Ok so I know a bit about this as I had the same exact thing happen to me in the past.
The reason this probably happened is that their business was getting a high % of chargebacks from paying customers, paypal is not a specialist payment provider that wants to handle what they consider high-risk business like that, so they block your account and hold your funds for 180 days and during that time keep processing chargebacks.
After the 180 days, Paypal will give you the remainder of the money back, so the title is clickbait, they will get back their money.
The best thing to do if you operate a business which gets a lot of chargebacks is to find a payment processor that is okay with that, when I had this issue I ended up looking at which payment processors porn sites used and picked one of them, which had no problems. That was a long time ago, so I'm sure there's more options now.
Not critiquing you but the approach - that's abysmal UX. If PayPal blocks your account with no feedback, that's incredibly anxiety inducing.
And in an environment like finance, good communication of the status of the account should be the difference between an "oh okay that's fair" and a lawsuit for theft.
Not only anxiety inducing, it can actively deny the customer the thing they paid for. I've heard of events that had to be cancelled because PayPal didn't want to release the money. PayPal making the chargebacks a self-fulfilling prophesy.
The real problem is that the possibility of chargebacks makes every transaction uncertain. Chargebacks are an ugly fix to a broken system. Direct payment is better in nearly all situations. The one exception being dishonest merchants, but I don't think that's something you can really fix without lawsuits and/or police.
Lawsuits are expensive and police won't even pick up the phone. Chargeback is one of the only powers I have as a consumer who is otherwise relying on a merchant being honest and responsive to problems.
The last part has become increasingly difficult. A merchant might be honest, but if they don't have customer support and do not reply to issues, that's indistinguishable from dishonesty. For the first 20 years of having a credit card, I had to do one chargeback: an online "merchant" who was totally fraudulent. In the last 2-3 years, I've had to do about 4 chargebacks, and it's mostly otherwise-legit companies ghosting me.
You still aren't accounting for the case of things sold in the future, like event tickets.
That's a unique situation because the event organizer (or kickstarter inventor, or travel agent, etc) needs the money now to invest in something they may not be able actually provide. That isn't dishonesty, but a question of competence plus the uncertainty of life.
Those types of businesses rely on loans. The money has to come from somewhere, and be spent before the product is delivered. A payment processor is not in the business of giving loans.
Event tickets are easy to account for. Just specify who carries the risk in case the event is cancelled or the customer can't go the the event. The money can be reimbursed. Happens all the time.
The only problem is when the merchant is dishonest. Also too common, that's really a legal and regulatory matter, because there are always ways in which sellers can break the law.
Any evidence it appears on balance sheet / they use it as capital for investments? or are you just parroting a line you heard someone say one? Parent comment makes it fairly obvious why they are holding the money, seems entirely sane and reasonable - or do you think PayPal should take on an $80K risk? Would you or your business? (in this very specific context)
> You have any evidence for that claim or just assuming?
To be completely honest, and while I only have a degree in Finance and don't work in the industry, it would actually be considered irresponsible of a financial services company to NOT put it into at least a Treasury bond of sorts.
In fact, the process should be almost automatic. Otherwise, I'd argue their system , and its management, as grossly mismanaged and arguably violating their fiduciary obligations to shareholders. As to whether the other party should hold claim over any interest, that's something courts would need to decide in the same way the interest from a security deposit account once went to landlords and I think all the courts changed so that it always belongs to the tenant. Bear in mind that the interest in these cases is typically just dollars and it was more a symbolic victory for tenants.
Although, I've been skeptical of Paypal practices ever since my sister asked me how to pay me using her Bitcoin through Paypal only to find out that the Bitcoin bought on Paypal can only be sold to Paypal. That one just rubbed me the wrong way.
You made the claim "its a 0% loan", i'm asking you to prove that. Its not on me to somehow counter prove they aren't as I didn't make the original claim.
