"I told her that the money generated by the pre-orders taken through the web site effectively pays for the production and distribution of the book [...]".
Same post as most of the time. Someone takes money through Paypal for a product that does not (yet) exist, without reading Paypals terms, then money gets frozen, then people start to cry.
PayPal Acceptable Use Policy:
"(d) are for the sale of certain items before the seller has control or possession of the item [...] collecting donations as a charity or non-profit organization"
Paypal terms (and here my English might not be good enough):
"Initiation of transactions considered to be cash advances or assisting in cash advances; [...] and listing items for sale that have a delayed delivery date of 20 days or more after the transaction list."
I also found that interesting: "Use of an anonymizing proxy;"
"Same post as most of the time. Someone takes money through Paypal for a product that does not (yet) exist, without reading Paypals terms, then money gets frozen, then people start to cry."
I've got a client who does this every year - he starts taking pre-orders for the new version of his book in September, gets his PayPal withdrawals suspended in October, ships his books late December, and gets his money around the end of January. He's happy to keep doing it that way, 'cause he's using the pre-orders to accurately gauge demand and to decide how many copied to get printed, rather than as a way of pre-funding the production or printing costs.
(The fact that it's played out identically for ~4 years now also includes the bit where he gets a bit drunk over xmas/newyear and rings up any PayPal phone number he can find and swears abuse at whoever answers… It's much more likely to be that which ends up getting him banned from PayPal than the $20 or $30k of transactions who's funds they get to hang on to for 3 or 4 months every year)
Simple Rule: You can't take pre-orders (be it for physical products or events) via any kind of credit-card payment system without pre-agreement with your credit card processors.
If you fail to deliver the product then whoever processed the credit card orders is going to be on the hook for payments when the consumers run chargebacks. Obviously they don't want this risk.
So if you want to do this you need to come to an arrangement with your credit card company before-hand (for example letting them hold onto all the cash until you've delivered the goods).
Yes these people broke the rules, but it seems that PayPal hasn't told them which rule they broke! How hard is it to say "preorders are not allowed, so we froze your account"
Because that's probably not why they suspended their account, PayPal suspended their account because it triggered a potential fraud tripwire.
The owner just won't be able to unsuspended the account because they're in violation of the rules. If they weren't in violation they could just supply the required verification documents and get their account unsuspended.
A big part of the problem is that fraud prevention is HARD.
Worse, it's prone to expensive scaling laws, and more so if you want to catch edge cases, and much more so if avoiding false positives is critical.
Any PayPal successor which is successful enough to become an interesting target for fraud will have to deal with exactly the same problems, possibly causing service to break down in similar (or equally problematic) ways.
Fraud prevention is hard, customer service is not. PayPal works hard at fraud prevention but totally abandons customer service. All they need is a few people who have authority to actually help. If a company the size of amazon can do it, so can PayPal.
Good customer service is expensive. Paypal doesn't sell itself on customer service for sellers, since it perceives (probably correctly) that those sellers using Paypal have nowhere else to go.
The patent on a fraud-free electronic payment technology has come and gone. The banking industry relies on the existence of fraud, because it decommoditizes money into an identity-based instrument - akin to ISPs wanting to provide bundled "differentiated services" instead of moving opaque bits. Information commoditization causes frictionless competition, which makes for a race to the bottom and much less profit.
Yes, they would. With a traditional merchant account (as you apply for to directly accept Visa or Amex), you declare your expected monthly volume and average ticket size on the application. If your actual processing deviates from those values significantly, the risk department will almost definitely hold your funds in a reserve account until they straighten things out with you and establish you're still operating within the bounds of the risk profile established when they opened your account.
When I got my first merchant account, I declare those numbers based on the current state of the business: About $1000/mo. I never revised those numbers in the 6 years I had the account. When I sold the company, we were doing +$1MM/yr. I've never had this happen on any other merchant account I've used since.
Obviously YMMV, but that's just my experience with risk tiers.
My first start-up was almost tanked immediately because of a crappy merchant bank (Cynergy, if you're wondering). We got our first large order, much larger than we ever had before, and it exceeded our average daily balance in our bank account. They froze the funds for 6 months since that's the potential chargeback period. Meanwhile, we had to foot the bill on the material as we were a hardware company and had to float those funds for a while. Our margins weren't so high that this was a simple matter for us.
We ended up switching to a merchant bank that was better for online transactions. Cynergy ultimately released the funds as three different disbursements after we closed our account and decided to charge us account activity fees for those three months as well. It was frustrating to say the least.
Could that risk not have been averted by paying closer attention to merchant agreements and shopping around more?
