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Paypal - the company that's too clever by half
All it wants is control of your bank account
oddsod




msg:3342209
 5:03 pm on May 17, 2007 (gmt 0)

First off, let me say this probably does not apply to US residents.

If you are in the UK Paypal wants a Direct Debit - the ability to debit your bank account with whatever amount they want, whenever they want - and they'll go to great lengths to get it. And if they don't get it they have multiple ways to make your Paypal usage difficult.

That's not a big deal, surely? Paypal isn't your average hustler and isn't going to clean your account out, so what's the harm?

First, Paypal is not a bank and it's dangerous to treat it like one. Deposits in Paypal aren't covered like deposits in banks. Paypal isn't subject to the same strict regulatory regime as banks. Further, they are now Luxemburg based and even less accountable.

Second, and this is a big difference that people forget: If you cash a cheque someone gives you they can't cancel it a few weeks down the road. Paypal transactions CAN be cancelled and giving Paypal direct access to your bank is giving them an easy route out of any disputes. See #1: Paypal is not a bank.

Third, there are good reasons to treat them like you would a conman. Some of their modus operandi are highly suspicious. And that's what this post is about.

If you are UK based:

- Paypal will limit how much you can send people till you get "Verified"
- You can get verified via your bank account or your CC [paypal.com]
- Except that when you go to actually do the verification the only option is via your bank account.
- Hmm, but the info says CC. That's designed to take the emphasis off what is obviously their #1 intention
- To say bank or CC and give you only the bank option is a bit of a con in itself but let's say you give them your bank details
- They'll verify the account is yours but won't mark your Paypal account as "Verified" unless you give them a Direct Debit mandate.
- OK, so you give them the mandate to allow them to verify you and then remove it. Guess what - yes, you suddenly become unverified again!

They don't need to have direct, unrestricted access to my real bank account. That they are so keen as to be almost crooked in achieving that access is, I caution, grounds to consider them suspiciously.

 

Matt Probert




msg:3342240
 5:27 pm on May 17, 2007 (gmt 0)

For what its worth, you are not the only UK businessman who avoids PayPal. I refuse to deal with them, except for sending mony through them, but then only if I absolutely have to (once in the past six years).

Matt

phantombookman




msg:3342300
 6:20 pm on May 17, 2007 (gmt 0)

PP is primarily for amateur sand part-timers IMHO.
They do provide a good service for those who meet the above criteria but if you are in business then you need your own merchant facilities.

oddsod




msg:3342301
 6:23 pm on May 17, 2007 (gmt 0)

I do have merchant facilities. And physical PDQs coming out my earholes. But that's irrelevant.

This thread is about Paypal.

herb




msg:3342325
 6:51 pm on May 17, 2007 (gmt 0)

If you are UK based:

They are using the same "scam" in the US.

Your Sending Limit is the maximum amount of money you can send through PayPal before becoming Verified.

Your Sending Limit is: $2,000.00 USD
with a maximum of 500.00 per month

I refused to use them for years until I couldn't resist an item on eBay that would only accept instant payment and only PayPal.

I will NEVER give them access to my bank accounts

oddsod




msg:3343001
 1:36 pm on May 18, 2007 (gmt 0)

I've just tried helping someone get verified. They sent a help message to Paypal asking how to get verified with a CC as that option is supposedly available but there's no information on how it can be done.

A Paypal employee replies by email acknowledging that "you stated you would like to become verified through your credit card" and goes on to provide a link to becoming verified .... with a bank account.

Stupid? Or just very, very clever (and crooked)?

Anat




msg:3343089
 2:36 pm on May 18, 2007 (gmt 0)

I have been verified with CC only, years ago. Never had a problem receiving or sending money so far, until a couple of days ago. I tried to accept a payment, and kept getting the "add bank account" page.

I live in Israel and don't have a bank account in the US or UK (they don't work with Israeli banks). I called Paypal and they said this was a temporary malfunction that will be fixed within a day or two...

oddsod, could it be that you have the same problem? Did you call them to find out why they don't let you verify your account using only your CC?

pageoneresults




msg:3343095
 2:45 pm on May 18, 2007 (gmt 0)

PP is primarily for amateur sand part-timers IMHO.

Hmmm, watch out! Brett uses PayPal here for Subscriptions, does that mean he is an amateur or part-timer? I manage a site that is 100% PayPal driven and we don't have any issues, nor are we amateurs or part-timers. It was a business decision at the time to keep operating costs to a minimum and liability issues.

They do provide a good service for those who meet the above criteria but if you are in business then you need your own merchant facilities.