Don't be deliberately obtuse. It's clear that PayPal won't pay interest on "frozen" cash unless sued, and it is also evident that any corporate cash is swept into money market funds at >5% interest.
I can’t be sure of whether this specific line in their user agreement applies to this specific situation (balance of an account that has been locked isn’t specifically mentioned), but a cursory glance at their (Canadian) user agreement [1] states the following:
“PayPal combines your balance with the balances of other users and invests those funds in liquid investments. PayPal owns the interest or other earnings on these investments.”
(I can’t seem to find a way to hyperlink to selected text on iOS, so I’ve also included a screenshot of this quoted statement instead, below [2])
I assume that (unless stated otherwise in their agreements / legal documents) PayPal continues to apply the same policy to funds that are held by them in accounts pending closure for high chargeback rates. I could be wrong though, I just ctrl+f’d for “balance” on the first legal document linked on their site. Also, only applies for Canada, since I didn’t check any other country’s agreements (but my guess is that wherever it’s not expressly illegal for them to do so, they’ll use whatever money they’re “holding” for you as a revenue generating investment vehicle).
Isn't the real issue that Paypal lets both consumers and businesses receive money, and consumers are far more likely to be fraudsters - receiving money and not sending goods or requesting chargebacks for goods they have received etc.
If you use a credit card merchant that does more vetting of the seller side businesses, they're more likely to give you the benefit of doubt if you start getting chargebacks and not lock everything.
Yep! In my case I switched to a processor that had higher fees but had less of an issue with chargebacks.
Having said that, I think these days there are ways to limit your exposure, for example requiring 3D Secure for every card payment, as well as tools like Stripe Radar that help reduce fraud.
In this case a competitor used fake accounts and stolen credit cards to buy a competing app to get it delisted - Apple's apparent policy once the chargeback total hits some arbitrary figure.
Edit: Immediately downvoted for no reason. Catching these sort of malfeasant actors was literally one of the USPs of former Irish yCombinator Winter 2014 participant Trustev, which was picked up by TransUnion for €44 million a year later :
https://www.siliconrepublic.com/business/transunion-buys-tru...
It's more complicated. In theory, you should not be able to chargeback any transaction at will, you need to provide a reason for it. But because US banking is stuck in between of 90s and 00s, to pay with the card online it's enough to know what's printed on the one side of it, maybe two sides. Therefore, "fraud" can always be used as a chargeback reason ("Oh, it wasn't me, someone taken a photo of my card! I definitely didn't pay 300$ on that hot mums nearby website!").
In some parts of the world this is solved by mandatory 2FA authenticaton for online payments (3DSecure and similar tech). If the transaction is verified by 3DSecure or some other 2FA, you cannot chargeback because of "fraud", but you still can chargeback for any other verifiable reason (e. g. goods not delivered).
To add to that - it's crazy(but also kinda cool?) that in US you can request an instant chargeback and the bank just does it no questions asked. I tried a chargeback on my British Credit card recently because the goods I ordered were never delivered, but it still took 60 days for the claim to be processed .
I even had a back and forth to get my chargeback accepted. The product I ordered was broken on arrival and return shipping was like 40% of the product, so not worth it. After initially accepting my chargeback, the merchant somehow reopened the case and I had to state my claim again.
It really is crazy how easy chargebacks are in the US in comparison.
Pretty much, and if your avg payment is rather low you could end up owing PayPal money as you don’t just pay for the refund of the order, but you have to pay additional charges for the chargeback.
Let’s say your avg payment is $15, one chargeback means that not only have you lost the payment from the customer who charged back but as you now also owe the chargeback fee you technically lost the payment on a sale which wasn’t charged back.
Edit: just a quick note. Chargebacks are different than “PayPal Claims”, chargebacks are initiated by the card issuer, claims are initiated by the customer in the PayPal interface, so claims cost less than chargebacks, but PayPal will still ding your account if you get too many of them.