Your merchant account has a limit. When you're about to blow it out of the water, you pick up the phone and call your merchant and talk about it, not wait for everything to go into automatic investigation fraud hell.
There are no flawless , fire and forget payment solutions that scale to any amount out there, there are just too many variables.
Possibly. But I've never actually been given a merchant agreement with any of the accounts I've ever set up. I've been given a rate sheet and little more beyond that. Shopping around is hard when you effectively have no prior business history. This has gotten a bit easier in recent years and Stripe makes the issue a bit moot. But, the point is the grass isn't necessarily greener and merchant banks can and will freeze funds if they think doing so will avert a bad outcome in a risky situation.
With an established account, it is a non-issue because they have the chargeback history. New accounts are monitored differently because of the potential for abuse. Had your chargebacks spiked, your merchant bank likely would have withheld funds.
While this may be true, this also doesn't always hold. I was treasurer for a student union and if people signed for it, we would take the money directly out of their bank account ("automatische incasso", very normal over here). Doing this requires a contract with a given limit and number of transactions. I tried to get the limit raised, but they refused, so I just went over the limit and no one ever ever complained. Had no chargebacks, but still, doesn't seem like a very safe situation.
Believe it or not, yes. You have to make them (through the arm they entrust with safeguarding them against risk, your Acquiring Bank) aware that you are expecting a large increase in your transaction volume so that you do not get shut off.
From what I understand they have tiers for assessing risk level, if you're not approved for a higher tier and try to cross the threshold your account will be flagged and cut off automatically until they can investigate/approve.
The difference is that when this happens you have someone to call and tell you what's going on. If you ask nicely, maybe you can even get a ballpark estimate for when something should happen next. You know, people acting professionally and such.
They almost certainly will not unfreeze the funds if your bank account can't cover the amount. All credit cards allow the customer to chargeback. If you're no longer solvent, the merchant bank eats that loss. So, they do whatever they can to prevent that.
You know how they call the founder of Paypal the "Paypal Mafia"? It makes me wonder if that wasn't just an endearing term, but somewhat hinted at the culture of shady business practices that is still prevalent in the organization.
I had Paypal instate a 21-day holding period on all money coming into my account for a while, making buying/selling of things (I sell X, and I buy Y as an upgrade) nearly impossible. I'd never had any refund problems on my account- ever. Emailing support got canned responses about how this is for my safety, and partially because I don't do regular business that they can pattern out on my account.
Then about 8 months later, they removed it. No reason why I was suddenly more safe than before. I've had the account over 10 years. Zero problems. Yet, they seemed to think there was a problem for a while.
He doesn't strike me as the Mafia type. The founders of paypal have long gone. Initially paypal wasn't all bad but the got worse over time and after the sale to ebay the customer relationships (or lack thereof) dropped through the floor.
Bitcoin is generally misunderstood by the HN crowd, but this is precisely one of the problem it solves. If this guy had collected donations in bitcoins, nobody would have the technical ability to shut down his "Bitcoin account" because it "suspiciously received too much too quickly".
Don't downvote me. This is a true design principle about Bitcoin.
I'm so glad you point this out since I think this is the only validly useful feature of Bitcoin. BC has its own problems but it's pretty awesome that transaction costs are nil.
For some reason (maybe it's the fact that I'm currently reading 11/22/63), a picture of a battered wife staying with her abusive husband comes to mind.
This is why I can't wait for a Square or Stripe in the UK. At the moment you have PayPal as your only option to take payments rapidly for say a quick idea you have had and want to hack up.
I've been more than happy with the services offered by Skrill/Moneybookers [1], and AFAIK they have no issues working with UK merchants. Might be worth checking them.
I'm not 100% sure although if you email hello@izettle.com they will probably give you a better idea regarding timescales or may let you in on their testing in the UK - which I know they are doing right now
Depending on your needs, a traditional merchant account or another 3rd party processor like Amazon Payments, Google Checkout, Stripe, 2Checkout, etc. may serve as an alternative.
But there is no equivalent substitute for PayPal. There is no no-monthly-fee, no-credit-check, no-application 3rd party processor that lets you accept all major credit cards, eChecks, bank transfers, and includes all 190 countries and regions PayPal supports, including those where credit cards are uncommon and Google/Amazon/etc do not offer accounts.
In addition, of the fee-free services, Paypal may be the only one that does not require end customers to make accounts to use it. This is, for me, by far the biggest disadvantage to the otherwise competent Google Checkout product.
I think you have to be more specific with your question. If you are you dealing with international funds, or you are outside the US, I don't think there is. Maybe Google checkout?