If you are a business, you are going to provide as many payment outlets that you possibly can so that you can cater to your visitors requirements. Not offering PayPal as a checkout option could be costing you a little business. Its another tool for your business.

With PayPal's new Virtual Terminal, you no longer need to be tied into those 3 year Merchant Accounts either. Best thing that could have happened to the small/medium business. I cancelled my Merchant Account and switched to Virtual Terminal. One of the better decisions I made.

In the 8+ years I've been using PayPal, I don't recall "ever" having any issues that were not resolved professionally and there have been less than a few. ;)

Control of my bank account?

While I'm always concerned when someone has direct access to one of my accounts, I'd rather it be PayPal than someone else. Really, I would.

herb




msg:3343163
 3:51 pm on May 18, 2007 (gmt 0)

I'd rather it be PayPal than someone else

Some of us seem to have short memories

[webmasterworld.com...]

The worst thing I'd say is how long the "Dispute Resolution Process" can take. I'd rather they just made a decision in 24 hours and seller/buyer could move on. Waiting for weeks and not knowing how much money you have in an account makes bookkeeping stressful


pageoneresults




msg:3343193
 4:23 pm on May 18, 2007 (gmt 0)

PayPal's policies are no worse or no better than let's say, American Express. Any company that large is going to have its problems, it is a given, no one is perfect.

I've had more problems with CC companies than I've had with PayPal, seriously.

I do understand your pain though. I think most of us can share a horror story or two about financial issues.

So, it comes down to choice. Those that don't like PayPal, won't offer the option during checkout. Those that do, will. From my own experiences, PayPal has been a positive benefit in the ecommerce experience.

oddsod




msg:3343199
 4:26 pm on May 18, 2007 (gmt 0)

Thanks for that link, herb. It's great that attorney generals from 28 US states took them to task and got $1.7 million out of Paypal for walking all over consumer rights. Maybe we need something like that in the UK. No, hold on, they're tax exile based now (got the email notification a few days ago).

P1R, millions of people in the UK regularly give their utility suppliers etc. direct debit access to their accounts. That's fine. With Paypal it's not. 1) Because they are effectively a bank and can decide to bounce a cheque after clearing it (if they have direct access) and 2) The underhand way they attempt to get a DD is evidence of bad faith and good reason to regard them as not trustworthy.

>>most of us can share a horror story or two about financial issues.

We're not talking bad customer service. Please don't confuse an Amex billing error with Paypal's DD tricks. Bad customer service isn't the same as violation of consumer rights.

oddsod




msg:3343233
 5:18 pm on May 18, 2007 (gmt 0)

We emailed them trying to get them to tell us where customers can get verified via CC. You know what? I don't believe you can. I think it's all a smokescreen.

They have to offer CC verification as, legally, they probably can't demand a DD to verify ID. So they say you can use a CC... but conveniently forget to code that in.

Instead of replying to the email to admit they don't do CC verifications they're trying to move the conversation to the phone at the moment!

victor




msg:3343240
 5:26 pm on May 18, 2007 (gmt 0)

Paypal have given us few reasons to trust them financially, that's true.

But direct debit in the UK comes with guarantees from your bank.

If you do not like an amount that a direct debitor has taken from your account, pick up the phone and call your bank. They will reverse the transaction within 24 hours. It's then up to Paypal (or the Gas Company, or whoever initiated the disputed transaction) to contact you (the customer) and ask nicely.

Basically: your money is returned without question the day you raise the issue with your bank.

rj87uk




msg:3343249
 5:28 pm on May 18, 2007 (gmt 0)

Instead of replying to the email to admit they don't do CC verifications they're trying to move the conversation to the phone at the moment

Record the call incase you need to bring up the information you talk about?

-- edit.

Just to add - I use paypal every other day to send payments directly from my bank and i don't have any problem!

herb




msg:3343311
 6:41 pm on May 18, 2007 (gmt 0)

Plaintiff Craig Comb ("Comb"), who is not a PayPal customer, alleges the following: On February 15, 2002, without his knowledge, consent or authorization, PayPal removed the sums of $110.00 and $450.00 from his bank account. Comb allegedly had difficulty contacting PayPal with respect to the erroneous transfer and finally reached a PayPal representative on February 18, 2002 to report the alleged error. PayPal acknowledged the error and returned the entire $560.00 to Comb's account on February 25, 2002.

PayPal's transfers, however, caused Comb's bank account to have insufficient funds, and the bank charged Comb $208.50 for failing to maintain his required balance. Comb contacted PayPal and requested reimbursement for the insufficient fund penalty and any interest his funds accrued while in PayPal's possession. PayPal allegedly refused to pay either amount, disputing Comb's figures but failing to provide Comb its own figures or documentation of its investigation.

