PayPal to Fine Gambling, Porn Sites

scubacuda writes "Yahoo! reports that PayPal is taking an aggressive stance against gambling, adult, and non-prescription drug sites: anyone caught using PayPal for these purposes will be charged $500. Eric Jackson, a former PayPal executive and author of the new book 'The PayPal Wars,' calls the new policy 'draconian' and says it is likely a two-fold strategy to discourage certain behavior while heading off regulators."

Comments

It's a restriction of freedom.

[bs_02_06_02]

How would you feel if your bank said, "Write a check at the porn store, and we're charging you $500!"

It's a violation of our freedom. I've never, ever liked Paypal for their ability to screw the consumer without answering to anyone for any reason. There's a lot of discontent out there... just search for Paypal sucks sites... there are a lot of them. Thank god I don't have an account.

Re:How?

[Detritus]

IANAL but a company isn't free to put anything that it wants in a contract and have it enforced by the courts. A judge can invalidate all or parts of a contract that are illegal, unconscionable or against public policy.

Paypal shutsdown romance novels and gay literature

[tehanu]

Here is the google cache of the All About Romance newsletter (it seems to have disappeared from the site) which is a newsletter about romance novels and give a good idea about how specifically people are being affected:

http://66.102.7.104/search?q=cache:lfrekzaQLGAJ: ww w.likesbooks.com/184.html+&hl=en

Some interesting quotes:

"PayPal can be used to buy and sell pre-1980s issues of Playboy, Playgirl, and Penthouse. On eBay, these can be categorized as "Collectibles" rather than as "Mature Audiences.""

"Books classified as "romantica" - ie. books about people falling in love and making love are not allowed - but who is to say what is romantica and what is just hot romance? Print romances seem to get a pass. Readers can go onto eBay and find print erotic romances such as those published by Kensington's Brava line. They can also find books far more explicit than erotic romance novels for sale, and their PayPal payments will be accepted. The Claiming of Sleeping Beauty, one of Anne Rice's BDSM novels, is one obvious example of this."

"According to Brenna Lyons, when the new policy went into effect, many people noticed that the adult content guidelines were vague. For that reason, many publishers of sensual and erotic books asked PayPal to check out their sites. PayPals adult content guidelines are open to interpretation and so changes can be made. PayPal did, in fact, assure the publishers that their sites were acceptable.

Early in 2004, almost a year after the announcement of the new policy, PayPal began freezing the accounts of publishers, writers, and even readers of erotic romance. Brenna herself knows of four publishers, five self-published authors, and two review sites that had their accounts frozen by PayPal.

What happened to warrant such drastic action? PayPal was investigating them for violations of their Terms of Service (TOS). When an account is under investigation it can be frozen for up to 180 days.

Though those under investigation often disagree, Amanda Pires says that the investigation is "not an invasive process." PayPal doesn't contact the vendor until they've decided it's violating the Acceptable Use policy. They will, however, investigate sites on the basis of a single complaint. According to Amanda, this is because PayPal "encourages people to let them know because the Internet is so large." She adds, though, that while a single complaint is enough to start an investigation, that single complaint isn't enough to get PayPal to take action against a vendor. As part of this investigative process, PayPal staff review both the sites and the content. In the case of an electronic publisher, they might ask for downloads of the books. In a case like that, the process could take longer because they have to evaluate books rather than just evaluating a web site.

The evaluation process involves trying to determine "whether or not the sexual content is a small or insignificant part of the book." Ms. Pires adds, "We allow PayPal to be used to sell a book, not based on length or number of loves scenes, but on the topic or intent of the book. If the sexual scenes or content is part of the story line but not the primary purpose of the book, then PayPal can be used to sell the book." Staff members performing this evaluation must decide whether the books adhere to the Acceptable Use policy. When performing these evaluations, the staff members "try to be as fair as possible."