But I know the answer to the question "Is there anyone else who can match PayPal feature for feature?" The answer is a clear and resounding no.
If some unusual activity triggers a warning, I don't mind PayPal putting an account up for review in order to keep the system safe. But they should do it quickly and provide some way for the account owner to see what's going on instead of just freezing the funds and going radio silent.
I'm sure one reason they move so slowly is to give everybody involved enough time to notice if money is missing and fraud has occurred. In which case PayPal will still have the money to issue a refund. I do appreciate that as a buyer. But as a seller, the way they're handing it can be disastrous for a business that is relying on their service.
Paypal once froze my account too (it had about $3000 in it then). I got it solved over the phone in about a week, but the customer service was really really hard to work with. And here's an anecdote:
When I called the customer service for the first time, gave them a few details, up until the point I was from Romania.. their (clearly shocked) reaction: "Aaah, you're from Romania ? Let me redirect you to our India office". WHAT ?!? Are you kidding me ? Romania was in the European Union back then already, and I was already assigned to the Ireland branch of Paypal (an email about that was sent).
"you are now at the mercy of the customer service representative, who is asked to make “a judgment call.”
Wrong, the CSR never makes judgment. This is for services like Account Review. So you can yell at or sweet talk to the guy on the phone, it won't change much.
Anyway it's sad that PayPal shows almost no progress year after year to handle legitimate "small" business, especially when they cancel transactions of goods already delivered. But people need to READ THE TOS. We're talking about MONEY, being on a shiny Internet website does not change that fact.
In the phone call I had with a PayPal executive after the Christmas debacle, It was stated to me that when an account is frozen for bringing in too much money too quickly, the CS representative taking calls is asked to "make a judgment call. " In our case, "they made a very, very incorrect one."
That's my entire complaint with this process. In any other business, a good customer who makes you money gets dedicated customer service. Your account is treated carefully. That's not how they do it there.
I also want to say that I understand the compulsion to lay blame at the feet of the person being screwed over in stories like these ("They used the wrong button!" "They didn't read the TOU!"). Human nature is such that we have to find fault with the person on the receiving end of treatment like this. We desperately want to believe that if we'e very good, nothing bad will ever happen to us.
>I also want to say that I understand the compulsion to lay blame at the feet of the person being screwed over in stories like these ("They used the wrong button!" "They didn't read the TOU!"). Human nature is such that we have to find fault with the person on the receiving end of treatment like this. We desperately want to believe that if we'e very good, nothing bad will ever happen to us.
I'd say this is roughly 50/50. While Paypal's customer service is legendarily bad, and there's no excuse for not providing a method to talk to a live human, there's also no excuse for not reading the T&C and knowing what you can and cannot do, moreso if you're a business. This is a friggin' payment processor. One of your lifelines as a business. Not reading the terms is one of the dumbest possible things I can think of doing.
And this isn't a case of fine print, either. It's not hard to find Paypal's policy on preorders, or other things which you are specifically not supposed to do, and in fact agreed in advance not to do when you signed up.
You'd think that people knowing in advance that they're dealing with the devil would make them scrutinize the details that much more...
I stand corrected then. Process must be different when they call.
You are right about the human nature. Marketing is also to blame. You read "Accept money now ! click here and be ready in 5 minutes." so that's what you start doing, and it works great for a moment.
Unfortunately, its impossible to get the email of a real singular person at Account Review to interact with, let alone get them on the phone, or even fly there to meet them in person. Sounds absurd, but if I had to buy a $200 plane ticket to get $20K unfrozen, I'd do it.
Instead, they just stonewall you, keep the fees, hold your money and provide no way for you to make things right.
I am a former PayPal Resolution CSR and I was always making request for the fees to be refunded and it was usually accepted. It was ridiculous to the point that account was suspended because of a negative balance due to fees.
I have heard of people coming to the call center with baseball bat to get their money, so paying a place ticket is not that stupid :)
Any tips to how to actually deal with Paypal when something goes "bad" on your account (frozen, 21-day holds put on it, etc, etc) and you really need to talk to a human and get real resolution?
I must say we were trained to give the best service. Now resolution cases can be hard to figure out for an agent (especially as no one is assigned to an account, so it's random at each call).
Now, as in a lot of companies, you can try to be an asshole, call again and again, ask to be called back, send mail after mail, ask to speak to a senior agent etc. At some point it can trigger a special handling of your case, but everyone want you to disappear.
