3 ms·

"We don't like what you are doing, and are going to hold your money for six months. I hope you don't subsist on it, or have any business obligations to attend t

"We don't like what you are doing, and are going to hold your money for six months. I hope you don't subsist on it, or have any business obligations to attend to. We'll call you." This should be illegal for Paypal to do, period. Absolutely illegal. And if it is on behalf of a government or banking/fraud regulations, then the person should be referred to relevant agencies. Let's be clear and drop the pretense: They are confiscating his property.

slownews45 5y ago
Are you sure it is being confiscated? He will have a claim then. What can happen is when your credit card / other payment providers cuts you off is that you go out of business. You might fail to provide services to users - so they do a chargeback / ask for a refund from payment provider. So when a payment provider is shutting you down, they usually want to hold onto some money to be able to handle those refund requests. Very common in travel situations as well.
- mdoms 5y ago
  So PayPal is holding onto his money in case he incurs expenses as a result of going out of business due to PayPal cutting him off? And this seems normal and good to you?
  - wearywanderer 5y ago
    The beatings will continue until morale improves.
  - slownews45 5y ago
    This is the way many providers that offer recourse settlements handle things. They have data showing when they cut off a business from processing credit cards etc they may receive claims from customers who have already paid whose money they are either holding or have forwarded. If they are holding it they refund that customer, and business can ask for payment using another method. If they are not holding funds, they run into an issue of asking merchant for money (which is difficult to collect). So most providers of this type when making a decision to end a business relationship hold onto the funds for a while to let everything settle. This is not unique to paypal. Some providers don't hold funds if payor has no recourse. You usually need to be settling with what are called "good funds" for that to be the case, then merchant is paid out usually within 1 day under all circumstances. A fair number of B2B wire type clearing operations work like this. I'm just explaining what happens. They don't generally closely evaluate the reasons or likely outcomes of account closures, and there is enough fraud and profit motive / cost cutting in system that the rules tilt pretty heavily against merchant. That said, if OP is not lying and they really do confiscate the funds there will be an issue for them. Especially individuals, they'll send the unclaimed funds to the state generally even if not claimed by the person.
  - tzs 5y ago
    Where did you think the money comes from when a consumer complains to their bank about a charge on their credit card and the bank credits the consumer? It sure as heck ain't the consumer's bank that pays for that. Nor is it Visa or Mastercard or whichever company owns the card network the card is part of. No, it is the merchant bank that processed the charge. To be allowed to process charges through Visa, MC, etc, the merchant bank has to agree to cover all credits the issuing bank gives when consumers successfully dispute charges if the merchant cannot cover them. Merchants that want to accept credit cards have to get an account with a merchant bank. It acts as an interface between the merchant and the credit card system, submitting charges and collecting the payments from the issuing banks, and depositing them in the merchant's regular business bank. Merchant banks hold back some of those payments to maintain a buffer to cover their potential obligations in the case of disputed charges. How much they hold back and how long they hold it for varies depending on things like changes in your sales volume, how risky your line of business is, how often you've been getting chargebacks, and probably a ton of other factors their actuaries have identified. PayPal doesn't look like a traditional merchant bank from the merchant point of view, but if people are able to use credit cards to buy your stuff there is a traditional merchant bank or something else with the same obligations as a traditional merchant bank somewhere in there, and that means that for a merchant using PayPal they are going to have someone holding back a reserve. When you use a traditional merchant bank and are directly exposed to all that you know it is going to happen, and quickly realize that the whole damn credit card system is designed to make sure that if anything goes wrong anywhere in the chain it is the merchant that is going to eat it. With these services that try to do it all in one and make it easy to accept payments, such as PayPal, it is easy to not realize that credit cards work that way and so you get surprised when PayPal won't let you take all your money out right away.
    - slownews45 5y ago
