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

How productive.

[rincebrain]

Now, instead of only worrying that we'll get crappy porn, we have to worry about having our money stolen, and NOT getting crappy porn!

Ebay does have Adult items

[lecithin]

What is the difference? They(ebay) list adult items, why could you not pay for them via Pay Pal?

Re:Ebay does have Adult items

[Lisandro]

My guess it's they want to deattach themselves from those "markets" and keep a reputation as a serious buisness. Otherwise i don't know; like you said, it's not very different from buying adult items from eBay. And it's not like gambling and prescription drugs don't leave them any money.

How is this going to work for ebay?

[sgant]

Paypal is owned by ebay right now...but how is this going to work if you buy your adult stuff ON ebay?

Ebay does have a whole adult section where you can buy movies, toys etc etc...so will this effect it?

Fined by the same company that your buying adult things from.

Sounds too me like a double standard in the works. I don't think Paypal is trying to discourage this behavior that it finds objectionable...because if it did, then ebay would remove the entire adult section from it's site also.

Just and observation

Re:How is this going to work for ebay?

[rekoil]

Actually, eBay items are the sole exception to Paypal's adult items policy. The policy was primarily aimed at porn sites who took subscription payments via paypal, rather than physical items such as adult movies, toys, etc.

This is due to the extremely high dispute rate for these types of payments, most often due to husbands claiming the charge is fraudulent when the wife discovers it. As you might expect, Paypal does not want to be in the middle of these disputes, and banning said usage is, in their opinion, the best way to avoid being put in that position

I'm curious if anyone's tried to sell memberships to a porn site on eBay, however...that could be an end run around the policy if eBay permits it.

Re:How?

[Lehk228]

Since when has paypal cared about whether their actions are legal or not?

PATRIOT act..

[k98sven]

Thank the PATRIOT act.

This is another victory in the 'war on terror', obviously.

What's Next?

[BalorTFL]

I really hope that this isn't the beginning of a new trend. How long until VISA won't let you buy beer or cigarettes and MasterCard charges a 50% tax on Penthouse? When payment methods start enforcing their own moralities on their costumers, something is seriously wrong.

Re:What's Next?

[mark-t]

This has nothing to do with enforcing certain moralities on you.

Paypal and credit card companies couldn't care less about your personal moral character. What they *DO* care about is making money, and certain classes of purchases have a much higher rate of fraudulent activity than others. Online purchases in general and especially online pornography in particular has an absolutely _huge_ level of fraudulent use compared to most other credit card activities. They are only trying to avoid the chargebacks that would follow such fraudulent uses as these radically cut into the amount of money they are going to make.

I can say one thing though... your CC company will not ever try to stop you from making a purchase in person, regardless of the nature of the item (barring credit limit issues, of course). According to a representative at VISA that I spoke to when I was talking to them about a merchant account, CC fraud incidence is lowest in transactions which expect a physical signature (and if you don't actually _check_ those signatures, you could end up losing your merchant account).

Fines for legal businesses?

[nurb432]

Correct me if I'm wrong, but aren't adult sites legal, in this country at least?

And last I heard, on-line drugs are legal in general, if there is a real doctor on staff..

Sooo. how can pay-pal *fine* these people? Its not their job to play moral police...

Sure they can just refuse to do business with them, if they don't agree with the morality of the business, that is their right.. but FINES???

No I didn't RTFA, it wouldn't load..

ebay is starting to show it's true face

[Pivot]

You cannot get someone's paypal payment unless you sign up for a paypal merchant account.

It's no longer allowed to add a surcharge to ebay auctions to cover paypals 3% fee when you have a merchant account. Thus, you not only have to pay for listing your actions on ebay, you also have to pay to get your money.

I wish ebay had a little competition.

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

[mrgreen4242]

Someone will fill that gap, inevitabley. Someone with enough capital and the knowhow of the online financial transaction business will start up a service that caters SPECIFICALLY to the porn/gampling/drug crowd. Of course, they will take other business, but they will advertise those three in particular.

If they do it fast, they can cash in on some free press as PayPal bans the activities.