It almost feels as if someone at Paypal read my comments today and acted on my account just for fun. It turns out that around 2 hours after posting this I got another one of the lovely "we're holding your money for 21 days" letters, which is really annoying. No returns on my account, no complaints, nothing. Fully verified and long term customer. I happened to buy/sell a few things and used Paypal for payments, and I almost feel punished now for using it.
I'm going to try and get in touch with customer service, but I have the feeling I'm going to get a stock response that's cut/pasted.
Last week, Google decided to ban my Adsense account and refund advertisers because my website was a risk. The money was there for years and I removed Adsense from my blog YEARS ago. I can't contact anyone about it and can't enter Adsense now for any new website I would make.
I believe that Paypal (and judging by the comments above: banking institutions and credit card companies) are going to these customer-service-destroying efforts at fraud prevention because the regulatory environment forces them to do so.
If so, lets put aside the question of whether it is "right" to put the responsibility of service abuse on the service provider, but instead ask the question: is any of this really in our best interests? It seems to me that a consumer population would be better served by not being artificially protected and thus completely off-guard when they do get caught in a scam. Any payment processed online should be done with the same amount of wariness and forethought that a purchase at a brick-and-mortar retailer would be.
Now, it's possible that I'm wrong here and Paypal is actually doing all of this as some sort of verification service to provide a fraud-free environment for payers (i.e. paying with paypal will never be a scam). If that's the case , then this is a really ineffective way of going about it. It seems like a great deal more upfront investigation and analysis would be appropriate. I would take some of the peer-to-peer lending services as a model.
True, this certainly could be just a bad policy on Paypal's part. However, if there is even a remote possibility that Paypal could be held liable for fraud using their services then I can sympathize with "shut them all down" approach. After all, like garbage mashers, some things should not be trifled with.
Fraud is hard especially for a small eCommerce store because of chargebacks. Unlike a brick and mortar store who can show the credit card association physical receipts with signatures, a video recording of a customer purchasing an item from a store, or ask a customer for an ID, online merchants can only show shipping receipts. These are often not enough. Chargeback policies are skewed towards buyers. The funny part is that this is only mostly true in the US, Canada, and Europe. If you're a credit card owner from another country (especially in Asia) it is very difficult to file for a chargeback.
We all accept that Paypal probably have a hard job to weed out frauds etc, but they could improve things immensley by just making sure their phone support people do not patronise and talk down to customers when they freeze their funds. I had a frozen payment once and the needless beauracracy and petty attitude coming out of those Paypal phone operators is truly mind blowing. If you ever have to deal with this sort of situation it just turns you right off PayPal altogether.
Why is it everyone assumes that making a pity post on the internet will fix their issues with PayPal? File a suit in a small claims court if you want some relief.
First, it's not always "small claims." In the case of our charity fundraising at Christmas, we had collected $20,000 for those kids. That means real court, with real lawyers, and going up against PayPal's legal department. They will file motion after motion after motion and bankrupt your legal fund.
And really, public airing of corporate bad deeds is extremely effective. After we publicly shamed PayPal for keeping fees on charity donations they forced us to refund, they were embarrassed enough to donate $20,000 to 200 needy families.
Traditional court is not where individuals really have power.
I'd be willing to bet that completely ignoring your customer is a business practice that goes above and beyond the T&C. Unless the T&C says "In the event we flag your account for fraud, we will not touch you with a ten foot pole..."
Again, the problem isn't the automated risk prevention system, the problem is the complete lack of customer service if/when it happens to you.
If Paypal was taking, say, 0.2% commissions, I could understand this attitude. At close to 4%, they need to man up and pay for experienced CS reps with discretion to put things right when their systems slam down on someone who isn't actually running a Nigerian ponzi scheme.
PayPal is what happens when you have a completely unregulated financial industry. They act like a bank, but they have no responsibilities like a bank. Somebody needs to find out what PayPal 'is' and slot it under some existing regulatory agency.
Many have commented on my suggestion that something as powerful as US Congressional action might be required to fix some of the totalitarian behavior of the internet giants.
I do realize that this is sort of thing often comes with collateral damage. I for one don't want to see government in my life. Their function is to do a few things, do them well and stay as invisible as possible. This is far from what we have today.
Yet I wrestle with this issue of monopolies, particularly when they behave as badly as PayPal, Google, eBay and others seem to be doing with some frequency. Because they are monopolies they don't encounter any force that might compel them to fix some of these issues. Under a normal competitive environment participants would improve their offerings at many levels in order to gain points here and there. This would include improvements in customer service because this is most-definitely one item that could sway customers to use one service over the other. Examples of this effect abound.