On February 24, 2002, Toher discovered that PayPal had transferred funds from her checking account to four individuals without her knowledge, consent or authorization. Toher had difficulty locating any telephone number for contacting PayPal. Once she found a telephone number, which was not toll-free, she was placed on hold for a lengthy period of time, and no one answered her call. Toher then located PayPal's e-mail address and reported the error by e-mail

On March 6, 2002, PayPal sent Toher a series of e-mails explaining that because her bank had declined its attempted transfers, PayPal intended to transfer funds from her credit card account. Toher in turn closed and reopened her credit card account to prevent PayPal from accessing her funds. As of the date the instant suit was filed, PayPal had not acknowledged that Toher had reported an erroneous withdrawal or that an error had occurred, nor had it undertaken any investigation with respect to Toher's complaint

UNITED STATES DISTRICT COURT NORTHERN DISTRICT CALIFORNIA [pub.bna.com]

Having considered the terms of the User Agreement generally and the arbitration clause in particular, as well as the totality of the circumstances, the Court concludes that the User Agreement and arbitration clause are substantively unconscionable under California law and that arbitration cannot be compelled herein. Good cause therefore appearing, IT IS HEREBY ORDERED that the motions to compel individual arbitration are DENIED.

JEREMY FOGEL

United States District Judge

Still feel safe in letting PP have access to your bank accounts?


Corey Bryant




msg:3343342
 7:10 pm on May 18, 2007 (gmt 0)

If you are using Paypal as an aggregator, unfortunately you are putting another party into the mix (already the card associations, merchant account provider, consumer, etc).

Paypal does not verify users unless that user is reported. So kids are able to get a Paypal account. And a lot of people have that same mentality - if you only offer Paypal, the company should not be trusted. I somewhat have that. If I am buying from a company that only offers Paypal, I will usually look a bit more before submitting my information.

For users that have a Paypal account, don't leave money in your account. And consider having a bank account only for Paypal. Yes I know bank accounts cost money, but actually Bank of America considers deposits from Paypal a direct deposit and you can get a free checking account from Bank of America with direct deposit. Even depositing a small amount once a month will usually make Bank of America happy and they won't charge you a monthly fee.

And then once this money is in your account, move it to another account that Paypal has no access to.

No, I am not for Paypal or against them. They are a business and businesses make money. I have heard the horror stories and of course seen users that have never had any problems. But guess what - the more you use a service, the more chances you have that something will go wrong.

-Corey

oddsod




msg:3343793
 9:50 am on May 19, 2007 (gmt 0)

Another bank account is not the answer, I'm afraid. Apart from costs - free checking accounts are very much on the way out - all banks will let Paypal take your $0 account into an unauthorised overdraft. Guess who pays the eye-watering penalties on unauthorised overdrafts?

If I may return to my original point. It's not about running a business selling goods via Paypal payments. Lots of webmasters need to use Paypal even if they're not running an ecommerce site. They need it for everything from buying links to buying services. Many of the things they need to buy online may only be available on Paypal payments. Even if they aren't webmasters and just active ebay users they'll find life very difficult without a Paypal account.

My original point is the length Paypal go for an authority on your bank account that they do not need. The pretext is "verification" but they won't release the DD after they've verified you. This makes them highly suspicious and a dangerous company to deal with.

Maybe my many decades in business have me a suspicious old fool. Perhaps the Paypal supporters in here could offer me some good reason why Paypal needs that control over your account. Not why they make money - I have no problem with anyone making money legitimately. Not that they need to verify you - there's plenty of fraud about and they are entitled to take security measures. I'd like to know what possible reason they could have for being so obsessed with direct debit control over all our bank accounts.

stevedob




msg:3343848
 12:05 pm on May 19, 2007 (gmt 0)

I got my paypal account to UK Verified status using a savings account. They happily sent through the two small deposits as part of the verification process, but the account doesn't provide for DDs at all, and can only have one, previously named, account as a destination for fund transfers (and it isn't setup to be paypal!).

Paypal are 'happy', as they have my bank account details. I'm happy, as they can't possibly do anything with them.

herb




msg:3344055
 5:30 pm on May 19, 2007 (gmt 0)

I think most of us can share a horror story or two about financial issues

This isn't about a horror story or two. This is about a policy they have published on their site and refuse to honor.