The fact that the porn and gambling are probably some of the biggest money makers online, they could concievably overtake PayPal in terms of $ transferred in a relatively short time. The sheer bulk of what they are doing, plus the fact that the are the 'new kids on the block' (on an aside, why did that band have to ruin that saying?) will likely let them start a price war against PayPal.

This just might be good for the consumer in the long wrong. Paypal is making an opening into an otherwise global monopoly. Perhaps the new competing sites will even start up some sort eBay like related service if they do well enough.

Rob

Re:How?

[Florian Weimer]

What right does paypal have to fine people. If its against the terms of service they could shut down the offending account, but fine them?

It's called "regulatory pressure".

The US is currently trying very hard to push online gambling off the Internet (with a few exceptions for US sites with licenses, I assume). It tries to do this by targeting any US company that indirectly benefits from gambling sites: banner ad buyers, ISPs, and now PayPal.

PayPal's situation is complicated because they operate in a field that is strictly regulated (banking) and haven't got banking licenses in all US states. PayPal basically has no choice to comply with law enforcement suggestions at this point if they want to continue business.

down with paypal

[Doc Ruby]

PayPal is an unregulated global banking monopoly. The porn and gambling industries are some of the most intense hothouses of commercial Internet development. Darwinian pressure is creating an opportunity for a PayPal competitor which will give consumers an alternative. The world is in a sorry state when porn and gambling are our best hope for freedom, but it does sound familiar.

Re:down with paypal

[Doc Ruby]

Everyone clicking on the PayPal button on eBay, or any of the tiny sellers of services/products on the Web without a credit card merchant account. And everyone sending money to their friend across the Net without needing to process credit cards. By "everyone" I mean "practically everyone", as there are other marginal players offering services for accepting payment without having a merchant account. That's a huge market, and growing much more quickly than online credit card billing. It's more flexible and scalable than credit cards, and more secure (credit card numbers are passed in the clear between many untrustworthy people, and are static over many years), so it will soon be a larger transaction system than all the credit cards, especially once it has a simple client on mobile phones. Yet it's not regulated like any bank - largely unaccountable for major abuses running into the billions of dollars annually. If there were one bank, and one store, across 90% of the world, we'd be right to demand it be tamed. The PayPal nightmare is just beginning.

Feed your local e-diots.

[Anonymous Coward]

Any site that has advertising popups on the main page, has no titles on pages, and panders to people who will believe anything anyone says, as long as it's backed in allegedly real gold... well... (Hey, nobody ever said /. only had intelligent people.)

Don't Hate Paypal

[Anonymous Coward]

Almost every single reply so more is complaining that its none of Paypal's business to enforce their morals on the user. Anyone who has said something like that is a mindless slashdot troll who doesn't know anything about 3rd party processing or merchant accounts. Most merchant account providers have banned adult sites and gambling for years because they are High Risk Industries. Its not just adult and gambling, many processors also ban game servers, IRC-related sites, MLM schemes, make $3000-working-from-home-sites, etc. These types of websites are highly likely to attract stolen credit cards, credit card fraud, and chargebacks. It costs the merchant provider money every time a chargeback is done, and it takes both time and money to fight a chargeback. So please do a little research into the world of credit card processing before you go on a rant about PaPal's religious crusade. They are simply trying to decrease fraudulent transactions. If you don't agree with their policies or the $500 fine, you can opt to use a different company which does allow adult and gambling merchants, but beware you will probably have higher transaction fees, more thorough background checks, and possibly a several day ACH hold on any funds you receive.

Re:Don't Hate Paypal

[Jah-Wren Ryel]

First, Paypal is not a monopoly. There are alternative facilities in existence that can do the same thing. Paypal simply has the luxury of being the industry leader, but they are by no means a monopoly.

Do you understand the definition of a monopoly? It is not "mono." It is the ownership of at least 90% of a market -- that's how microsoft can be a monopoly in the PC market while Apple still exists. So, industry leader with 90% marketshare?
MONOPOLY.

Does paypal have 90% of the market? I dunno. But I think neither of us would be surprised if that were the case.

