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I think the important distinction is that banks will not open accounts without reasonable documentation of identity. So, even if banks and paypal freeze accoun

I think the important distinction is that banks will not open accounts without reasonable documentation of identity. So, even if banks and paypal freeze accounts for the exact same reasons, paypal will do it much more, because they have less confidence in the identity of the account owner.

dangrossman 14y ago
That's seemingly the purpose of most temporary freezes. They ask for identification and a description of what you're selling with the account, and if the response is satisfactory, unfreeze the account. Banks do their underwriting up front, PayPal delays it until some kind of event triggers it (whether it's a spike in processing volume, a change in average ticket size, or buyer complaints). Since we only read about an incident or two a month, most people probably never hit one of those triggers, only using their accounts for eBay purchases and the like. When an account starts looking risky, or starts looking like a real business, they get treated like one -- the sudden need for documentation is the jarring part, and the sudden loss of the account if underwriting doesn't approve of the business the cause of the dissatisfaction. I'd bet the whole process could be made a lot less antagonistic with just a change to wording -- better explanation of what's going on, why PayPal wants the documents now that they didn't ask for before, and the fact that a temporary freeze doesn't mean you're losing your funds or won't be able to continue processing.
- harshreality 14y ago
  I think the point of confusion revolves around the definition of a (real) "business". If someone accepts paypal payments for a garage sale or transient lemonade stand, is that a real business? People accept cash and checks for many things that might be considered commercial, and banks don't have a problem with low volumes of commercial-transaction-related deposits being made to personal accounts. It's primarily the account owner's responsibility to pay taxes and do any other necessary reporting. I believe banks do primary reporting for money laundering and terrorism purposes and back-up reporting for tax purposes, but none of that generally involves freezing accounts. People expect paypal to work like an easier means of check or cash payment, and when it turns out it doesn't work like that and the account gets frozen, people are understandably pissed off. The commercial/private transaction distinction is fairly arbitrary to begin with.

dangrossman 14y ago

That's seemingly the purpose of most temporary freezes. They ask for identification and a description of what you're selling with the account, and if the response is satisfactory, unfreeze the account. Banks do their underwriting up front, PayPal delays it until some kind of event triggers it (whether it's a spike in processing volume, a change in average ticket size, or buyer complaints). Since we only read about an incident or two a month, most people probably never hit one of those triggers, only using their accounts for eBay purchases and the like. When an account starts looking risky, or starts looking like a real business, they get treated like one -- the sudden need for documentation is the jarring part, and the sudden loss of the account if underwriting doesn't approve of the business the cause of the dissatisfaction. I'd bet the whole process could be made a lot less antagonistic with just a change to wording -- better explanation of what's going on, why PayPal wants the documents now that they didn't ask for before, and the fact that a temporary freeze doesn't mean you're losing your funds or won't be able to continue processing.

harshreality 14y ago
I think the point of confusion revolves around the definition of a (real) "business". If someone accepts paypal payments for a garage sale or transient lemonade stand, is that a real business? People accept cash and checks for many things that might be considered commercial, and banks don't have a problem with low volumes of commercial-transaction-related deposits being made to personal accounts. It's primarily the account owner's responsibility to pay taxes and do any other necessary reporting. I believe banks do primary reporting for money laundering and terrorism purposes and back-up reporting for tax purposes, but none of that generally involves freezing accounts. People expect paypal to work like an easier means of check or cash payment, and when it turns out it doesn't work like that and the account gets frozen, people are understandably pissed off. The commercial/private transaction distinction is fairly arbitrary to begin with.