I'm looking for anyone who PP has allowed to become verified by Credit Card in the last couple of years and is able to give me a URL, a contact or the directions to do so.


oddsod




msg:3344239
 10:14 pm on May 19, 2007 (gmt 0)

Because I insisted on an email reply they've now put it in an email: "You cannot use your credit card in order for your PayPal account to be verified."

Which is exactly not what they say on the site.

I would appreciate if someone can give me some background as to why they claim you can get CC verified. I'm fairly sure it's a legal requirement to not tie verification into Direct Debits.....

Can anyone shed any light?

Realbrisk




msg:3344443
 6:38 am on May 20, 2007 (gmt 0)

I second "herb" post just like Combs story, I have paid $165 in bank fees for an unauthorized withdrawal from my bank

I have thought that ill be safe with an shell bank account and I guess not

oddsod




msg:3347567
 1:32 pm on May 23, 2007 (gmt 0)

Paypal seem to be having a change of mind. A little reporter friend of mine has contacted them formally for information on a piece he's doing.

News: Paypal will now keep your verification intact even after you close the direct debit

At least that's what they've agreed. It appears that, legally, a DD is an excessive invasion of privacy for anyone who wants only to receive money.

It's a small victory but my advice remains unchanged: Do business with Paypal - it's difficult to avoid that - but trust them only as far as you can throw them (with both arms tied behind your back).

Helpinghand




msg:3351683
 12:52 pm on May 28, 2007 (gmt 0)

I'm looking for anyone who PP has allowed to become verified by Credit Card

I'd never allow them to do this, as although don't think Paypal would do this deliberately, but if a mistake was made, could be trouble for you and get you into debt with your card company.

This ofcourse always comes down to authorisation. Never give anyone rights to withdraw from anything, especially a credit card, where funds aren't yours anyway. Debit direct debits are fine, and have heard horror stories, but can say nothing has happened to me.

As I see it, there are 2 issues here:

1. Direct debit from an account (from Paypal to your account).

2. Direct debit allowing funds to be given to Paypal, from an account (highly illegal without authorisation).

The first is what most people possess and have arranged. I haven't had any problems with Paypal in this regard. But have heard of funds being 'held' and not released when transferred, and advise that as soon as your get that Notification of Payment - you tranfer these funds at once (however small). This will stop Paypal from withdrawing your funds.

Even if they do keep your funds, I think this would be highly illegal and some authority would have shut them down by now (Department of Trade and Industry have incredible power and can do this very easily). Personally, I think this direct debit arrangement that WebmasterWorld members are talking about is not the standard debit arrangement usually associated with Paypal, and is a seperate arrangement.

Bear in mind that access to anything such as a bank account (without permission) is a serious legal issue, and you can find remedy in the courts of law in your respected Countries.

Key bit of advice is never grant access in the first place. And not something where the money isn't yours eg: a credit card!

There is a website that deals with this and it's Paypal Sucks [#*$!.com...]

In the UK, we have a consumer TV programme called Watchdog, Paypal have regulary been featured, but this is to do with security issues when trading with their sister company Ebay. Personally, if PP started robbing people's bank accounts, they would be in serious trouble, not to mention the bad press. It would destroy them, certainly Paypal would get closed down by the DTI, and seeing as Ebay relies a lot on Paypal for transacations, Paypal are not going to chance annoying members.

Yes this would be a theft issue. There are things you can do.

[edited by: Helpinghand at 12:57 pm (utc) on May 28, 2007]

oddsod




msg:3351874
 5:44 pm on May 28, 2007 (gmt 0)

Department of Trade and Industry have incredible power and can do this very easily...Paypal would get closed down by the DTI

The DTI - or the Dept of Timidity and Ineptitude as one major UK newspaper insists on calling them - has no ability to close Paypal down. And the UK government is looking to close the DTI anyway. I wouldn't be too complacent about the government protecting you against Paypal. Paypal have even moved their operation overseas to be further out of the reach of the authorities.

Bear in mind that access to anything such as a bank account (without permission) is a serious legal issue

You've given them permission to access your account. They are insisting for that permission before they verify you. That's the problem!

Helpinghand




msg:3353023
 1:39 am on May 30, 2007 (gmt 0)

has no ability to close Paypal down

I have a friend who worked for an Insurance firm, his boss was investigated by the DTI for fraud, he was found guilty in a UK county court and got 10 years. His company was shut down by the DTI -Trading Standards officers went in and physically shut it down.

Paypal's verification is just to confirm that you own the account - nothing sinister, ofcourse if Paypal decides to hold payment for it's own ends, then it's a legal matter.