Edit the second: the 180 day hold is to cover not only chargebacks (which generally have a shorter period the customer can start one) but also PayPals own “protection program” claims which is 180 days iirc.
Keep in mind that chargebacks are considered a nuclear, double-edged option. Yes, you can get your money back as a customer or abuse the system to financially cancel someone, but issue too many chargebacks and the banks will be more than happy to also kick you out too.
Chargebacks as they are intended are used only when all other attempts at resolving a dispute have failed, including the merchant refusing to issue a refund. It's the means of last resort and damages the credibility of both sides involved in the transaction.
The problem here lies not in legitimate chargebacks, but in chargebacks as a result of using fake or stolen credit cards. There's a whole industry of blackhat and greyhat Scamming as a Service, ranging from botnets used to delist AdSense ads, to Eastern European carding forums which offer scripts to run 100s or 1000s of transactions that will be flagged fraudulent within 24hrs.
If you take credit card payments on any platform: yes. The difference is in how much prior warning you're getting and how expensive paying for the chargebacks is going to be, but every major payment platform will either shut you down or massively increase prices if you incur too many chargebacks.
This is one of the practical reasons why credit card processors generally don't take porn sites as customers.
Does anyone know if this happens in Europe, where stronger authentication is generally required for online purchases?
Last year I asked my bank to chargeback a transaction, where I didn't recognize the merchant or the amount. They said it was paid in-person with a PIN, and unlikely to be fraudulent unless I'd lost my card. (It was genuine.)
Normally when I purchase on my card I have to authorize the transaction with a smartphone app. I can see the bank being reluctant to reverse an honest purchase authorized this way.
Can't speak for the rest of Europe, but in the UK tech speaking the bank still needs to prove that you still made the transaction even though you say you didn't. While SCA does helps in their claim not every transaction uses SCA. In my experience its less than 10% of my normal transactions, but some companies (my old phone provider being one) required SCA on every transaction I made with them. Strangely enough, when I purchase something via the standard checkout process on Amazon I don't get a SCA prompt, but every time I setup a subscribe and save purchase I need to approve the transaction even though its the same card as my "normal" purchases with them, but I guess that's because I'm creating a automated repetitive charge on S&S orders.
Also when I have seen cases in the news (this has been quite a while ago, so don't have sources to hand) where the bank have just told the customer "We know it was a legit payment, claim denied" but when pushed for copies of their proof its later turned out they didn't have any and were basically just saying that to get the customer off the phone.
EDIT: Trying to think back to my last few "NSFW" transactions, I think some sites did require SCA but iirc my last SubscribeStar.Adult (think patreon but for NSFW creators) subscription didn't, but that might be because it was just adding a new creator to my existing payments.
EDIT 2: For Chip and Pin, while the bank can say "Well the purchase was made with a pin, so you must have auth it", it doesn't prove that your card wasn't pick pocketed and the pin shoulder surfed from the last transaction/cash machine withdrawal.
Yes, although in general this will happen with any payment provider. Stripe for example will decline your business after a certain point, and in a few cases have banned entire product categories that were having significant issues with chargebacks. There are payment providers that specialise in high chargeback rate industries, but they cost a lot more.
It happened to me a while ago and while chatting with support they had my birth date wrong and thought I was underage. When I told them that they just deleted the support thread.
I had only ONE charge back, in 2015 I think.
I would understand if they would try to cooperate or ask for more info to prove things. But they have too much power and it's easier to just limit accounts.
Hence why I said the remainder. In my case they held about $10k and I got back most of it, they take back any chargeback amounts + a flat fee per chargeback
I have nightmares about this. The comments here saying that PayPal is just for hobby projects and should be avoided are living in a different reality.
For me (e-commerce business, mainly in Germany), PayPal makes up around 70-80% of revenue and isn't easily replacable.
I'm sure some customers would whip out their creditcard (if they even have one) or enter their long IBAN bank account numbers for direct debit, but many probably wouldn't. The convenience of PayPal is unmatched.