      Exactly. One difference having used both services. Your merchant bank will know you, there is a relationship manager who wants the rest of your business, they may have lent you money etc etc. In short, someone spends more than 5 seconds dealing with you. And they do charge more for sure. PayPal - no one there cares at all about you. They offer something convenient, but that's it. You are SOL when things go wrong.
heavyset_go 5y ago
PayPal has been doing this for more than a decade now. I wouldn't be surprised if its part of their business model to hold funds indefinitely and to collect interest on them.
- deleted 5y ago
  [deleted]
- astrange 5y ago
  There's hardly any such thing as interest in the US and there hasn't been for at least a decade. Besides, if that was their business it'd be in their S-1 and it isn't. (IIRC it says they keep customer funds in interest free accounts)
  - trhway 5y ago
    >IIRC it says they keep customer funds in interest free accounts exercise for the one's imagination - you come to a banker and say "i'm thinking about keeping with you an N billions of dollars, interest free. Any ideas?" (in mid-199x i did some work around large Russian municipal funds to be kept in banks, and what i saw helped develop my imagination :)
    - astrange 5y ago
      Buy some negative interest rate bonds until it adds up to 0%? Or cash out and keep it all in a mountain fortress.
  - sdenton4 5y ago
    s/interest/short-term cryptocurrency speculation/
- pitay 5y ago
  They certainly have. Here is one from 2010 when they held over 600,000 euros from Markus Persson, the creator of Minecraft for 'suspicious activity' that they wouldn't disclose. It's a good thing for him that he was so well known. https://notch.tumblr.com/post/1096322756/working-on-a-friday-update-crying-over-paypal https://notch.tumblr.com/post/1096322756/working-on-a-friday..., https://www.devicemag.com/2010/09/10/paypal-holding-over-600000-euros-from-minecraft-developer/ https://www.devicemag.com/2010/09/10/paypal-holding-over-600...
krisroadruck 5y ago
Way back in 2011 they did this to me. My marketing agency had been running most of our customer payments through PayPal for several months, and we were growing fast. At some point they took the $50K we had in the account and froze it for 180 days with no recourse, claiming it was to protect against charge backs (despite us never having a single chargeback). I explained to them that if they didn't release the funds they would most certainly have charge backs because we'd be out of business and thus unable to deliver on the work promised for the money. Nothing we said did any good. That is until I looked up the laws in Washington State about money transmitters. Turns out based on the specific license they had in Washington State at the time, it was illegal for them to hold funds for longer than 7 days. Me telling them this did nothing at all, but when I sent a letter to my state governor explaining my predicament and someone from that office sent a letter to the folks at PayPal, suddenly my funds were released and a note was placed on my account to never withhold funds on that account ever again. Been smooth sailing ever since :-D
- tomjakubowski 5y ago
  > a note was placed on my account to never withhold funds on that account ever again Did PayPal just tell you this or did you find out another way?
- timlyo 5y ago
  > Been smooth sailing ever since Did you stay with Paypal after that? I'd have run for the hills.
  - krisroadruck 5y ago
    Mostly use stripe/freshbooks these days but have kept that paypal account all these years because it feels like it's got special powers :-D
deleted 5y ago
[deleted]
politician 5y ago
The funds you deposit with PayPal are held on their balance sheet. They are no longer your property, and in return you receive some rights according to the contract you signed at account opening. If you want to reduce liquidity risk, store your funds in an escrow account. The funds in an escrow account are legally your property, and the custodian is legally required to follow your orders (simplified).
mcherm 5y ago
> This should be illegal for Paypal to do, period. Absolutely illegal. In the US, it *is* illegal for any bank or other regulated financial company. But PayPal claims that they aren't that. There are lots of other ways to send or receive money and most of them don't have the reputation that PayPal has.
- dangrossman 5y ago
  That's odd, since every merchant account (credit card processing) agreement from any bank I've ever read has the same 180 day period written into it for holds and reserve accounts. It covers any chargebacks that may come in after the account is suspended.
tjbiddle 5y ago
I haven't trusted PayPal for years - but I still use them. My business does ~$100-250k monthly revenue, and probably 1/3 of transactions are via PayPal. I'd never not have them - it helps conversions too much. But, I made sure to call their support and enable the "auto-sweep" feature, so that I can withdraw everything above a balance that I set into my bank daily. This way, I never need to worry about too many funds getting frozen should anything go wrong.

