspended until I give them a checking account number. I don't want to give them this information... I just want to use the service to pay for something. I don't want to use it for a checking account or anything like that. And you can't use a credit card for more than account... so basically if you don't want to send them information that credit card becomes useless. If I was a regular user with just one e-mail address, there would be no way around this at all, even with other credit cards.

Their practices leave a hell of a lot be desired... give us your info or we'll make you jump through hoops or just not service you at all. Gee.. I wonder if they sell or use that info in questionable ways.. ya think?

Re:forced upgrade

[jjo]

Really? I looked at their website, and it appears that they do allow ACH (automated clearinghouse) withdrawals. Do they refuse PayPal withdrawals for all their customers, or do you have to ask for PayPal protection specially?

A company should be transparent

[Angelonio]

both regarding to customer rights and to the company obligations.
I think the Feds should be spending more time investigating Paypal's practices.

Re:Clearing up a troubled past...

[Dukael_Mikakis]

You're right, paypal is a very useful utility for sending money to and receiving money from parties that you might not entirely trust.

Unless, of course, the untrusted utility is paypal itself, as appears to be the case.

Not necessarily good, but necessary?

[sjb2016]

I don't agree that PayPal should be freezing accounts so liberally, but they do need some better control and tracking. Last year about this time I had a transfer in my account from somebody I didn't know. The amount? $2,000. I could have withdrawn the money immediately and let PayPal figure it out. Instead, I e-mailed both the sender and PayPal. Neither e-mailed me back, but the money was gone in 5 or 6 days. I wasn't peeved with the mistake, they happen in real banks too, but I was peeved that I e-mailed PayPal about something that could have gotten ugly had I been cut from a lesser moral fabric, and they didn't even acknowledge they received the e-mail. Not even an auto response. I didn't even want a thank-you, just wanted to know it was being taken care of. But I digress

Credit Card companies and PayPal

[powerpuffgirls]

Coming from another point of view - if you're a merchant accepting credit card, any complaints by customers will almost always result in immediate charge-back. This is actually very bad from businesses as it can take weeks to prove/disprove things.

PayPal is under fire because it's so common nowadays that when you buy things online via some sort of money-service, you are entitled to such privilege, ie auto charge back should you complain about it.

PayPal in this case is wrong for misleading customers, they should have come clean and stated clearly that they don't do charge back.

Imagine if we didn't have this 'charge-back' facility in the world as we know it, and suddenly Visa charged back a merchant's account without stating it clearly in its T&C, I'm sure Visa will be in deep water too.

Paypal founder

[Anonymous Coward]

Luke Nosek was my college roomate. Luckily he sold out before Ebay took over, and is winking over this thread while he drives around San Jose in his cute little Z3 wondering what to do next in life. Ya PayPal sucks, but for a marketing major at UIUC, he did pretty well.
The idea originally started out as a way for roomates to "beam" money to each other using their PDA's, which at the time was early model Palm Pilots. It evolved into one of the largest online payment schemes available. Anything at this point is beyond the original goal of having a convienant way for friends to float money back and forth for bills.
It sucks that Ebay charges you for selling something, and then a seperate charge for using the paypal service. Guess that .10 cents a picture wasn't paying enough.
At least Paypal has given friends jobs... Richman has been bumped up through 5 levels over the past 2 years. Any day now I imagine he will be Chief strategic Officer.
If you want to move up through the ranks fast, join the paypal team. Not sure how Ebay has effected the business structure though.
At least a few people got very rich. Time for me to send out resumes now..

It's the law with credit cards

[Sycraft-fu]

You can stop any charge by contacting the issuing bank. They then reverse the charges to the seller. Your recourse at this point is to sue him for the money. Since it's small dollar it'll be small claims and this not expensive to file. I'm not saying it's a good situation for you, but it is the law with credit cards, it is rather biased in favour of the consumer.

By the way, you'll be glad it is if you are ever on the other end of the stick. I got my car fixed at a Pep Boys to the tune of $650. Drove it out, and found out that what they were supposed to fix was still broken, despite their claims it had been fixed. Wanted like $200 more. No, enough of that, you don't get to charge me $650 tell me it's done and then not have it done. I stopped the charge. The bank investigated, and decided I was in the right.

Small amount, folks

[The Tyro]

I'd never use paypal to directly pay for any big-ticket items; that's why God made escrow services.

Seriously, if it's over a hundred bucks or so (definitely if it's into the thousands), I'd seriously consider using an escrow service and paying the percentage... though dedicated fraudsters have gone so far as to set up fakes.

I tend to treat paypal as a convenient money order service for small-ticket items... if I lose, no big deal.

Re:The problem is fraud

[angle_slam]

"The bank noticed this (Gamestop is a popular place for stolen CCs), noticed it was way outside of their normal spending, and instantly froze the card and called them."

