Paypal problems

February 19, 2005 2:16 PM

Paypal is causing me troubles, anyone had experience?

I was recently paid $2500 over paypal. I immeadiately transferred it into my bank account. When I logged in two days later, I found that Paypal had locked my account and transferred the money back, due to "suspicious activity". This money is desperately needed. The steps to begin resolution will take two weeks, and that's before they begin to look into it. When I called Paypal, they could not tell me why they disabled the account, just a "it happens" (that's literally what they told me). I've read Paypal horror stories online before this happened, but (stupidly) thought it wouldn't happen to me.

Has anyone had this problem with them? How long did it take to resolve? Will I see money in the next 6 months? Would a lawyer letterhead speed things up? (I'm a college studen on his own, the locked money is basically my savings). Any other advice? Thanks

posted by null terminated to work & money (10 comments total)

PayPal isn't a bank, and they can do whatever they want with the money. Many, many people have had similar experiences.

I wouldn't expect that you'll get your money back.
posted by Jairus at 2:24 PM on February 19, 2005

Please never use paypal for anything serious. It's just asking for trouble. I understand this isn't particularly helpful now that it's already happened, but I really would suggest Western Union-type services for this kind of thing in the future. Money orders and cashiers' checks are infinitely more reliable than Paypal.

I wasn't aware that paypal could pull money out of your bank account after it's already been transferred. Is that indeed what happened, or was the pending transfer just canceled by paypal?
posted by odinsdream at 2:40 PM on February 19, 2005

odinsdream: I'll never use them again, believe me. I thought it'd be okay if I transferred it as soon as I got it. I believe the transfer to the bank was cancelled, although I can't tell.

jairus: How is it FDIC insured if it's not like a bank? Isn't that supposed to prevent this kind of thing from happening?

I'm mainly wondering if I should get a lawyer involved now or not.
posted by null terminated at 2:58 PM on February 19, 2005

I would say don't immediately jump to the conclusion that they're stealing your money. PayPal has/had a huge problem with fraud. I used to work for a VoIP place, and we had similar problems. People using stolen credit cards to steal service, w/ PayPal, ppl using stolen credit cards and sending the money to a bank acct. somewhere.

Chances are their system automatically marked it as suspicious just because of the large amount.

I hope I'm not wrong. I would hate to be in your situation.

Don't forget, eBay owns them now, so that adds some more legitimacy to them. eBay wants the public to feel safe using them.
posted by formless at 3:38 PM on February 19, 2005

null terminated: How is it FDIC insured if it's not like a bank?

It's, IIRC, FDIC pass-through insurance. Basically all money they get is pooled in some bank account, which is, of course, FDIC insured. So if the holding bank goes kaput, you don't have to worry. If Paypal goes under or screws you, then it's lawsuit time.
posted by Gyan at 3:45 PM on February 19, 2005

Paypal is most assuredly not a bank, and they can, indeed, do whatever they want. Paypal was able to debit the funds back out of your account because when you gave them your account number, that was part of the agreement. They probably have the "right to correct any errors" much as your employer does when you have direct deposit. Good luck, man. If this were a bank, you would have consumer protection regs on your side, but since it's PayPal .. .. I'm pretty sure you will need to be very, very patient, and do exactly what they ask in order to get the money back. Good luck.
posted by Medieval Maven at 6:52 PM on February 19, 2005

Money orders and cashiers' checks are infinitely more reliable than Paypal.

Well, I wouldn't say they're that good. I wouldn't trust either on eBay, for instance. They can still be faked and I wouldn't ship unless I had cash-in-hand.

Western Union was also mentioned above, which is a very bad idea if you don't know the seller.
posted by smackfu at 8:41 PM on February 19, 2005

I have two bank accounts, one with all of my money, and one that's just a pass-through for PayPal. If you want to still use PayPal, then once the money goes from PayPal to one account, wire transfer it to your other account. PayPal won't be able to get the money back.

(I didn't set up two accounts for this; I moved, wanted a local bank, and decided to keep the old account.)
posted by sachinag at 7:19 AM on February 20, 2005

sachinag has the right idea. By giving PayPal your bank account informaiton, you're pretty much giving them the right to mess with that account. Therefore, don't give PayPal a 'valuable' account.

A lot of banks will let you set up more than one account as part of your service package - take advantage of that. Having said that, some banks have a policy where, if one account doesn't have enough to cover a withdrawal but another linked account does, the bank will automatically do a transfer between the accounts "for your convenience". Best to ask about that before thinking you're safe.
posted by lowlife at 7:24 AM on February 20, 2005

To clarify a little more on FDIC insurance. FDIC insurance protects you from your bank going out of business. It has nothing to do with this type of situation even if PayPal was a bank.

In the case of PayPal, it protects you against PayPal's bank going out of business.

FWIW, there is no method of accepting credit cards (or other online payment) where you do not have the risk of something like this happening. It's nothing specific to PayPal.
posted by winston at 7:08 PM on February 20, 2005