14 ms·

The whole idea behind Paypal was: -- we'll do everything a bank does, but without all those "laws" and "accountability for mistakes" that the other banks labor

• gst 16y ago
  Actually, in Europe Paypal operates as Luxembourg-based bank.
  • mise 16y ago
    Does this mean that the horror stories of frozen assets donn't/won't happen to European accounts?
    • jonknee 16y ago
      Considering that this story was from Europe, that doesn't appear to be the case.
    • cnvogel 16y ago
      Just recently a story was published in Germany where they evaded their responsibilities as a bank by clever shifting of responsibilties between eBay, PayPal and the credit-card issuer. So in case of a TV shipped to a identity thief chargebacks were no longer possible (I cannot find the article right now). Another story where PayPal doesn't provide chargebacks to the customer after paying a non-shipping company: http://www.heise.de/ct-tv/artikel/Video-Vorsicht-Kunde-801335.html http://www.heise.de/ct-tv/artikel/Video-Vorsicht-Kunde-80133... (Update: I had the description and the video mixed up...)
    • NiekvdMaas 16y ago
      I can assure you (from my own experience) that these horror stories also apply to EU accounts. In fact, the article was written about a Dutch PayPal account.
    • AlexMuir 16y ago
      I can confirm that they are sitting on 2000 GBP of mine and not responding to anything.
      • Tuna-Fish 16y ago
        Stop contacting them, and start contacting the relevant authorities.
      • AlexMuir 16y ago
        It's looking increasingly likely that I will have to sue them.
    • mironathetin 16y ago
      I also confirm. My account is frozen for no good reason since 1 year. No reply to any mails. Germany. I once used my Bank to get back my money from Paypal. Paypal took an amount from my credit card. So I called the bank and told them, Paypal did it without authorization. I had to fill a form and got my money back within a few days. I gave Paypal only access to my credit card, not to my bank account. Although they claim in their terms and conditions that this is correct (account OR credit card), I assume this is the main reason why my account is frozen. I can't even close it or delete data.
  • all 16y ago
    Technically, this is true. Being based in Luxembourg, however, effectively abrogates the effect of the regulatory aspect of things. I am not au fait with the ins and outs of Luxembourg's banking laws, but I do know it is a grey area of banking in the wider scene. Countries that tax worldwide income (e.g., US, Germany) routinely decry Luxembourg as a tax haven. I suspect, therefore, that Luxembourg does not regulate or apply its laws to commerce that occurs outside its borders. As I noted in the last round of "Paypal-was-architected-by-robber-barrons", Amazon in Europe is also incorporated in Luxembourg. Aside from its proximity to Brussels and being at the centre of western Europe, this is almost certainly for tax reasons. That is, they don't ship (or ship pitifully little) to Luxembourg itself and so pay considerably less in taxes than they otherwise might. Similar, though considerably less convenient, havens also include Jersey, Gibraltar, and Cyprus, all semi-autonomous regions belonging to the UK that attract businesses by taxing only commerce that occurs between two parties within their borders. FWIW, I wouldn't touch PayPal with a barge pole. We use RBS WorldPay because 1. we get favourable terms as we have an account with RBS, 2. we get 1% transaction costs with no monthly fees,and 3. we get fraud protection by RBS WorldPay for free. The tech folk at RBSWP are not the sharpest tools in the shed, but RBSWP itself has proven to be good for us financially. Another one that is quite popular but whose breadth of availability I do not know is SagePay.
    • StavrosK 16y ago
      How do you get no monthly fees? We have an account with NatWest (RBS group), but the site says 20 euros/mo.
      • all 16y ago
        Talk to your WorldPay account manager. We started off at 20 pounds/mo + a set transaction fee and then switched to 1%. It doesn't hurt so much when you are first starting out and it gives a helpful percentage to use in projections.
        • StavrosK 16y ago
          Thank you, I've send them a contact enquiry. How can it be so cheap, though? PayPal does 3.4% + $0.35, and WorldPay does just 1%? Is there a catch?