There's a trade-off to be taken into consideration before credit card companies freeze your card. If you are legitimately using your credit card in an "abnormal" manner, you can be stuck with a frozen card. This has happened to me twice. The day after I received a new AMEX card, I went out of state on business travel. Naturally, AMEX thought it was suspicious that a card mailed to AZ on a Monday was being used in CA on a Thursday. It took me a long time to convince them that I was on the level.

Later, after not using my AMEX card for months, I charged a lot of money in CA. Next thing you know, my card is being declined and I can't even fill up my gas tank anymore.

Re:Fuck Paypal

[ayatollah jones]

Be thankful you can still even access your account. A similar thing happened to me -- and I was a long-time Paypal user (since their X.com days) with hundereds of successful transactions.

After waiting eight months they finally released the frozen funds, told me that my account was no longer "limited", and that I was once again free to use the system. Unfortunately, despite telling me otherwise, they forgot to actually take the limit off.

At that point, I was so disgusted with their mistakes and the countless hoops they had made me needlessly jump through, I decided I just wanted to get rid of my personal information from their system. I just wanted to close my account, and move on.

However, because they had forgotten to take the limit off, I couldn't even close my account.

So I emailed their customer support. I forwarded them my previous correspondence, and their resposne stating that I was in the clear. I asked them to either take the limit off as they had originally stated (so I could close my account myself), or just close the account for me and remove my personal information from their system.

PayPal's response?

Thank you for contacting PayPal.

We have terminated your further use of PayPal. This termination is per PayPal's User Agreement, Acceptable Use Policy.

PayPal, in its sole discretion, reserves the right to terminate this Agreement, access to its website, or access to Service without notice for any reason and at any time."

Your account will remain locked indefinitely, and we ask that you not attempt to open a duplicate account, as any additional accounts will be locked from use as well.

We thank you for your business with PayPal.

Sincerely,
Josh
PayPal Account Review Department
PayPal, an eBay Company

Gee, thanks PayPal! And sadly I'm by no means alone in this. So keep in mind, your personal information is by no means safe in the hands of PayPal.

EUROPE = REGULATED, different ToS for EU members.

[brain159]

It's worth pointing out that European PayPal users (myself included) are now actually users/customers of PayPal (Europe) Ltd which has a physical presence over here (company offices in England as far as I can tell, possibly an extra customer service centre in Ireland).

There is a specific heap of EU legislation relating to Electronic Cash Issuers (not banks, just e-money services such as PayPal) - PayPal have now created this EU company and obtained the relevant license in order to do what they do in compliance with the European rules.

The revised ToS for affected users include:

*) that PayPal can only lock the funds related to a specific disputed transaction - not your entire account balance
*) a clear explanation of your financial position in relation to them (that your account balance represents an unsecured debt from them to you - if they tank, you might potentially be stuffed)
*) Jurisdictional stuff setting the venue for any suing of them by "us" to be England, and pointing out our right to go to the UK's Financial Ombudsman Service or the Courts for relief in the event of a dispute with them - no attempts at all at a "you cannot sue us" clause.

As a UK-based occasional PayPal user, I'm pretty pleased with this new arrangement. This move into the UK also means I could invoke the Data Protection Act to obtain any "hidden" information on my account in the event of a dispute.

These changes haven't been hidden - all EU-based members have been emailed about this and the information is on the "updates" column on the left on your main account overview page.

PayPal is indeed frustrating to deal with

[Usagi_yo]

Even if you are the subject of fraud, they are difficult to deal with. As I found out when somebody used a valid CC, then reported it as a faudulent transaction on Ebay. So I lose $90, appeal it, find out that my sort of transaction is not covered in the sellers protection plan by Neither ebay or paypal.

They won't tell me who it was, who charged back or any other information about the person other then it was a unautharized transaction.

60 days later my account is unfrozen and I'm billed or the transaction fee, a chargeback fee and I'm out $90.

My biggest gripe is, all that stuff they require you to send when under investigation, like utility bill, bank statement (I refused) etc ... they should require up front to open the account.

Re:Be careful what Paypalsucks motives are

[adzoox]

I would also be careful as to who "propogates and prods" for the "probes" to be done. Yahoo auctions have almost fade into non existence as eBay has grown bigger and bigger. I wouldn't be surprised at ALL if this was some type of Martha Stewart Example.

Because a vocal group of people hate Paypal and because the competition despise it and it's parent company's success - they are common targets for criticism. When companies like Yahoo and with services like Yahoo PayDirect are NO BETTER and in fact offer less protection and ARE OFTEN THE CHOICE of scammers.

Scammers will point to paypalsucks.com as reason why they don't accept paypal so as to give them some kind of "credibility'.

Paypalwarning is different, but still bias towards negative Paypal transactions.

Any poster to paypalsucks.com forums that praises paypal or argues points is banned or belittled.