What about adding Stripe/Google Pay/Amazon Pay as a choice, or if you have enough revenue history VISA etc through a merchant account.
The real issue is that if you start getting chargebacks - you will be liable for them. A bank might ask for payment, Paypal just grabs any money in your account and locks it. If you keep an eye on the level of chargebacks you should be able to sleep better!
Adding more payment methods is definitely key. But like the sibling comment says, they don't come close to PayPal's popularity. So its a reasonable fallback, but I wouldn't remove PayPal voluntarily.
Chargebacks are interesting in our case, since we barely get any and if we do, we solve any cases super quick. I remember a few years ago, I talked to some PayPal representative from their business team (so higher level, not normal support) and they mentioned how they had never seen an account with such a low amount of cases. Keeping that up is a big focus for us.
> What about adding Stripe/Google Pay/Amazon Pay as a choice
Not even close in popularity in Germany. People just don't use it. Would be surprised if more than 10% of transactions would move to that if offered while PayPal is still there.
I hope they add your long IBAN bank account number, instead of their own. ;)
All jokes aside, I've good experience inside the whole EU with receiving money for (digital) goods. Just from one simple bank account to the next, inside EU. I think it is a really overlooked paying method.
Yeah, bank transfers are still popular here, especially with older people. Either completely manual with (hopefully) automatic reconciliation through some reference number or with giropay/SOFORT.
Like the page explains: this is not for big webshops with thousands of orders a day and having small margins on each item. You have to see this way of running a webshop in the context of a small business just starting out.
Each payment is checked on your bank account. You can do that once or multiple times a day, whatever your situation requires. Can be easily done with the current banking apps in Europe. The moment you received payment, you can process/fulfill the open orders and mark them as such. Whether that's clicking a button to send a digital file, or packing the order in a box or envelope and sending it.
This might sound like a lot of work, and programmers probably only see the "this and that can be automated"-side of this webshop, but my clients with small webshops happily send their orders across Europe and laugh out loud when they spend only an hour a day on checking payments and shipping orders. They also don't have thousands of orders a day, of course. But they do have the margins to make it worth their while. And if their business grows, they can easily migrate off this webshop.
They are not afraid to put in a little work now, and know they can automate things later.
I wonder if this might be a case of PayPal in the US vs. Europe — at least with regards to charge-backs.
It seems that the burden of proof in the EU is much higher before an issuer will allow a charge-back — at least anecdotally, the credit cards I've used require you to prove that you tried to resolve the issue with the merchant first, prior to charge-back. Even then, charge-backs would negatively impact your account standing with the issuer, so are dissuaded.
I think many people in Germany actually have their bank account linked with PayPal, not their credit card. So PayPal uses direct debit to get the money from the customer and "floats" the payment to the merchant.
Direct debit payments in the EU can be reverted within 8 weeks with just a few clicks in your online banking. Those cost around 8€ to whoever debited (I think thats cheaper than CC chargebacks?). I've never done it, but I think you don't even have to put a reason. That just starts the process though, so they might have to add more information later.
- I will not get rejected by the website because they can't identify me sufficiently
- It gets around the fact that I have US cards but I live in Europe, which tends to be disqualifying for most websites.
- I can ship to an address other than my card address without problems
- I can get a refund via Paypal within 90 or 180 days with much much less effort than doing a change back via my bank.
Always keep in mind that you're benefiting from these things as much as the buyers are, in that they give you revenue, you can always not use Paypal and reduce your risk, but then you lose revenue. You'll also suffer from more fraud using other payment methods, etc.
Every time I see PayPal, I hit the 'nah, just let me fill in my card details'. I think you're overestimating their worth, and underestimating both your customers and the competition. As someone already pointed out: "Stripe/Google Pay/Amazon Pay" are available, to name just the most recognisable ones. There are others with better fees!