Personally, I don't feel that comfortable with Paypal, but it's better than shelling out 800 with Worldpay isn't it. If folks are that worried by PP activities, then just go to your banks and ask for the direct debit mandate to be cancelled. Paypal cannot stop it.

Loads other merchant providers out there - I don't see the problem.

[edited by: Helpinghand at 1:46 am (utc) on May 30, 2007]

Key_Master




msg:3353029
 1:57 am on May 30, 2007 (gmt 0)

I'm verified with a credit card. I don't believe you can use any old credit card though (could be wrong though). Mine is a PayPal Plus Mastercard issued by GE Money Bank.

You can dispute a credit card charge. It's a lot harder to dispute a direct deposit debit. No way would I allow PayPal have my checking account details.

oddsod




msg:3353277
 10:17 am on May 30, 2007 (gmt 0)

I have a friend who worked for an Insurance firm... His company was shut down by the DTI

And his company was Luxembourg based? If not, it's not really relevant here at all, is it? (Please read previous comments about Paypal moving out of the UK). I maintain that the DTI can't do a damn thing to Paypal. It would be foolish to continue believing you have a safety blanket there - you don't.

PayPal (Europe) Ltd was a UK company regulated by the FSA. Paypal (Europe) Ltd has transferred all its operations to PayPal (Europe) S. r.l. & Cie, S.C.A. (PayPal Luxembourg). Your contract is moved there too. You are no longer dealing with a UK company regulated by the Financial Services Authority. There are a lot of blind people who've missed this pretty major change in their contract.

then just go to your banks and ask for the direct debit mandate to be cancelled

There is something else you seemed to have missed in the OP: so you give them the mandate to allow them to verify you and then remove it. Guess what - yes, you suddenly become unverified again!

Helpinghand




msg:3353714
 5:40 pm on May 30, 2007 (gmt 0)

Paypal (Europe) Ltd has transferred all its operations to PayPal (Europe) S. r.l. & Cie, S.C.A. (PayPal Luxembourg). Your contract is moved there too.

That's Ebay's address, and your saying it's paypal's as well?

Hang on, Paypal europe still quotes it's address as:

Hotham House, 1 Heron Square, Richmond upon Thames, Surrey TW9 1EJ.

Now ofcourse, it may be likely they didn't change these details, but are still quoting them on their site. Paypal UK Telephone number is still a UK one: 08707 307 191.

I think I'll ring them tomorrow and check if they are still there. I think they still operate a call centre over here.


You are no longer dealing with a UK company.

Can you direct me to a news story confirming this? I must have missed this one. Not that I instantly trust what a UK newspaper says, but I'll give you the benefit of the doubt. But I'll call them for my own satisfaction.

There is something else you seemed to have missed in the OP: so you give them the mandate to allow them to verify you and then remove it. Guess what - yes, you suddenly become unverified again!

No, I don't think I missed anything. Just that what you just said is pretty obvious and most people with a brain will at least ask Paypal what is going to happen with their accounts. Which leaves them with a choice doesn't it, they can either use Paypal or go elsewhere.

I'm not scared of telling Paypal where to go... You are the customer that pays them the fees thus you can simply stop paying them. This may not shut paypal down, but if enough people follow, it sends a powerful message.

The customer is king and number one!

oddsod




msg:3353721
 5:49 pm on May 30, 2007 (gmt 0)

what you just said is pretty obvious and most people with a brain will at least ask Paypal what is going to happen with their accounts

Going by the replies in this thread it's obviously not a hot issue for people and I'd be surprised if even 10% of Paypal customers asked Paypal whether they'd get unverified by breaking the DD.

Can you direct me to a news story confirming this?

Paypal emailed you about two weeks ago. You probably missed the mail ;)

Helpinghand




msg:3353928
 9:51 pm on May 30, 2007 (gmt 0)

Paypal emailed me about their European Plans? lol - I don't think so mate.

Oh, and the Paypal.com site, still has a big logo pointing to the uk site, so that tells me they haven't shut anything down yet. They have 15 million accounts - I don't see them transferring that lot, it would be a nightmare to reorganise.

Na, they might have new headquarters, but so what if they buy a new head office, who cares. New headquarters has nothing to do with billing, and hasn't affected my billing or payments or security in any way, shape or form.

There is nothing to worry about. If you are saying they emptied your bank account, then yes - sure that is news worth talking about, but I haven't seen that here, so what's the big deal. Some authorisation process... - and? Look, if you want the account, then they Paypal, have to know who you are, and that you're not some mad bomber or Nigerian letter scamster or whatever. It's just security is all.

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