• johnitsagal 16y ago
  How come nobody sues them? How come there hasn't been enough of an uproar to get congress involved in regulating PayPal? Reading HN, these horror stories seem to be fairly common, or maybe I'm just hearing the same stories over and over again.
  • yummyfajitas 16y ago
    Currently we have two choices. You have banks, which are huge, bloated, slow, massive barriers to entry. If you want to build an MVP and accept payments right away, good luck with a bank. But your money is safe. On the other hand, we have PayPal. Sometimes they steal your money. For a very small business, paypal is easy to get going with. Millions of small business people have decided that this tradeoff is right for them - worst case, you lose a few grand. I'm hoping congress doesn't turn PayPal into a bank. If they do, we will only have one choice (banks), and life will be harder for smaller businesses. Thousands of very small businesses have decided PayPal's offers the right set of costs/benefits, why do we want congress to second guess them?
    • polynomial 16y ago
      > I'm hoping congress doesn't turn PayPal into a bank I'm hoping this doesn't mean you think any new regulatory oversight on PayPal would bring more harm than benefit.
      • deleted 16y ago
        [deleted]
      • yummyfajitas 16y ago
        In principle, I'm sure one could come up good regulations. In practice, I'm leery of congress's ability to do anything besides make PayPal more bank-like. That would be bad, since if customers really wanted a bank, they would already have a merchant account at one of {BankAm, Citi, Chase, PNC, ...}. Some sort of "cc-number portability" regulations might be useful - i.e., if your customers saved their recurring payment cc-number into PayPal, you can take the cc-numbers to a new service provider. It's a minimal intervention which empowers customers. I'd also be interested in having congress create a BankLite category of institution - more protections than PayPal, but not as heavyweight as BankAm. Some people want something which is 51% paypal, 49% bank, and a BankLite category might fit their needs better. Shoehorning PayPal into this would be a bad idea, but creating the option might be helpful. [edit: As suggested by extension, better disclosure of PayPal's non-bank like nature would also be very helpful. Minimalist regulations which enhance customer choice/knowledge are awesome.]
• Judson 16y ago
  1) I hate paypal. 2) I would respectfully argue that your point about banks being safe due to regulation is quite false. On the contrary I would say that it is (over-)regulation that causes banks to lose sight of their reason for existence (hint: its not selling mortgages to fanny and freedie), protection of capital (a service they used to charge for - Remember monthly checking fees?). Banks used to be in the business of protecting capital before the FDIC insured deposits for them at an insanely low price (relative to the risk the banks can take), thus killing the "Capital Preservation" specialized bank and entered free checking / free saving / free homes. Low reserve ratios and a never evolving asset classification (Mortgage backed securities were satisfying the reserve ratio for banks? Only government regulators could think up that one) allowed banks to play with everyone's money. Was it because of greed? Kinda. Exacerbated by having customers deposits insured? Now we're getting somewhere. Your point is not necessarily wrong, since most regulation is just a standardization of norms and practices common in the industry. But regulation can be bad (as almost anything in excess can be). The real reason Paypal sucks is my next point. 3) The real reasoning for their horror stories lies in the fact that they are simply an intermediary (of sorts, I believe that Paypal, the intermediary, is separate from Paypal, the bank). Person X pays Paypal and Paypal pays person Y. There are many ways this system could break down, but the most expensive for paypal are: - Person Y (the getting-paid) has their account hacked and starts scamming people on eBay, listing a lot of auctions and getting paid, never shipping stuff, and running with the money. eBay has made it harder to do this though, since you have to provide proof of shipping to get the funds released. - Person X (The payer) - has their account hacked (or their just a terrible person) and they charge up $1,000 in online shopping. Person Y ships the merchandise and Person X files a chargeback against Paypal. Paypal must then freeze that amount, sometimes taking it out of your bank account, to make sure they have the cash in case they lose the chargeback claim (which is really easy to do). In the end, I'm not really sure where they system breaks down. Paypal is over-zealous about trying to prevent fraud, but, unfortunately, they are at the mercy of the Credit Card processors. Its kind of amazing that they were able to create a market where they are bullied on all sides, by essentially bullying their customers.