Maybe I'm overestimating and most customers would go through the trouble of manually filling in their payment details, but it's scary to find out :-)
Fees are a good point. PayPal's fixed fee (0,35€ per transaction on top of the percentage) is actually kinda painful, since we have relatively low average order value.
With scary I'm referring to the potentially lost revenue if customers end up aborting their order instead of choosing another payment method if PayPal is not available anymore.
We offer both credit card and direct debit payment outside of PayPal (through Mollie.com), but people just prefer PayPal for the convenience and added buyer protection.
Since 2021, normal credit card payments in the EU also require 3DSecure verification, which causes many people to abort the payment for whatever reason (maybe they don't know how it works / don't have it set up correctly).
Having multiple payment processors is extremely important and I'm actively working on that. For example having multiple credit card processors and integrations ready to go. If you are paying with your credit card without using PayPal, you don't tend to care which processor the merchant uses. PayPal is just a special case because its so popular.
When dealing with smaller vendors I (as customer) still prefer PayPal as payment method. Having PayPal as an option increases my probability of buying (hard to say how much).
I guess I'm behaving this partly because I know PayPal can be hard against the vendors. For me this indicates that if vendor accepts PayPal, then they are probably not fraudulent.
Not sure what your sector is but how is Paypal easier than paddle, stripe, chargebee, etc?
Actually, how do people buy stuff in Germany? I'm in the Netherlands and everything uses iDeal, which was annoying at first but now I like it. I use a credit card otherwise. When I was in Ireland I used a debit card which functioned like a credit card.
iDeal is how all online payment should work in my opinion. The merchant only needs to know to which bank they should redirect you, and that's all. Your data and your money as as safe as your own bank is able to make them.
The only downside is that it's only for Dutch consumers, and therefore international support is very spotty (Steam supports it, Lego does not). This weekend I heard a rumour that they might be making it international, though. That would be really nice.
As much as I like iDeal, I was annoyed when I first moved here since I came from an EU country with SEPA payments but it was really hard to buy stuff from lots of different websites. I also wonder if it keeps the barrier to entry high for new banks, etc - I would love it if I could pay for things using my wise.com account via iDeal, but I cannot.
I have no idea how that works, but in order to become a universal payment system, it should definitely be easy to add new banks. I think it started out as an agreement between the Dutch banks, but new banks have been added since then.
The biggest problem to making it work for all banks is that at the moment, you need to select your bank from a list. That list is going to get enormous. The browser should probably remember your bank for you.
Its just very convenient due to being basically a one-click payment.
I think the big difference in Germany is that people here tend to have their bank account linked with PayPal, not their credit card (because many people in Germany don't even have one).
Compare that to entering your "up to 34 alphanumeric characters" IBAN bank account number manually while on your phone.
Direct debit would be great if the UX would be better. There are PSPs that make it easier for merchants (GoCardless), but entering the long IBAN is the crucial point.
It would be great if there was a popular app/feature so you could save your IBAN in your phone/browser and just fill it in with one tap. That would skyrocket adoption and let merchants move away from expensive payment service providers.
They are probably selling on eBay where it is (or used to be) very tightly integrated. In Germany eBay used to be very popular and that's how PayPal got so popular, it is one of PayPal's most established markets.
I thought it was common knowledge at this point that there is this risk using PayPal and it was generally not recommended for anything but hobby use.
PayPal has been seen using several jurisdictions, eg. Luxembourg, France, Germany. When maltreated customer try to sue and get their funds back, they will ping-pong people around in different orgs across these jurisdictions.
In the end you would need several very persistent lawyers across several jurisdictions, which is more expensive than loosing 100.000 EUR.
(There is a specific case on this that was shared on HN some time back).
Every third party integration a company relies on is risky, I just take an issue with spreading FUD and calling a probably top 5 by market share payment provider only fit for hobby projects.
If you are searching for Stripe or any bank you'll find an equal amount of horror stories which are of course always louder than the millions of accounts and transactions that go on without an issue.