Secondly, Paypal has just as much right to fine a customer for violating its terms of service as your nearest video store has a right to impose a charge on your CC for $2.50 because you returned a video one day late. It's all part of the terms of service.

They may have that right, but that still doesn't mean it isn't abusive as all hell. Furthermore, if the fact that they are charging such fines is hidden in the fine-print legalese of some modified user-agreement that less than 1% of their customer base can understand without spending half an hour deciphering, then that is probably criminally abusive.

Finally, if they are able to get away with imposing such abusive, then that is one clear indication of monopoly power. In a competitive market, pulling that kind of shit would cause a mass exodus to another services provider -- mostly by customers who had never been fined but didn't want to take the chance.

With paypal, yeah there are other providers without that restriction, but their marketshare is so tiny that the only reason you would use one is for a service you know paypal won't do and for all the rest of your regular transcations, you'd still stick with paypal. I myself thought about cancelling my very long-standing paypal account in outrage, until I realized that 99% of the stuff I use paypal for there are no alternatives. I'm sure that I am far from alone in that reaction and subsequent realization.

Re:How?

[hattig]

Not to the tune of $500 though.

Remember credit cards are YOU borrowing money from someone else.

Paypal is YOUR money.

Most bank charges and fees (they are not called fines) occur when YOU start eating into THEIR money, by being overdrawn, etc. You don't get fined because some of your money in your account came from you doing something illegal or immoral (according to the bank).

Re:How?

[hattig]

The common theme with all those fines though, is that it is you misusing their money/investment.

You get fined for taking out more money from the CC company than it wants you to.

You get fined for keeping hold of a store's property longer than they allowed you to.

You get fined for breaking a contract which most likely included a $200+ mobile phone for free as part of it.

Terms of Service aren't legally binding if they are unfair, immoral, etc. You can't have Terms of Service saying "If you are black, you will be charged 20% more". Unless you are the insurance industry that is :rolleyes:

Paypal hold YOUR money in trust (as someone else pointed out). It is not up to them to judge the right and wrongs of how that money is made, that is up to THE LAW.

If the TOS allows it...

[AtOMiCNebula]

PayPal is a private business. You agree to give them the right to fine you for those actions when you sign up with them. If you don't like the fines, get a MasterCard or something.

But on the other hand, I doubt PayPal is going to catch many people. As long as you don't include "Here's my $500 bet for the game tonight. Gambling Rocks!" I doubt they're going to check every transaction. As long as you aren't dumb about it, I don't really know what they're going to do. I'm not saying keep doing what you're doing, just be careful about it. Don't send money to 'Bets@GamblingOnline.com', or use comments that show it.

But really, if you don't like it, don't do business with PayPal. As long as they get you to agree to it when you sign up, it's fine for them to do it, it's up to read the fine print if you're going to be doing risky stuff like that. And there's a clause in there (like in everything) that says they reserve the right to update the TOS/AUP whenever they want, and that you automaticially agree to it.

Re:If the TOS allows it...

[jfengel]

I wonder if they plan to blacklist certain payees. "Hey, do you really want to send $500 to GamblingOnline.com and therefore risk a heavy fine if we find out that they're a gambling site? Click 'yeah, I'll take a gamble' to continue." At the very least, inform you that other users have been fined for sending money to that payee.

It's certainly their right to enforce whatever contract terms you agree to, but I'd consider it unpleasantly sneaky if they didn't warn you very explicitly first, at least when you're going to a known porn or gambling site. That is clearly, at the time you make the payment, not just in the fine print along with a hundred other regulations when you sign up. That's not a legal requirement, but if they're planning to use this as a source of significant income rather than an ass-covering gesture it would tip them into the Evil-Never-Use category for me.

Re:I don't get it...

[RealProgrammer]

My guess is there are three factors:

1. Paypal sees that porn, gambling, and viagra sales generate a lot of customer complaints. People tend to claim they didn't want the item, it wasn't them, somebody stole their identity, etc. Like any business, they're trying to limit their losses.

2. Those transactions are all very spammy. Add hot stock tips and Nigerian crown princes and you've pretty summarized my 'caughtspam' folder.