slownews45 5y ago

Are you sure it is being confiscated? He will have a claim then. What can happen is when your credit card / other payment providers cuts you off is that you go out of business. You might fail to provide services to users - so they do a chargeback / ask for a refund from payment provider. So when a payment provider is shutting you down, they usually want to hold onto some money to be able to handle those refund requests. Very common in travel situations as well.

mdoms 5y ago
So PayPal is holding onto his money in case he incurs expenses as a result of going out of business due to PayPal cutting him off? And this seems normal and good to you?
- wearywanderer 5y ago
  The beatings will continue until morale improves.
- slownews45 5y ago
  This is the way many providers that offer recourse settlements handle things. They have data showing when they cut off a business from processing credit cards etc they may receive claims from customers who have already paid whose money they are either holding or have forwarded. If they are holding it they refund that customer, and business can ask for payment using another method. If they are not holding funds, they run into an issue of asking merchant for money (which is difficult to collect). So most providers of this type when making a decision to end a business relationship hold onto the funds for a while to let everything settle. This is not unique to paypal. Some providers don't hold funds if payor has no recourse. You usually need to be settling with what are called "good funds" for that to be the case, then merchant is paid out usually within 1 day under all circumstances. A fair number of B2B wire type clearing operations work like this. I'm just explaining what happens. They don't generally closely evaluate the reasons or likely outcomes of account closures, and there is enough fraud and profit motive / cost cutting in system that the rules tilt pretty heavily against merchant. That said, if OP is not lying and they really do confiscate the funds there will be an issue for them. Especially individuals, they'll send the unclaimed funds to the state generally even if not claimed by the person.
- tzs 5y ago
  Where did you think the money comes from when a consumer complains to their bank about a charge on their credit card and the bank credits the consumer? It sure as heck ain't the consumer's bank that pays for that. Nor is it Visa or Mastercard or whichever company owns the card network the card is part of. No, it is the merchant bank that processed the charge. To be allowed to process charges through Visa, MC, etc, the merchant bank has to agree to cover all credits the issuing bank gives when consumers successfully dispute charges if the merchant cannot cover them. Merchants that want to accept credit cards have to get an account with a merchant bank. It acts as an interface between the merchant and the credit card system, submitting charges and collecting the payments from the issuing banks, and depositing them in the merchant's regular business bank. Merchant banks hold back some of those payments to maintain a buffer to cover their potential obligations in the case of disputed charges. How much they hold back and how long they hold it for varies depending on things like changes in your sales volume, how risky your line of business is, how often you've been getting chargebacks, and probably a ton of other factors their actuaries have identified. PayPal doesn't look like a traditional merchant bank from the merchant point of view, but if people are able to use credit cards to buy your stuff there is a traditional merchant bank or something else with the same obligations as a traditional merchant bank somewhere in there, and that means that for a merchant using PayPal they are going to have someone holding back a reserve. When you use a traditional merchant bank and are directly exposed to all that you know it is going to happen, and quickly realize that the whole damn credit card system is designed to make sure that if anything goes wrong anywhere in the chain it is the merchant that is going to eat it. With these services that try to do it all in one and make it easy to accept payments, such as PayPal, it is easy to not realize that credit cards work that way and so you get surprised when PayPal won't let you take all your money out right away.
  - slownews45 5y ago
    Exactly. One difference having used both services. Your merchant bank will know you, there is a relationship manager who wants the rest of your business, they may have lent you money etc etc. In short, someone spends more than 5 seconds dealing with you. And they do charge more for sure. PayPal - no one there cares at all about you. They offer something convenient, but that's it. You are SOL when things go wrong.