It's not FUD if it's true. The fact that it's popular in Germany doesn't mean that they don't randomly shut down people's accounts and access to their funds. PayPal has a long and storied history of doing this.
Well, I wouldn't recommend for using Stripe for anything but hobby projects either. Unless you have an account manager at Stripe. My guess is that OpenAI will do just fine using Stripe.
What I am hearing you are saying is that you can not recommend against big brands? I am currently looking for a new monitor, and according to your sentiment, all negative reviews of, eg., a Phillips monitor would be spreading FUD?
It says they'll release it in 180 days, don't know why he figures he won't get it.
What's missing here is a description of what he was doing to generate that money. Maybe he was completely legit, but we don't know anything. Does he perhaps have a reason to think he won't get his money? Maybe he was getting a lot of chargebacks or some other negative metric.
If I had to guess, I would say the reason is that they're getting a high amount of chargebacks because the website marketing copy promises "14 days money back guaranteed" and even highlights that their competitors don't offer a "refund after usage"
But then, in the FAQs, you can see the refund policy specifies they will only refund if you haven't downloaded any images. I imagine some people sign up to try it, then go refund if the quality is not as expected (textual inversion generators like this can be a bit hit or miss) and find they can't.
You can tell because the poster is evasive about what exactly they’re selling.
That is pretty strong evidence in itself, because everyone who isnt shady ties an explanation of their business into everything they talk about out of pride and desire for free marketing.
It technically is. A bank iirc cannot do the sort of black box of terminations PayPal likes to do with its customers.
The problem is that PayPal isn't legally considered a bank in the US but a payment processor, which gives them a lot more freedom to run their service in the way they're infamous for.
In the EU, they are a bank, which permits you much more rights but you have to drag them kicking and screaming to enforce your rights. (Among other things, they're homed in Luxembourg and basically employ all the competent financial lawyers in that country, making it basically impossible to get legal representation without getting rejected on a conflict of interest basis.)
Know Your Customer, anti-terrorism, anti-drug money laundering, and many other laws have been enacted to keep "the bad guys" from being able to operate efficiently. Unfortunately, and perhaps even sometimes by design, these laws have created all kinds of loopholes that allow financial institutions and governments to prey on innocents, especially those who aren't doing anything illegal but sometimes things that are unwanted. It all does seem to be designed to strongly discourage the possession of cash and cash equivalents by anyone not in the right circles of power.
It's gone way too far. My bank refuses to cash international checks (no banks in my country do). IRS refuses to do international wires. The result is that the united states government owes me money I can only claim if I actually fly there which is expensive enough and too much of a bother for the sum involved.
Like if even the fucking IRS isn't trusted enough to push money through the system then it's a complete joke.
Wise also has their own fair share of related drama like PayPal these days. Service quality has dropped and I've had friends have their funds locked for arbitrary requirements.
Nevermind them changing their US payment details on a dime last year.
Great for moving funds through, but don't keep any money there.
The more I get involved with banks the more I understand the crypto bros.
I'm on the same boat as you, my bank wont take the check paypal sent when they limited my account, or they COULD take it but with a 25% commission and 60 days waiting for the "procedure".
It's a shame, really, that we live in a world where a way to show the finger to all these corporate guardrails exists and is easily available - but it cannot get enough traction and receives a strong, and I think unnecessary, cultural pushback. While I do believe the dilapidating state of pax americana to be a tragedy for the humanity at large, crypto will be more of a thing in the increasingly fractured world where government entities would sanction (and perhaps even nuke) each other - and that's a good thing.
> Has anybody ever really been completely robbed by PayPal and never gotten their money?
Yes, speaking from experience. It’s been 22 years now and policies / laws have changed, so circumstances would certainly be different if it happened today.
Surely both of these had nothing to do with PayPal? (this is an honest question - I'm not trying to defend PayPal)
If the buyer did a charge back on their credit/debit card, PayPal gets charged and passes it on to you. Likewise if you as a seller didn't get the chargeback isn't that on your card company?