However, once a monopoly takes root the leverage disappears. The company who owns the market can then focus its attention on activities and policies that benefit them the most. Customer service is hard and it is expensive. Internet companies would much rather have algorithms make decisions. These are cheap and you don't have to feed them. Here the decision is simple: If the collateral damage caused by the brutality of a system without any semblance of customer service is but a rounding error in our revenue: Go forth and prosper. And that's how you end-up with what we are seeing happen with alarming regularity today.
The fact that your business might go down in flames because of their algorithmic decisions is a rounding error in their revenue stream. Devoid of competition there is no incentive to expend any effort chasing after rounding errors.
And so I search for solutions and can't seem to find any. A startup to compete with PayPal? Google? eBay? Not likely. Huge barrier to entry. They are in-effect, monopolies. It could happen, but I would not bet on this approach.
How about a united front of users, bloggers, etc., making a lot of noise in very public ways? Hmmm. Well. If you are in good standing with PayPal and Google, do you want to risk the wrath of the machine and get banned for life? Because that is exactly what will happen in one way or another?
How about suing them? Same issue. You almost can't exist on the internet without using services from these giants. Who wants to risk their wrath? For example, I'd sue eBay and Paypal in a second if I had the financial support and had a reasonable good certainty of a positive outcome. They have both caused me damage in the past with unfair unilateral/totalitarian actions. The problem is that when you look around you can't find a solid way to replace them. I'm willing to bet that thousands upon thousands of people just take it on the chin and move on precisely because of this effect.
And so, that leads me to where I really didn't want to go: Governmental action. The only way to kick these giants in the nuts seems to be to meet force with force. As consumers of the services of monopolistic companies we have no leverage whatsoever. None. However, we do have the ability to get our government/s to take note and take action with overwhelming force. This is just about the only kind of fight that monopolies are afraid of. Everything else might very well be an exercise in futility.
So, how does one get the ball rolling on something like this? While I have not been affected at the level that some of these stories relate I've had enough of a taste of how these machines work to be very concerned that one day I could incur tens or hundreds of thousands of dollars of damage because of these unfair practices. I would prefer to see them corrected before that happens.
What's the consensus among HN users? Is this something worth pursuing?
What could be the repercussions for a bit of law that says "If you hold customer money in an account, you cannot simply close and freeze the account without a certain set of procedures and an appeal process that looks like x"?
A bank can't do it. A stock trading brokerage can't do it. There are even laws to protect you from a company deciding suddenly that your gift card money is all theirs. (These laws are newish -- they can charge a small maintenance fee after x mos, but THE MONEY IS YOURS.)
There's no reason why Google or PayPal should get away with more theft than Macy's Gift Cards department.
This comment will no doubt drift out of sight, however:
Whenever this perennial "PayPal screwed us out of X monies" comes up (and I've seen it about 7 times in the last 3 years), no-one seems willing, or able, to actually understand why it happens.
It's this simple:
PayPal is an American company, and so has to obey US law, and in particular, financial regulations over money laundering.
[i]Section 351: Amendments Relating to Reporting of Suspicious Activities
This Section expands immunity from liability for reporting suspicious activities and expands prohibition against notification to individuals of SAR filing. No officer or employee of federal, state, local, tribal, or territorial governments within the U.S., having knowledge that such report was made may disclose to any person involved in the transaction that it has been reported except as necessary to fulfill the official duties of such officer or employee.
Section 352: Anti-Money Laundering Programs
Requires financial institutions to establish anti-money laundering programs, which at a minimum must include: the development of internal policies, procedures and controls; designation of a compliance officer; an ongoing employee training program; and an independent audit function to test programs.
Section 356: Reporting of Suspicious Activities by Securities Brokers and Dealers; Investment Company Study
Required the Secretary to consult with the Securities Exchange Commission and the Board of Governors of the Federal Reserve to publish proposed regulations in the Federal Register before January 1, 2002, requiring brokers and dealers registered with the Securities Exchange Commission to submit suspicious activity reports under the Bank Secrecy Act.
Section 359: Reporting of Suspicious Activities by Underground Banking Systems
This amends the BSA definition of money transmitter to ensure that informal/underground banking systems are defined as financial institutions and are thus subject to the BSA.[/i]
PayPal is legally required to both freeze accounts for review under the Patriot act when large sums of money quickly flow into accounts from non-US sources, [b]and[/b] legally required not to disclose the reasons for freezing said funds.
There's plenty more regulations for companies out there, however it amuses me no end to see the short-sighted band-wagon get going.
If you're ignorant of the way these companies work, and even worse, ignorant about what the [i]law of your own country[/i] demands of companies, then please: do the world a favour, and step out of the discussion.