Many authors and publishers of erotic romances who have been investigated disagree that PayPal treated people in their industry fairly. According to Brenna Lyons, no warning was given to small publishers and self-published authors that they were about to be investigate. Their PayPal accounts were suddenly frozen. "Just wake up one morning and have your account frozen. If you happened to have most of your working capital in there, you were screwed. Pardon the frank language. Here's the cute part. When they started going after the big boys, they gave them

Who cares? There are other services out there.

[ellisDtrails]

Use FIREPAY or NETTELLER (google them for info). They are RELIABLE and they aren't interested in being Big Brother or monitoring your online habits.

F Pay Pal.

Re:Who cares? There are other services out there.

[McDutchie]

Use FIREPAY

"FirePay is a Web-based cash account that can be used by anyone who has a U.S bank account." Woops, I'm in the Netherlands and I need to accept payments in euros. <sigh> Next...

or NETTELLER (google them for info).

Their site is so utterly content-free and/or badly designed I cannot even find a sign-up link or terms of service, so I have no way of knowing if they'd even accept me. But I doubt it since there's no reference to international accounts anywhere. Also it seems they cater to financial institutions and not mere mortals like me.

Seems PayPal is still the only choice I have. But if anyone has any other suggestions I'd appreciate them.

Re:Who cares? There are other services out there.

[XorNand]

For micropayments, check out BitPass. Their biz model is unique in the fact they sell the equivlient of prepaid phone cards. You can buy a $3 BitPass virtual card and use it to pay sites as little as a penny at a time. (Not affililated with them, just implementing a project using their system).

Closed

[LordK2002]

Paypal account closed as of today.

They can have whatever policy they want, but they are not going to impose fines on me for breaking it.

Incidentally, the "Mature Audiences" category includes "items that you have to be 18 or over to purchase", which would seem to include any 18-rated film whether pornographic or not.

K

Re:Ebay does have Adult items

[tukkayoot]

Are Mastercard, Visa or American Express taken any less seriously because they can facciliate the purchase pornography? How about First Union bank?

I don't think so.

No, like the article/summary says, I think this has something to do with regulatory pressure. I really don't understand all the fuss, but I think it has something to do with the fact that PayPal isn't a bank, and thus has a different set of regulations/laws it has to abide by.

Offhand I don't see why PayPal should be restricted in this manner, and why they should feel compelled to levy these fines, but IANAL or anything.

Re:Ebay does have Adult items

[mcknation]

Well I did some *research* on this topic just now. ;)

Ebay hides all adult items in a catagory called "Mature Audiences". There is all kinds of stuff in this catagory. Sex toys. Elargement pills all kinds of stuff.

However not ONE single auction in this catagory allows paypal as a method of payment. My guess is that the forbid it entirely...even on ebay

/-McK

Probably an unenforceable penalty clause.

[Animats]

Private parties cannot assess fines. From a New York court decision:

• The rule is now well established. A contractual provision fixing damages in the event of breach will be sustained if the amount liquidated bears a reasonable proportion to the probable loss and the amount of actual loss is incapable or difficult of precise estimation. If, however, the amount fixed is plainly or grossly disproportionate to the probable loss, the provision calls for a penalty and will not be enforced. In interpreting a provision fixing damages, it is not material whether the parties themselves have chosen to call the provision one for "liquidated damages", as in this case, or have styled it as a penalty. (citations omitted.) Such an approach would put too much faith in form and too little in substance. Similarly, the agreement should be interpreted as of the date of its making and not as of the date of its breach.

  (Truck Rent-A-Center, Inc. v Puritan Farms 2nd, Inc., 41 NY2d 420, 425 [1977]; see Fingerlakes Chiropractic, P.C. v Maggio, 269 AD2d 790 [4th Dept. 2000]; Benderson v. Poss, 142 AD2d 937 [4th Dept. 1988]; Pyramid Centres & Co. v Kinney Shoe Corp., 244 AD2d 625 [3d Dept. 1997].)