  • _delirium 16y ago
    Banks used to be in the business of protecting capital before the FDIC insured deposits for them at an insanely low price (relative to the risk the banks can take) They were never very good at that business, though. The main problem is that even a very conservative bank can't survive a large-scale bank run, and bank runs happened about every 15-20 years for an extended period of time: in the U.S., the Panic of 1819, Panic of 1837, Panic of 1857, Panic of 1873, Panic of 1893, Panic of 1907, and finally the panics of the late 1920s.
• bryanh 16y ago
  Cynically stating that PayPal is truly attempting to "steal" from their customers is incorrect. Based on most of what I've read (and I, like everyone here, have read a of PayPal horror stories...), PayPal "stealing" is really just PayPal giving a false positive about fraud and having abysmal customer service. While the end-result is indistinguishable from "stealing", they at least deserve the distinction. However, that certainly doesn't excuse their actions. I wouldn't object to further regulation for PayPal but I have a feeling this won't happen anytime soon.
  • ellyagg 16y ago
    No. They are fully aware that their support is abysmal and they are fully aware of their false positive rate and they are fully aware of the positive consequence to their bottom line. Just because they abstract the stealing process doesn't make it less stealing.
    • bryanh 16y ago
      > Theft: the illegal taking of another person's property without that person's freely-given consent. We all consent to PayPal's terms when we choose them over some of their competitors.
  • jimbokun 16y ago
    "While the end-result is indistinguishable from "stealing", they at least deserve the distinction." Sometimes the most straight-forward word to describe a thing brings the most clarity to the discussion. Doesn't pretty much any thief have a euphemism for what it is they do?
    • bryanh 16y ago
      I agree, the word "feels" correct. The problem is we consent to using PayPal. Check this out: > PayPal, at its sole discretion, reserves the right to close an account at any time for any reason, including but not limited to a violation of this Agreement, upon notice to the User and payment to the User of any unrestricted funds held in custody. Didn't everyone click "I agree" to that?
• KirinDave 16y ago
  It isn't necessarily an evil thing to want to be out from under those regulations. A lot of them are what conspire to make your banking experience terrible. For example, why can't you transfer from your savings account all you want? Regulations. Why do banks have such onerous process for signing up for a new account? Regulations. Which is not to say that PayPal isn't sleazy-as-all-hell. The whole point of PayPal was to find a way around the regulations so that they could make a ton of money by gaming your financial transactions in their favor, and cutting out the credit card middle man. Have you ever paid attention to how ardently PayPal tries to stop you from using a credit card to pay? The really sad part is that PayPal had the chance to become the Next Big Financial Thing. Their core ideas—if you separate away all the evil, that is—are not bad ones. “Make online payment easier and more secure.” Unfortunately, they seem to have dropped the second part and just settled on “Make online payment”. They took the short-term road to profit and missed a much, much larger play.
  • sprout 16y ago
    "Make payment easier" is a bad idea. The difficulty is designed to make it easy to track. Making it easier makes money harder to track, which is a Bad Thing.
    • KirinDave 16y ago
      I disagree, in the strongest sense possible. Payments are hard for consumers because banks prefer it if you funnel money through channels they make money on (e.g., Credit Cards and accounts with stiff fees). For large financial institutions, they move money in different and less expensive ways. For example, ACH fees are a tiny fraction of the cost that you use when you move money by credit card, and they're almost frighteningly easy to initiate (there is 0 authorization for these). It's just rare for the banks to expose a way to do ACH for you except in the specific case of billpay (and even then, many institutions handle these as mailed checks rather than ACH). The idea that finance has to be hard with big ceremony in order to be secure is a clever ruse by big banks. They're not content with the large amount of security-from-competion that regulation gives them. They want your trust, and they're not afraid to scare you into believing that they're the only option.