Or, you know, protest against the people who wrote the Patriot Act.
You need to read more closely. No one has a problem with PayPal freezing accounts. The problem is that once they do so, they refuse to communicate with the account owner to resolve the situation.
I can understand that to a first approximation, pretty much everyone whose account they freeze is committing fraud. But there are exceptions, and their processes don't seem to take account of that fact.
There are always those subtle little details that get missed in these discussion.
For instance the site is, right now, taking pre-orders, not orders. There is no published timeframe when they'll actually ship the books that I can see. Paypal only allows you to accept pre-orders up to 20 days in advance of shipping the product to buyers, and even then they can demand significant additional proof.
Because, unfortunately, pre-orders are the classic setup of too many scams (which some random agent probably won't easily be able to eliminate), and it's the domain where PayPal ends up holding the bag. 5000 people pre-ordered some cool internet controller and then maker disappears, etc.
We've been hearing these sorts of "horror" stories for years (wow do people not understand how hard and exclusive the payment process used to be!), yet despite PayPal still being relatively small -- especially compared to the banks and credit card companies -- no one is credibly doing what they do. Maybe because they're doing something rather hard?
This isn't just a PayPal problem. All of the large Internet companies have this totalitarian approach to customer service. Google, Paypal, Ebay, etc. One bit goes from 0 to 1 somewhere in their code and you are friggin screwed. Can't talk to anyone. Can't email anyone. Can't SMS anyone. Can't even send smoke signals.
It's a totalitarian hit-them-with-a-hammer approach that truly needs to end.
I don't know what it will take for this to change but it has to change. For example, AdSense alone has left a trail of destruction like no other service out there. You read stories all the time about legitimate businesses being cutoff for no apparent reason without even the possibility to engage in dialog.
This thing with PayPal is downright scary. Having done tens of thousands of dollars of business with PayPal its one of those things that can keep you up at night.
The problem isn't the suspension of accounts for investigation. I welcome a responsible approach to preventing fraud at all levels, as a consumer and a vendor.
No, the problem lies in the fact that they don't engage in any kind of mutually-constructive dialog in order to try to determine whether or not there's a real problem. By not doing so they can ruin people's lives and, because they have so much money, they don't really care because it causes them no pain at all.
I for one hate government burrowing too deeply into anyone's affairs. However, this is one case where I find myself really hoping that one day we'll see Congressional action here in the US in order to protect us from the monsters that these huge corporations have become. Remember, vendors are customers too, not just the end-users/buyers of products and services.
You are completely right. The problem is certainly not "fraud monitoring", and it's not a problem specific to Paypal either.
The problem is in the attitude. Being French, I'm well-trained in dealing with soulless bureaucracies; but with the French administration (or probably any public administration in most countries) there is always a way to escalate the issue; and if you were right, you very usually win.
But these companies are judge, jury, police and executioner. This can't go on forever.
I totally agree - there is a total lack of responsiveness to any communication or contact by all of these internet giants once their "systems" determine that you are guilty. It is a one-way, dead-end street. Surely, all of them must realize that no matter how sophisticated their pattern matching algorithms and fraud detection mechanisms, they can be prone to error. This may be by design though - these companies have no problem with systems with a high false-positive/Type I error rate (convicting innocent people), as long as they can decrease their False-negative/Type II error rates (letting guilty people go free). This is of course the exact opposite of how the rest of our legal and court systems are designed - and therefore the frustration and dissonance.
Many times, when dealing with fraud, the damage done by a false negative completely outweighs the damage done by a false positive. This is almost always the case for the company, in some cases it's also true for other users involved. Thus, companies are frequently OK with having a high false positive rate in order to get the false negative rate to be close to zero.
The company obviously realizes it has a large number of false positives, and it's probably decided that it's worth it.
There's nothing wrong with deliberately having a high false positive rate. Airport security does that too. The problem is if you treat everyone who gets flagged up as irredeemably guilty even though you know you have a self-positive rate.
This would be akin to having airport security send anyone who sets off the metal scanner to a maximum security prison without right of appeal.
Very true, they definitely should dig a bit into their margins to provide a method of appealing the decision - I think it would actually help them quite a lot on the PR front, so it might be good even from a bottom line perspective.
I too have had issues with Paypal, albeit it was just an account used for eBay purchases. Someone sent me some money, that person was somehow related to some fraudulent transaction so my account got blocked. They then wanted lots of ID and proof of my purchases for my sales... well I had only sold one old mobile phone on ebay... they repeatedly asked for this until someone with 2 brain cells had the bright idea to look up my sales history, and then they blocked my account anyway!
