5 ms·

The "paypal blocked my money" stories are frequent. I'm curious to which extent this is legal. I'm pretty sure a bank isn't allowed to block access to your acc

The "paypal blocked my money" stories are frequent. I'm curious to which extent this is legal. I'm pretty sure a bank isn't allowed to block access to your accounts without a formal request from a legal entity. Paypal doesn't "own" the money. This sounds to me as extremely abusive. Is that this frequent?

acabal 16y ago
That's the rub--Paypal is not a bank. They can do whatever they want with the virtual money that is exchanged on their servers. Which is why a real merchant account is the only serious option for a larger-scale business.
- mattmanser 16y ago
  They are a bank in Europe, just not the US. Sounds like the whole legal status in the US is a bit of a mess really: http://en.wikipedia.org/wiki/PayPal#Regulation http://en.wikipedia.org/wiki/PayPal#Regulation
  - deleted 16y ago
    [deleted]
  - acabal 16y ago
    I stand corrected, good to know!
  - all 16y ago
    While that may be true, Luxembourg is known as a tax haven. I note that Amazon also registers its European operations there. From the same source as you cited: "Concern about Luxembourg's banking secrecy laws, and its reputation as a tax haven, led in April 2009 to it being added to a "grey list" of nations with questionable banking arrangements by the G20." [http://en.wikipedia.org/wiki/Economy_of_Luxembourg#Banking http://en.wikipedia.org/wiki/Economy_of_Luxembourg#Banking] So, in effect, Paypal is probably a bank in nominal terms only. They can still do pretty much whatever they want with your money and get away with it. That is why my company went with WorldPay even when we started out. We don't get charged any fees, just commission, and we get free fraud insurance on the major credit cards.
    - auxbuss 16y ago
      Paypal is a bank in Europe, as stated. I was one of those who lobbied to achieve this. I was burned by this odious outfit more than five years ago. You don't get two chances with someone else's money in their lifetime. You can't be a bank "in nominal terms only" in Europe. Once registered as a bank you are bound by EU and Member State laws. There's no sidestepping that. Governments can't sidestep them. The fact that Paypal is registered as a bank in a European Member State means that they must abide by these laws and the regulation that goes with it. Remember, loser pays in European courts. So when a bank steps outside the law, it will be liable for costs and "damages". It is not in their interests to break or even "stretch" the law. Regardless, I wouldn't do business with Paypal if you paid me. Well, perhaps I would, but pay it straight to my bank, and not via Paypal. P.S. My fight goes on: this week I have been active again in the European Parliament with MEPs fighting to get the appalling ACTA spiked. Something we should all be aware of and striving to kill.
- nodata 16y ago
  They are a bank in Europe - or at least, they have a banking license in Europe. Edit: mattmanser got there first.
- deleted 16y ago
  [deleted]
- laverick 16y ago
  Well, you can bet this kind of experience would quickly convince somebody to add alternative billing/donation options :)
- jacquesm 16y ago
  Paypal actually is a bank, just not in all jurisdictions. As for the 'virtual money', it's not virtual, it's real. They run what is technically called a wallet system. A real merchant account is of course an option, but the transaction fees can be quite high, there is the charge-back risk and a whole pile of regulatory hoops to go through before you can get that to work. Larger scale businesses have plenty of users for who credit card use is not an option. Large parts of the world are relatively free of the credit card plague and so can not pay you using your merchant account. For those situations paypal (or something like it that does not have paypals drawbacks) is a solution.
  - eru 16y ago
    Yes, in Germany you could probably get away with just a normal bank account and accepting direct bank transfers.
    - aw3c2 16y ago
      Not as easily as with Paypal as transactions take a day or two.
- dRother 16y ago
  It's not 'virtual' money. We're not talking tokens here, this is actual money.
deleted 16y ago
[deleted]
Alex3917 16y ago
Stories like this have been frequent for almost ten years now. I remember writing about this in 2005 and it was already old news by several years then.
jimbokun 16y ago
Can anyone explain how PayPal is not constantly in court defending against class action law suits? No lawyer anywhere has considered the possibility of a massive payout from representing all of the clients over the world whose money PayPal has swallowed without explanation? Or, somehow, PayPal has managed to craft contracts so legally airtight that they can do absolutely anything with anyone's money with absolutely no legal obligations on their part? It seems like the latter, but that seems to indicate that the legal systems of the world are fundamentally broken.
- mkr-hn 16y ago
  Anyone with the money and will to tangle with Paypal has the clout to get enough attention to make Paypal change their mind.
  - jseliger 16y ago
    A corollary: Anyone with the money to tangle with Paypal has the wits not to need to use Paypal in the first place.
- deleted 16y ago
  [deleted]
  - jacquesm 16y ago
    I've had this happen to me with $50K and it wasn't 'lies or made up' in that case, I suspect most of them are much like mine. You realize you're up against a giant in a foreign country that says they'll release your funds in 6 months time. So rather than spend 50 K on American lawyers and end up with nothing even if you win you grit your teeth and get on with your job vowing to never use the service again. And they did pay out after 6 months. In my case I've not even managed to stand by my vow because I had to pay a few people using paypal. But I'm no longer accepting paypal payments myself and I would advise everybody to keep their account balances as low as possible.
    - deleted 16y ago
jemfinch 16y ago
> I'm curious to which extent this is legal. I'm pretty sure a bank isn't allowed to block access to your accounts without a formal request from a legal entity. It's simple to explain: Paypal isn't a bank.
hristov 16y ago
The problem is credit cards. Credit cards are very un-secure and a credit card owner usually has a right to do a charge-back which means that a credit card processor has to get their money back, which means that every credit card processor puts in conditions in their contract that allow them to block your funds if they smell even a whiff of impropriety.