3. Paypal doesn't want to be in the liability loop for kiddie porn, illegal gambling, and illegal drug sales.
   

4. Paypal wants to keep a clean image, and genuinely don't want those transactions. I kind of doubt this was a factor, but there's always hope.

Re:Finally!

[tabdelgawad]

"Now if we could just get our government out of the gambling business..."

Modded funny, but the fact is the US government (at least state governments) have a *monopoly* on gambling. They share it with Native Americans as a form of compensation (Indian casinos), but note that no private entity is allowed to run a lottery, for example. State lotteries are a significant source of income (aka voluntaru taxes) for state governments.

Re:Finally!

[gcaseye6677]

It seems like under the current laws, the mob is most likely to benefit from gambling being illegal. Especially if they have cooperation from corrupt individuals in government. Laws against gambling are no different than 1920s prohibition of alcohol. People will do it anyway, it's just a matter of who gets the profits.

What money?

[ebyrob]

Paypal doesn't have any of my money in their accounts, it's all in my bank and credit card accounts until I actually order something...

this is scary and heres why

[danknight]

We are moving to a cashless society, even McDonalds is now accepting credit & debit cards. While I initally resisted using a debit card, the fact is I use it all the time now and often only keep $10 or $20 in my wallet simply because just about anything I purchase can be made with the debit card. It makes tracking my finances much easier. Now while I wouldn't expect to buy smack from the local drug dealer with a card, I would expect to be allowed to purchase anyting legal. Credit card companies stopped processing gambling debts years ago due mostly to government pressure, (and chargebacks, I know) But the bottom line is gambling is generally illeagal unless it is 'sponsored' by the state. It is a scary idea that any finacial company starts down the path of restricing money transfers based on morals. I think others will follow...

Pissing off your Enemies for $10.00

[ThatsNotFunny]

This whole thing gives me a great idea...

Send someone you don't like $10.00 through PayPal (from an alternate email address, of course). Wait a week, then complain to PayPal that, despite sending the money and after "numerous attempts to settle the transaction", you still haven't received the copy of "The Olsen Twins Fuck a Goat Volume 3" (or the Canadian Viagra) that you paid ten bucks for.

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

Re:Finally!

[whoever57]

I suspect that PayPal is very cooperative with authorities so that it can keep its "not-a-bank" status. Being treated as a bank would involve PayPal in all kinds of unpleasantness (for PayPal) like not arbitrarily freezing people's money, arbitrarily withdrawing money from their checking accounts, etc.

Re:Finally!

[whoever57]

Modded funny, but the fact is the US government (at least state governments) have a *monopoly* on gambling.

I think your statement is inaccurate. State govenrnments have chosen to either regulate or ban gambling outright. Through this mechanism, they can create a monopoly. I don't think a monopoly on gambling exists in Nevada, but it is highly regulated.

The situation with Indian Tribes is interesting. Since those tribes have sovereignty, I don't see how the states can regulate or ban gambling on tribal lands, but apparently those states with Indian reservations have done just that. Given the money flowing into gambling on tribal lands (the definition of which appears to be rather loose these days -- witness new casinos being built in the heart of the SF Bay area), I am surprised none of the tribes have challenges the States' ability to regulate gambling on Indian lands

you're on slashdot and

[real_smiff]

you pay for porn? caveat emptor, amigo. the first thing a geek learns is you don't have to pay for it (in the virtual world anyway).

The simple reason for the blacklisting...

[crazyhorse44]

the chargeback numbers for these types of merchants are incredible. it's an issue of Paypal losing money... not any type of feigned morality.

When did porn become illegal in the US?

[Anonymous Coward]

instead of only worrying that we'll get crappy porn

I don't get it. Unlicensed gambling and drugs, OK, they're illegal. But pornography????????

Since when is porn illegal in the US?

Re:When did porn become illegal in the US?

[Anonymous Coward]

uh, have you noticed who our president and attorney general are? many types of otherwise legal porn (anal, fisting, golden shower, etc...) have been prosecuted in the last year