I try not to buy of ebay or use paypal now (it wasn't difficult to open a another account - different card/address), I would rather pay a little more and buy off Amazon who in my experience have the best customer service I have ever experienced.
"It's a totalitarian hit-them-with-a-hammer approach that truly needs to end."
In my mind, this behaviour can be explained as the one of a monopoly. PayPal is probably a great service in the vast majority of cases, but the behave unacceptably in a number of exceptions. And it would not even be very hard to solve, because it seems to be mostly about process, transparency and communication.
This is quite similar to the treatment you get from many government services, which happen to be organized monopolistically as well.
Once there is a true choice for these basic services like text ads, auctions and online payment, this would likely end quite quickly.
There is probably something in the structure of these businesses that makes them come pretty close to natural monopolies. Maybe internet users should actively start to pick always the second biggest provider for everything in this space. But I would not be able to tell you a name for payment service and auctions site that was to fit that description.
I wonder if US Congressional action would solve this? There are other options in the USA instead of PayPal, but outside the USA PayPal is sometimes the only option (if it's available at all, I wonder what Africans will tell you about PayPal). So in the USA, there is starting to be a force to make online payments better. But not outside USA. So if the USA brings in some law, will PayPal, the Luxembrugish bank, have to abide by it? Probably not.
What it boils down to is the scale that these organizations operate and the limited investment in customer service means that CS operations can't spend the time to understand problems. They build a decision tree that doesn't capture the subtleties of the real world and then implement it in a draconian way giving no autonomy to the people implementing the decisions. This is how a Strad copy violin can be seen as a fake when copying Strads has been a common and accepted practice for centuries.
I always said that the service of all online companies is great until something goes wrong. How they handle mistakes and problems is the real test.
Well, the voting system in HN is friggin broken. It's too easy for fan-boys to push you down and out of a conversation. I've experienced this many times. It's sad only because these are generally good discussions. However, if you don't tow the "company line", if you will, you'll get punished with down-votes. All this promotes is a uniform culture of fan boys or, what is worst, an audience that does not participate due to the futility of it all.
Down-vote away.
It'd be easy to implement a set of rules that could make it fair. For example, limit the rate of change on any given post so that it can't be attacked by a barrage of down votes by fan boys. This would open up a post to a wider non-ideological audience and allow it to float or sink on its merits rather than whether or not the author pandered to the fan-boy culture's point of view on all fronts.
Further to that, nobody should be allowed to down-vote silently. That's chicken-shit. If you down-vote you need to state why you are doing so and subject your view to the same peer review, if you will.
Another interesting idea is that down-voting costs you a significant amount of karma points. And, if you go below a certain number you are ejected from HN. Now people are likely to think twice before down-voting on ideological basis because they'll stand to loose something.
All said, HN is still tolerable but it really is frustrating to be down-voted when purely on ideological basis rather than on based on the merit, accuracy or veracity of a post.
Anyhow, the PayPal, Google, eBay, etc. problem is not likely to be solved by yelling and screaming on blogs and HN. I firmly believe that massive legal action, and, more than likely, in the US, Congressional action, is the only light at the end of the tunnel. They are too big and just can't be hurt or bothered with any other approach.
Anyhow, the PayPal, Google, eBay, etc. problem is not likely to be solved by yelling and screaming on blogs and HN. I firmly believe that massive legal action, and, more than likely, in the US, Congressional action, is the only light at the end of the tunnel. They are too big and just can't be hurt or bothered with any other approach.
Be careful what you wish for. Congressional action forcing PayPal, Google, et. al to provide better customer service sounds great for consumers, but unless the legislation is very narrowly focused, it will just end up being another piece of regulation that protects incumbents and punishes newcomers (e.g. by imposing an untenable customer support burden on bootstrapping companies).
Exactly my point. If we use the government to protect ourselves from PayPal, we have to be careful not to kill WePay, Stripe, Dwolla, Gumroad, etc. in the process.
True, people downvote if they don't agree. without even giving a reason. While downvoting should be for eliminating spam and comments that don't add to discussion.
It's insane though, I just went through an issue approving my adsense account that took over a month. No replies, info, nothing. This is the life blood of the companies and they have so much money you think they would get on top of it better.
I don't buy it. I've done suspicious transaction monitoring for a very long time, and no, it's not that hard.
Certainly not hard enough to prevent your CS people from even giving out a phone number to call for support. Most certainly not hard enough to not be able to address quickly.
