Above the Law or Under the Radar…the truth behind the lies
(A warning for small businesses about PayPal)
When last Sunday we received a phone call from Amber at PayPal’s Fraud/Resolution Department to warn us that our business account may be frozen, we thought it might have gotten hacked. But it wasn’t.
PayPal did not respond well to the increase of business volume our network inherited from a contract with the United Nations, or organizing a large wedding overseas this month. They said we were a risk. Yet, our clients had already paid us through PayPal and we needed to post payment for their wedding’s hotel reservation by the next morning. This ordeal earned us a friendly warning from PayPal and the expectation of an email throughout the week, listing all the documents necessary to remain in good standing. No rush. That was Lie #1.
By the next morning, the account was frozen.
Whether money was transferred from PayPal to PayPal or charged via credit card did not matter. Our clients’ money was suddenly frozen, and could not even be returned to them. Here is what did not sound right.
Our clients’ money was frozen for…3 to 6 months in ‘a reserve’ box or safe, in case of a credit card chargeback. And that is a normal concern, however, had we been warned in advance, we would have processed our transactions through our existing merchant, a bit less advantageous in interest rates, but far more reliable in terms of process. In fact, the bait started with a sales call convincing us to consolidate our accounts with one merchant: PayPal. They’re very good, and we caught the bait. Once in, we found ourselves traveling through the hallways of hell; seeking the unreachable solution, an impossible dialog, just to reach the point of no return. In one word: we were stuck.
Regarding our clients’ payment that was due to pay their hotel, PayPal suggested we pay for it with our own money and get reimbursed when PayPal releases the ‘reserve’ funds, three to six months down the road. No warning, no explanation.
After nearly 12 hours of repetitive dialog with the brainwashing robots of the Fraud Department, Zack, a manager, offered the option for PayPal to pay our vendor (the hotel) via the ‘reserve’ of nearly $20,000 they were holding hostage, but we would not be able to withdraw any of it. Ok, for now. Unfortunately, the call dropped and we never spoke to him again, nor did anyone hear of such suggestions offered by PayPal. I hope he did not get in trouble. Goodbye Zack, hello Mitch, Tammy….and the herd of other robots.
The next day, I asked how PayPal explains to capture a client’s money for payment for services then hold it for months as a ‘protection’ against credit card charge backs (interesting to note that several payments were in fact PayPal to PayPal payments…no credit cards, hence no charge backs possible). Well, they still tried to convince us “PayPal will not draw any profit from holding someone’s money for 6 months without their consent”.
Here was our question:
“How can you arbitrarily, and without warnings, take an amount as important as $20,000 from a small minority-owned business you lured into creating an account that had provided all necessary documents and government contract?”
Here was PayPal’s Fraud manager’s response verbatim:
“Well, having received a $50,000 transfer/payment to your account this month, we did not think you would mind. Plus, what’s $20,000…. less than 4% in a year “. After ONE transfer of $50,000, they assumed that was our monthly revenue every month only to justify our ‘dangerous activities’.
Please read it again. That’s right! It’s only $20,000! What is our problem?!?!
Anthony, the 4th supervisor we spoke to told us our clients’ money could finally be refunded so we can charge their credit card.
Dupont: “When will the money be available for us to charge?”
PayPal: “Within 24 to 48 hours”
Great! But that is not true. Both the client’s bank and PayPal stated it would take (up to) 2 weeks to get the money from PayPal.
That was Lie #2.
Dupont: “Will the refund come out of our checking account?”
PayPal: “No. The refund will come out of the ‘reserve’”
That was Lie #3.
Any company in this situation will view the amount debited from their checking account while PayPal holds the same amount. Ask them what they do with it…. And by the way, regardless of the amount, if it mysteriously disappears, the FCC does not insure it. It’s your loss.
After this wild display of low-level accounting, we all looked at each other in awe knowing such diabolical practice had to be illegal, right…? Wrong. PayPal is categorized, as a “Money Service”, not a bank, hence does not abide by the bank regulations that actually protect and ensure account holders’ money.
PayPal Solution
Regardless how many times we called or whom we talked to, we were hammered with the same alternative.
PayPal: “If you want your clients to have a hotel reservation, your company will have to pay for it”
Dupont: “But our clients already paid us through PayPal to secure their hotel…why are you holding their monies for 6 months? “
PayPal: “Sorry. It’s our rules”
When asked whether they would pay for the 3% inflation rate inflicted on our money’s purchasing power, they declined to answer. When asked if PayPal earned interest on all moneys they summarily take from business accounts, they scoffed and affirmed PayPal does not make money from “reserve” amounts. Not even 3.5 % from money market accounts?
Well, that is not what CNN Money investigators found out.
http://money.cnn.com/2008/02/26/smbusiness/paypal_float.fsb/
It is at least now clear that PayPal cannot provide the adequate merchant services for small companies or ventures. But why induce small woman’s owned travel management businesses in their shady circle of control and pain, only to strip them off their dignity and spit them out against the wall?Because they can.
Dear PayPal,
Maybe it is time you hired qualified personnel to conduct business analysis and establish who you want…or not, instead of parading with open arms like everyone’s savior under the false pretense to provide solutions-for-all.
Had we not been lied to — by strategy, or out of incompetence — we would have saved thousands of dollars in billable hours, focused on a true merchant service and not lost clients because of you.
As far as we are concerned, you should be proud to have left a dirty print on our impeccable record with clients now asking whether we are a reputable company just because PayPal would not proceed with a payment, or a refund.
Let this be an unfriendly warning to all small businesses. Try your bank first; you may be surprised.
Arno Agman
The Dupont Travel Network