This is precisely why on all my PayPal accounts I have a auto-sweep enabled so that anything over $6,000 is sent to my account daily.
I could set it to a lower threshold, but my AOV is ~$2,000 so I prefer to have enough for refunds - otherwise PayPal needs to debit my checking and then it takes very long for the customer to get their money back.
Looking at your HN history, your PayPal situation is not at all surprising.
Before this one, your most recent comment on HN was written ten months ago, promoting your website. One person replied to that comment. This is what they wrote:
“I signed up on profilepicture.ai and paid, but have changed my mind before uploading photos. There is no way to contact you through the site for a refund because the live chat isn't working and there isn't a support email. Also, when I search the help desk no content is returned. How can I reach you?”
You ignored that person.
It’s no wonder you are getting lots of chargebacks.
Not enough information, no context. PayPal has terms of service and laws they have to comply with. Probably a story here but unlikely PayPal just shut him down and kept his money for no reason.
That's just speculation. We don't know if PayPal "hid" behind KYC/AML laws. More likely the account got too many chargebacks -- I've seen processors cut people off for that reason, but after multiple notices. I don't know what happened, just what the victim posted, but that's not enough to know the chain of events. Accusing PayPal of closing an account and keeping $80k with no additional information seems like a serious charge, but with no additional facts I don't know what to make of it. I suppose it plays well for people who hate PayPal. I have nothing to do with PayPal, for the record.
Chargebacks are also speculation right now. That's kind of my point. These situations never have any usable info. How can any action by a financial/payments company be trusted in this case?
We all suck it up and move on so we can make money, but that doesn't make it any better.
> How can any action by a financial/payments company be trusted in this case?
We don't know the details in this case. But we do know that millions of companies manage to work with and trust payment providers and financial institutions, because those providers are regulated and protections exist for customers and merchants. That's not to say that payment processors and banks never do anything wrong, or screw up, or freeze and close accounts arbitrarily. But that's clearly not the norm -- we're focusing on the relatively rare shark attack rather than the millions of swimmers who don't encounter sharks.
I have multiple customers using Stripe and PayPal (or PayPal-owned Braintree). The only times I've seen a processor take any action against a merchant had to do with fairly clear terms of service violations: excessive chargebacks, and operating a business that appears to skirt the law or the processor's allowed merchant types (it was consumer financial "services" in my experience, basically marketing shady lenders). So if I have to guess what happened, I'd guess chargebacks, because that's the main reason things like this happen. When I've seen that the merchant was getting a lot of chargebacks, and the processor sent multiple notices about that -- they didn't just shut it down with no warning.
Very likely it was a dumb reason, an automated reason, a poor user experience of that reason, a completely optional experience, a poor corporate policy that substantially diverges from legal obligations, legal obligations being poorly thought out and misguided as well.
There's literally no reason to blame the victim here when HSBC can launder money for the literal cartel under the same legal regime that deputizes financial institutions to demonize transactions instead of a government agency demonizing an actual behavior and investigating that actual behavior. The party in power made a choice they shouldn't be in a position to make or shouldn't chose to do that way, the predictability of that choice occurring is not a factor at all.
Businesses will abuse you like this unless you know how 1.] to sue 2.] how to make a threat to sue sound credible 3.] be strong on #2 with articulation on punitive damages.
A well written letter can get things moving pretty quick.
There's not many businesses that'll take $80K of your money and refuse to give any explanation, though. Especially businesses that have a long history of similar incidents.
Heh. I wish it were so uncommon that it were unheard of. Ya gotta have a great legal team or else you'll get hosed. There are days I'd rather have spent coding rather than working with legal.
Punitive damages are not a thing in a large part of the world. In particular in the European countries where Paypal or some of its subsidiaries reside.
As I wrote on another thread: PayPal is exploiting the fact that they exist in several jurisdictions. So you don't just need to be able to sue. You need to be able to sue across borders, several borders – Good luck with that.