• sausman 16y ago
  Businesses don't need the government to tell them how to treat their customers. It is in a company's best interest to be accountable for their mistakes because if they don't they will lose business. Fraud is and always has been illegal, so why we would need a regulatory institution to tell businesses how to treat their customers is beyond me. If anything, regulations just protect bigger companies from smaller competition because smaller companies can't afford to bear the cost of complying with regulations.
  • CamperBob 16y ago
    Businesses don't need the government to tell them how to treat their customers. Apparently some do.
• cookiecaper 16y ago
  The annoying thing is that in cases like this, people are not supposed to just resign themselves to take it and they are not supposed to try to get Congress to force PayPal to do what they want by fiat, they are supposed to look around, say, "Oh, PayPal is a dishonesty entity that makes a lot of money from stealing; if it hasn't happened to me yet, it is more happenstance than anything else", and not use PayPal. This is a great opportunity for someone to create a non-broken, non-evil PayPal and make money off of it. That is how the market is supposed to work but people are generally too lazy to care or do any research before they go on with something. What good is it to keep running to the government to tattle on everyone who crosses us? We need to teach people to cultivate a brain and learn from their mistakes instead of getting upset and running to Uncle Sam crying about the bully down the street; instead of trying to make your dads fight, just don't play with the bully anymore and the problem goes away. PayPal should be running amiss of generic anti-evildoing laws involving fraudulent activities and deceitful business practices without the need for any specific legislation.
  • dangrossman 16y ago
    I don't think the problem is as much that end-users don't care enough to want alternatives, but that it's near impossible for an alternative to exist. During the dot-com era when PayPal came about, there were many other 3rd party processors doing the same thing, and they went out of business primarily because they were losing more to fraud than they were making on fees. PayPal was losing tens of millions of dollars a month at one point, but they managed to create good enough screening systems and policies in place to stay in business. These days even if another company were to manage the fraud as well (which will almost automatically make them as bad as PayPal with freezing funds and accounts... you know real merchant accounts underwritten by banks do this too), but the regulatory climate around finance is so different that they'd be unlikely to get off the ground. Visa/MC/Amex/Discover would never agree to allow such large scale factoring (accepting payments on behalf of another business, forbidden in every standard merchant account agreement) again.
• brc 16y ago
  A bank doesn't exist to safeguard your capital. That's what they tell you to convince you to deposit your funds there. The government promises to make good any bank failure in order to convince you to deposit your funds in a bank both because it helps the economy and because it makes it easier to keep track of you for tax purposes. Before this guarantee it was common enough for a bank to fail and depositors would lose all their funds. A bank exists to take in deposits, pay interest and then loan that money out to other people at a higher interest rate. It's a completely different model to PayPal, which exists as a payment transfer company along the likes of Western Union. Yes, they avoid banking regulations, but the banking regulations exist to protect the banking industry, as widespread bank failures can seriously damage the economy. This is because banks use fractional reserve banking and actually don't have the funds to satisfy all depositors at the same time. There's no reason why a payments transfer company should be regulated like this, because PayPal should be able to make good all requests for funds at the same time, as they don't (well, I hope not) leverage the funds on deposit and lend them out again. If any regulation should be applied to PayPal, it should be in the area of consumer protection by having an ombudsman or defined area of recourse for settling disputes. But because of the trans-national design of the business, this is never going to work. And any increase in regulation is going to cause an increase in fees, which is the reason everyone uses PayPal in the first place.
• netcan 16y ago
  I wouldn't jump to conclude that regulation is the only answer. One of the reasons we have so little competition and innovation in this space is regulation. It would be nice if Paypal got pulled in to line a little, but what I would really like is an alternative. BTW, don't we already have laws against stealing?