7 ms·

The premise of his "vehemence" is untrue: banks can and do have the exact same policy regarding terminating merchant services accounts. They can terminate you a

The premise of his "vehemence" is untrue: banks can and do have the exact same policy regarding terminating merchant services accounts. They can terminate you at any time, without reason, and when they do so, hold any undisbursed funds in a reserve account for exactly 180 days. There is no regulation banks are subject to that PayPal isn't that would have an affect on that. PayPal did not make up this policy; it's based on Visa and MasterCard's Operating Regulations, which predate PayPal's very existence. I have first-hand experience that not only is this in virtually every merchant services contract at every bank in the US, but it's actually enforced, exactly the same way PayPal enforces it. 8 years back I had a sudden influx of chargebacks from a single scammer that used a bunch of different cards on one of my websites to buy services, back before I knew how to spot that kind of activity. My real, regulated bank (First National Bank of Omaha) terminated my merchant account and held several thousand dollars for exactly 180 days with no recourse for me. They never saw another chargeback against my account, but I still had no access to that money for 6 months. Exactly the same as PayPal does when it terminates an account for activity it deems high risk.

mattmanser 14y ago
Just to note, the's author's not in the US, he's in the UK and Paypal's a regulated bank over here. I always have mixed feeling on these stories. On the one hand, if you operate almost entirely online, you're in amidst a mass of scammers and conmen, it's a much higher risk, hence everything being more draconian. So there's always problems. Brick and mortar businesses are much less as there's a real presence, etc. On the other hand, this is a long established business. Are they really that high-risk any more? Why are they treated like someone who's just started? Why can't Paypal treat them more respectfully as there's plenty of trading history. Why are there no mechanisms for establishing real identities that are much stronger than what they seem to be doing?
- DanBC 14y ago
  > On the other hand, this is a long established business. 8Faces has been in print since 2010. That's a great start. It's not a really long time. Issue 5 is ready to pre-order. (Weirdly the author claims that they don't really do pre-orders, but on the website there is a huge banner telling people that they can pre-order issue 5.) Magazine publishing is notoriously tricky, especially in the UK. > Why can't Paypal treat them more respectfully as there's plenty of trading history. Why are there no mechanisms for establishing real identities that are much stronger than what they seem to be doing? This is an excellent point. I can understand why Paypal don't have customer reps for every little nickel and dime trader, but a magazine doing £15,000 per issue is reasonably substantial amount of money. It'd be great if Paypal could establish identities (interviews? documentation?) and build relationships with the honest traders that use the service.
- hackerboos 14y ago
  And as a result of being a Luxembourg bank >It is therefore not possible for UK customers to obtain legal redress from the company in the English, Scottish, or Northern Irish Courts. So he's not getting his £600 back through the courts.
meanguy 14y ago
I can echo the same treatment with two different merchant account providers across three companies. Didn't matter if it was a $10k month or a $1MM month or if the company was new or old--it was a constant battle. In one case it was only my personal credit rating (which happened to be spotless) that saved my business. Yes, think about that. A merchant account -- where they hold your company's money -- relies on your personal credit score. Anecdata: I had two chargebacks in five years of web software sales. Both claims were buyers ripping me off. I provided signed FedEx receipts for boxed software shipments and IP addresses/dates/times when the customer registered the software and downloaded updates. I ate the full cost (plus investigation and chargeback fees) both times. (This is "cost of doing business" and not an opportunity for a blog post, IMHO.) From the post: "And thank god I made that [five figure] withdrawal when I did, because yesterday came the second phone call, informing me that a reserve would indeed be placed on my account." I believe this action is what actually triggered the issue. If he paid the costs of running his business out of his PayPal account and took consistent monthly paychecks, it would have been far less of a flag. Sucks that you have to do it, and we software types are famously short-tempered when it comes to dealing with real-world bureaucratic nonsense, but sometimes a bit of careful planning and playing the game wins the race.
- ios84dev 14y ago
  Why would a merchant account provider have your personal social security number/be doing credit checks? Assuming its an incorporated C corp?
  - tptacek 14y ago
    Because merchant banks require them. Anyone can create any number of C corporations at any time. Merchant accounts are one of several business services that young companies can't set typically set up without somehow binding the contract to the business owners themselves.
    - ArbitraryLimits 14y ago
      > one of several business services Could elaborate on the other ones?

mattmanser 14y ago

Just to note, the's author's not in the US, he's in the UK and Paypal's a regulated bank over here. I always have mixed feeling on these stories. On the one hand, if you operate almost entirely online, you're in amidst a mass of scammers and conmen, it's a much higher risk, hence everything being more draconian. So there's always problems. Brick and mortar businesses are much less as there's a real presence, etc. On the other hand, this is a long established business. Are they really that high-risk any more? Why are they treated like someone who's just started? Why can't Paypal treat them more respectfully as there's plenty of trading history. Why are there no mechanisms for establishing real identities that are much stronger than what they seem to be doing?

DanBC 14y ago
> On the other hand, this is a long established business. 8Faces has been in print since 2010. That's a great start. It's not a really long time. Issue 5 is ready to pre-order. (Weirdly the author claims that they don't really do pre-orders, but on the website there is a huge banner telling people that they can pre-order issue 5.) Magazine publishing is notoriously tricky, especially in the UK. > Why can't Paypal treat them more respectfully as there's plenty of trading history. Why are there no mechanisms for establishing real identities that are much stronger than what they seem to be doing? This is an excellent point. I can understand why Paypal don't have customer reps for every little nickel and dime trader, but a magazine doing £15,000 per issue is reasonably substantial amount of money. It'd be great if Paypal could establish identities (interviews? documentation?) and build relationships with the honest traders that use the service.
hackerboos 14y ago
And as a result of being a Luxembourg bank >It is therefore not possible for UK customers to obtain legal redress from the company in the English, Scottish, or Northern Irish Courts. So he's not getting his £600 back through the courts.

meanguy 14y ago

I can echo the same treatment with two different merchant account providers across three companies. Didn't matter if it was a $10k month or a $1MM month or if the company was new or old--it was a constant battle. In one case it was only my personal credit rating (which happened to be spotless) that saved my business. Yes, think about that. A merchant account -- where they hold your company's money -- relies on your personal credit score. Anecdata: I had two chargebacks in five years of web software sales. Both claims were buyers ripping me off. I provided signed FedEx receipts for boxed software shipments and IP addresses/dates/times when the customer registered the software and downloaded updates. I ate the full cost (plus investigation and chargeback fees) both times. (This is "cost of doing business" and not an opportunity for a blog post, IMHO.) From the post: "And thank god I made that [five figure] withdrawal when I did, because yesterday came the second phone call, informing me that a reserve would indeed be placed on my account." I believe this action is what actually triggered the issue. If he paid the costs of running his business out of his PayPal account and took consistent monthly paychecks, it would have been far less of a flag. Sucks that you have to do it, and we software types are famously short-tempered when it comes to dealing with real-world bureaucratic nonsense, but sometimes a bit of careful planning and playing the game wins the race.

ios84dev 14y ago
Why would a merchant account provider have your personal social security number/be doing credit checks? Assuming its an incorporated C corp?
- tptacek 14y ago
  Because merchant banks require them. Anyone can create any number of C corporations at any time. Merchant accounts are one of several business services that young companies can't set typically set up without somehow binding the contract to the business owners themselves.
  - ArbitraryLimits 14y ago
    > one of several business services Could elaborate on the other ones?