It's up to a court to decide whether $500 is proportional to the actual loss incurred by PayPal. You usually don't get to count administrative time as costs in contract disputes; it has to be an outside expense.

Re:How?

[cshark]

If they were considered a bank by the regulators there is no way they would legally be able to get away with this kind of extortion scheme. Unfortunately, the regulators don't consider them a bank.

RTFA

[SuperBanana]

However PayPal is actually fining the PayPal user, not the sites.

RTFA.

"The new policy, which takes effect Sept. 24 and applies to both buyers and sellers,"

This is a pure money-grab by Paypal; they're doing it to sites they think support piracy as well. This profiteering off illegal activity, in many cases(not for legitimate porn and legal gambling, but certainly for piracy)- and I can't wait for a US attorney to fire up an investigation against them, because the scumbags deserve it. Among other things, by seizing the money, they're proving they knew it was obtained illegally. Posession of stolen funds, anyone?

Re:ebay is starting to show it's true face

[base3]

From the horse's mouth

Sellers may not charge eBay buyers an additional fee for their use of ordinary forms of payment, including acceptance of checks, money orders, electronic transfers or credit cards . . .

I wouldn't bid on an auction that advertised such a charge, and if I had bid on one and had been told to "send a money order or shut up," I'd neg the seller and report him to eBay. I have also reported auctions that advertise the illegal surcharge and seen them pulled.

Re:E-Gold

[Ledora]

I am pretty sure that happened cause he link the URL wrong he needs www.E-gold.com

Don't keep money in your PayPal account

[Anonymous Coward]

Don't keep any money in your PayPal account - always transfer it to your bank account as soon as you get it.

I'm not sure if PayPal is allowed to automatically debit the "fine" from your bank account, but lots of banks out there will let you open up an account for nothing (exact terms depend on bank). You could conceviably just transfer it to a free checking account and then just have your bank trasnfer it from your PayPal associated account to an account you do not have associated with your PayPal account.

If they go after your credit cards, just dispute the charge, make PayPal prove that you did these transactions. Hell, just get a credit card with an insanely low limit that they will not be able to charge!

If these fuckers want to take your money, make it as hard for them as possible.

Re:you're on slashdot and

[astrotek]

I dunno about that. The golden age is starting again. My site is designed to hurt your high speed internet connection. I have others coming, like video channels etc. All for free, no tricks.

http://babes.usefulidiot.com

daylight robbery

[irf]

while i dislike gambling, adult, and non-prescription drug sites, who are paypal to fine them? i sure hope that they are not the custodians of the "values, morals, etc.." of society, because paypal are nothing but a bunch of crooks who will not hesitate to use any means to defraud their customers. if they indeed feel so strongly about "gambling, adult, and non-prescription drug sites", why not deny them service instead? but, of course they will not do so, they will offer their services to them, and skim the $500 fine.

Re:Pissing off your Enemies for $10.00

[LordK2002]

Your enemy will be fined $500.00 for just $10.00 and a few emails. Not a bad return on investment, eh?

And so will you, if you read the Acceptable Use Policy.

This is not an issue of fining just websites, it is an issue of fining users, as has been pointed out in other comments.

This is what makes it unacceptable and is why I have chosen to discontinue my use of PayPal.

K

Headline is Misleading - It is worse

[samantha]

The fine can also be levied for ordering prescription drugs fron any firm online which isn't certified re:

" Under the new policy, prescription drug sellers who do not have Verified Internet Pharmacy Practice Sites certification from the National Association of Boards of Pharmacy, and the people who buy from them, also face fines and possible legal action if they do business using PayPal."

So if I buy Piracatem over the net as it is not available without a prescription in the US, PayPal can fine me and otherwise bring legal action against me? A convenient financial middleman is now a pimp of the FDA and Big Pharma as well as for Religious Nuts attempting to take over the US government?

This is way, way too much. If this is not rescinded then I am pulling all funds out of Paypal and closing my account. I don't pay bloody creeps for their malicious behavior.