Wild speculation: some of the AI-generated headshots sold by the company were used for fraudulent activities.
Real outrage: how can a company take $80K of someone else's money ("I won't get back"). Decline to do business, sure, hold until an investigation is done, why not? But this is outrageous. Did they refund it to the buyers at least?
TIL: from reading comments here. PayPal, an American company, is very popular with German businesses and consumers.
As an American, I only used PayPal to send and receive money to/from dad. I have seen a few pushes to use PP, but mostly in the e-commerce space for some promotion. “Use PayPal, get extra X% off price!”
Personally, I am not a fan of the debit/credit world. I will use them simply out of necessity and “cashless” society. But there are much better ways to pay people and businesses that don’t involve a sea of middleman siphoning off percentages or pennies of each transaction.
The problem is a lack of "I want to pay you but don't want to give you my credit card" processors out there. That's 99% of the reason I use PayPal (with just one case of using buyer protection because the vendor just forgot about my order for months and didn't respond).
Google Pay & Apple Pay helps with this now (and the fact they're implemented as a payment type like VISA and not a processor like PayPal helps a lot to prevent lockout cases like this) but they're nowhere near as widespread as PayPal, at least from my experience.
A well-designed app offloads the "enter your payment details" dialog to the processor (e.g.: Stripe), but many shops don't. You're handing off your details to the vendor's website, which then promises to process your payment with Payments R Us. But (A) I can't be sure of that, (B) maybe their forwarding/processing method is insecure and (C) maybe their server is already compromised and a man in the middle will save my card details.
Compared to PayPal that are a clear redirection in-browser and result in the vendor getting (at most) a "payment cookie" that can be completed to transfer X USD from Y to Z. Or Apple Pay where your (ephemeral) payment details are E2EE to the payment processor's server, even if they go through the vendor's website/servers.
One of the things that fascinates me about silicon valley is that there's this very clear playbook that goes along the lines of: We're going to 'disrupt' X industry with technology. And disrupt often has a veneer of technological progress, but really is primarily just regulatory arbitrage. Paypal: We're going to be a bank, but we're not going to adhere to banking regulations. Crypto: We're going to be a stock exchange, but we're not going to adhere to SEC regulations. Uber: We're going to be a taxi company, but we're going to ignore all local taxi regulations. Uber/Doordash/Gig economy: We're going to employ people, but we're going to ignore employment law.
Not only is it interesting that this keeps happening, and successfully. But we're like 25 years down the line since Paypal started, and Paypal is still acting in ways that you wouldn't expect a bank/payment processor to be allowed to behave by regulators.
Like, if I were a regulator I would seriously be considering just going through Uber's behaviour since the company started and prosecuting every single violation they committed. Let's see how well that business model holds up. It's not good enough to say "Oh we're all billionaires now and we floated on the stock exchange so I guess now we'll think about abiding by the law".
> Paypal: We're going to be a bank, but we're not going to adhere to banking regulations
There is nothing in banking regulations that stops what PayPal is doing here. Any credit card processor will not hesitate in putting a hold on your payouts if they want to investigate your business. Heck one of our credit card processors wouldn't even pay out before 90 days as standard.
I never even knew this was an option, despite relying on them for well over 10 years now for well over half of my business' revenue (with 0 issues whatsoever, fwiw). Just enabled it.
The reason this probably happened is that their business was getting a high % of chargebacks from paying customers, paypal is not a specialist payment provider that wants to handle what they consider high-risk business like that, so they block your account and hold your funds for 180 days and during that time keep processing chargebacks.
After the 180 days, Paypal will give you the remainder of the money back, so the title is clickbait, they will get back their money.
The best thing to do if you operate a business which gets a lot of chargebacks is to find a payment processor that is okay with that, when I had this issue I ended up looking at which payment processors porn sites used and picked one of them, which had no problems. That was a long time ago, so I'm sure there's more options now.