heavyset_go 5y ago

PayPal has been doing this for more than a decade now. I wouldn't be surprised if its part of their business model to hold funds indefinitely and to collect interest on them.

deleted 5y ago
[deleted]
astrange 5y ago
There's hardly any such thing as interest in the US and there hasn't been for at least a decade. Besides, if that was their business it'd be in their S-1 and it isn't. (IIRC it says they keep customer funds in interest free accounts)
- trhway 5y ago
  >IIRC it says they keep customer funds in interest free accounts exercise for the one's imagination - you come to a banker and say "i'm thinking about keeping with you an N billions of dollars, interest free. Any ideas?" (in mid-199x i did some work around large Russian municipal funds to be kept in banks, and what i saw helped develop my imagination :)
  - astrange 5y ago
    Buy some negative interest rate bonds until it adds up to 0%? Or cash out and keep it all in a mountain fortress.
- sdenton4 5y ago
  s/interest/short-term cryptocurrency speculation/
pitay 5y ago
They certainly have. Here is one from 2010 when they held over 600,000 euros from Markus Persson, the creator of Minecraft for 'suspicious activity' that they wouldn't disclose. It's a good thing for him that he was so well known. https://notch.tumblr.com/post/1096322756/working-on-a-friday-update-crying-over-paypal https://notch.tumblr.com/post/1096322756/working-on-a-friday..., https://www.devicemag.com/2010/09/10/paypal-holding-over-600000-euros-from-minecraft-developer/ https://www.devicemag.com/2010/09/10/paypal-holding-over-600...

krisroadruck 5y ago

Way back in 2011 they did this to me. My marketing agency had been running most of our customer payments through PayPal for several months, and we were growing fast. At some point they took the $50K we had in the account and froze it for 180 days with no recourse, claiming it was to protect against charge backs (despite us never having a single chargeback). I explained to them that if they didn't release the funds they would most certainly have charge backs because we'd be out of business and thus unable to deliver on the work promised for the money. Nothing we said did any good. That is until I looked up the laws in Washington State about money transmitters. Turns out based on the specific license they had in Washington State at the time, it was illegal for them to hold funds for longer than 7 days. Me telling them this did nothing at all, but when I sent a letter to my state governor explaining my predicament and someone from that office sent a letter to the folks at PayPal, suddenly my funds were released and a note was placed on my account to never withhold funds on that account ever again. Been smooth sailing ever since :-D

tomjakubowski 5y ago
> a note was placed on my account to never withhold funds on that account ever again Did PayPal just tell you this or did you find out another way?
timlyo 5y ago
> Been smooth sailing ever since Did you stay with Paypal after that? I'd have run for the hills.
- krisroadruck 5y ago
  Mostly use stripe/freshbooks these days but have kept that paypal account all these years because it feels like it's got special powers :-D

deleted 5y ago

[deleted]

politician 5y ago

The funds you deposit with PayPal are held on their balance sheet. They are no longer your property, and in return you receive some rights according to the contract you signed at account opening. If you want to reduce liquidity risk, store your funds in an escrow account. The funds in an escrow account are legally your property, and the custodian is legally required to follow your orders (simplified).

mcherm 5y ago

> This should be illegal for Paypal to do, period. Absolutely illegal. In the US, it *is* illegal for any bank or other regulated financial company. But PayPal claims that they aren't that. There are lots of other ways to send or receive money and most of them don't have the reputation that PayPal has.

dangrossman 5y ago
That's odd, since every merchant account (credit card processing) agreement from any bank I've ever read has the same 180 day period written into it for holds and reserve accounts. It covers any chargebacks that may come in after the account is suspended.

tjbiddle 5y ago

I haven't trusted PayPal for years - but I still use them. My business does ~$100-250k monthly revenue, and probably 1/3 of transactions are via PayPal. I'd never not have them - it helps conversions too much. But, I made sure to call their support and enable the "auto-sweep" feature, so that I can withdraw everything above a balance that I set into my bank daily. This way, I never need to worry about too many funds getting frozen should anything go wrong.