acabal 16y ago

That's the rub--Paypal is not a bank. They can do whatever they want with the virtual money that is exchanged on their servers. Which is why a real merchant account is the only serious option for a larger-scale business.

mattmanser 16y ago
They are a bank in Europe, just not the US. Sounds like the whole legal status in the US is a bit of a mess really: http://en.wikipedia.org/wiki/PayPal#Regulation http://en.wikipedia.org/wiki/PayPal#Regulation
- deleted 16y ago
  [deleted]
- acabal 16y ago
  I stand corrected, good to know!
- all 16y ago
  While that may be true, Luxembourg is known as a tax haven. I note that Amazon also registers its European operations there. From the same source as you cited: "Concern about Luxembourg's banking secrecy laws, and its reputation as a tax haven, led in April 2009 to it being added to a "grey list" of nations with questionable banking arrangements by the G20." [http://en.wikipedia.org/wiki/Economy_of_Luxembourg#Banking http://en.wikipedia.org/wiki/Economy_of_Luxembourg#Banking] So, in effect, Paypal is probably a bank in nominal terms only. They can still do pretty much whatever they want with your money and get away with it. That is why my company went with WorldPay even when we started out. We don't get charged any fees, just commission, and we get free fraud insurance on the major credit cards.
  - auxbuss 16y ago
    Paypal is a bank in Europe, as stated. I was one of those who lobbied to achieve this. I was burned by this odious outfit more than five years ago. You don't get two chances with someone else's money in their lifetime. You can't be a bank "in nominal terms only" in Europe. Once registered as a bank you are bound by EU and Member State laws. There's no sidestepping that. Governments can't sidestep them. The fact that Paypal is registered as a bank in a European Member State means that they must abide by these laws and the regulation that goes with it. Remember, loser pays in European courts. So when a bank steps outside the law, it will be liable for costs and "damages". It is not in their interests to break or even "stretch" the law. Regardless, I wouldn't do business with Paypal if you paid me. Well, perhaps I would, but pay it straight to my bank, and not via Paypal. P.S. My fight goes on: this week I have been active again in the European Parliament with MEPs fighting to get the appalling ACTA spiked. Something we should all be aware of and striving to kill.
nodata 16y ago
They are a bank in Europe - or at least, they have a banking license in Europe. Edit: mattmanser got there first.
deleted 16y ago
[deleted]
laverick 16y ago
Well, you can bet this kind of experience would quickly convince somebody to add alternative billing/donation options :)
jacquesm 16y ago
Paypal actually is a bank, just not in all jurisdictions. As for the 'virtual money', it's not virtual, it's real. They run what is technically called a wallet system. A real merchant account is of course an option, but the transaction fees can be quite high, there is the charge-back risk and a whole pile of regulatory hoops to go through before you can get that to work. Larger scale businesses have plenty of users for who credit card use is not an option. Large parts of the world are relatively free of the credit card plague and so can not pay you using your merchant account. For those situations paypal (or something like it that does not have paypals drawbacks) is a solution.
- eru 16y ago
  Yes, in Germany you could probably get away with just a normal bank account and accepting direct bank transfers.
  - aw3c2 16y ago
    Not as easily as with Paypal as transactions take a day or two.
dRother 16y ago
It's not 'virtual' money. We're not talking tokens here, this is actual money.

deleted 16y ago

[deleted]

Alex3917 16y ago

Stories like this have been frequent for almost ten years now. I remember writing about this in 2005 and it was already old news by several years then.

jimbokun 16y ago

Can anyone explain how PayPal is not constantly in court defending against class action law suits? No lawyer anywhere has considered the possibility of a massive payout from representing all of the clients over the world whose money PayPal has swallowed without explanation? Or, somehow, PayPal has managed to craft contracts so legally airtight that they can do absolutely anything with anyone's money with absolutely no legal obligations on their part? It seems like the latter, but that seems to indicate that the legal systems of the world are fundamentally broken.

mkr-hn 16y ago
Anyone with the money and will to tangle with Paypal has the clout to get enough attention to make Paypal change their mind.
- jseliger 16y ago
  A corollary: Anyone with the money to tangle with Paypal has the wits not to need to use Paypal in the first place.
deleted 16y ago
[deleted]
- jacquesm 16y ago
  I've had this happen to me with $50K and it wasn't 'lies or made up' in that case, I suspect most of them are much like mine. You realize you're up against a giant in a foreign country that says they'll release your funds in 6 months time. So rather than spend 50 K on American lawyers and end up with nothing even if you win you grit your teeth and get on with your job vowing to never use the service again. And they did pay out after 6 months. In my case I've not even managed to stand by my vow because I had to pay a few people using paypal. But I'm no longer accepting paypal payments myself and I would advise everybody to keep their account balances as low as possible.
  - deleted 16y ago

jemfinch 16y ago

> I'm curious to which extent this is legal. I'm pretty sure a bank isn't allowed to block access to your accounts without a formal request from a legal entity. It's simple to explain: Paypal isn't a bank.

hristov 16y ago

The problem is credit cards. Credit cards are very un-secure and a credit card owner usually has a right to do a charge-back which means that a credit card processor has to get their money back, which means that every credit card processor puts in conditions in their contract that allow them to block your funds if they smell even a whiff of impropriety.