Financial transaction analysis is an old science. Experienced people are hard to find, but not exceedingly hard. Systems already exist to mine the hell out of data to tell the scammers apart form the genuine people. An of course, you can build your own system and whatever analysis you want.
And how big do you have to be to be able to afford this? Not large at all. I think you overestimate the difficulty of catching bad guys.
You should note that the recurring complaint is NOT "PayPal froze my funds". The complaint is "PayPal froze my funds and then refused to communicate at all with me". This points to incompetence and lack of consideration much more so than "This shit's hard, yo!"
So, no, financial transaction analysis is not hard enough to screw over your customers.
The notion that pre-orders are scary or generally disallowed has nothing to do with "scams": legitimate people just trying to get business done, who have established names or even good track records, don't always come through on these orders. It is not appropriate for those companies to be mitigating that risk using the credit from their merchant account; in this specific issue, PayPal can even get in trouble for allowing pre-orders to happen using their card providers.
As for Regretsy's continual lack of ability to get CS from PayPal, as someone who has often spent egregious amounts of time talking to PayPal, I honestly think Regretsy is doing something wrong. I also personally feel like PayPal should just ban them from using the service: they don't seem to understand how online payments work, and their reaction to normal procedures is to raise a public shit storm... it's just lame, and it shouldn't be getting play on HN.
As for Regretsy's continual lack of ability to get CS from PayPal, as someone who has often spent egregious amounts of time talking to PayPal, I honestly think Regretsy is doing something wrong.
Customer service != fraud department. Google, Netflix & Paypal seem to have similar methods of dealing with "suspicious accounts". Those methods usually involve something along the lines of shutting the account down and then rebuffing attempts to communicate with the people who made the decision. Customer service evaporates once you've been ostracized by their security systems.
I once asked a merchant account provider how larger companies (airlines, for instance) operate by selling stuff way in the future (booking at ticket 5 months in advance, for example), when they were giving me grief about selling a magazine subscription for a year in advance.
"Big reserves on deposit" is what I was told.
It's probably not quite as simple as that, but I suspect being able to demonstrate a degree of financial solvency (airlines? really?) and having funds in reserve would go a long way towards paypal working with you more. In fact, I think paypal ends up holding some of your funds for you as a reserve against chargebacks after certain conditions are triggered, no?
"It is not appropriate for those companies to be mitigating that risk using the credit from their merchant account."
If I'm not mistaken, if this were an actual, say, visa merchant account, all parties would have much clearer rules laid out. The customer would be protected "they didn't deliver, I'm not paying". The merchant doesn't get "credit" per-se..... they have to deliver goods or the charge-backs start, at which point they are up shit creek, along with possibly their substantial deposit with their merchant provider.
Paypal does not work like a normal merchant account for credit cards - people need to remember that - that's why we have these horror stories.
If a credit card processor tried to pull this stuff they'd have their visa contract yanked in a heartbeat and thir merchant banks would drop them like a hot potato.
The notion that pre-orders are scary or generally disallowed has nothing to do with "scams"
I rather liberally misused scam to mean "sloppy or negligent financials" -- like "let's take lots of pre-orders and with those funds maybe we'll be able to make something happen!" When businesses need to front-load financing from their future customers, the likelihood of failure increases dramatically.
I think it actually is quite difficult, nearly all of PayPal's competitors were bankrupted by fraud (early on it was organized Russian crime rings).
"The origins of Palantir go back to PayPal, the online payments pioneer founded in 1998. A hit with consumers and businesses, PayPal also attracted criminals who used the service for money laundering and fraud. By 2000, PayPal looked like “it was just going to go out of business” because of the cost of keeping up with the bad guys, says Peter Thiel, a PayPal co-founder.
The antifraud tools of the time could not keep up with the crooks. PayPal’s engineers would train computers to look out for suspicious transfers—a number of large transactions between U.S. and Russian accounts, for example—and then have human analysts review each flagged deal. But each time PayPal cottoned to a new ploy, the criminals changed tactics. The computers would miss these shifts, and the humans were overwhelmed by the explosion of transactions the company handled.
PayPal’s computer scientists set to work building a software system that would treat each transaction as part of a pattern rather than just an entry in a database. They devised ways to get information about a person’s computer, the other people he did business with, and how all this fit into the history of transactions. These techniques let human analysts see networks of suspicious accounts and pick up on patterns missed by the computers. PayPal could start freezing dodgy payments before they were processed. “It saved hundreds of millions of dollars,” says Bob McGrew, a former PayPal engineer and the current director of engineering at Palantir."
Well, he got his info through a game of Chinese whispers. He heard it from a Palantir spokesman, who got a brief from Palantir PR, who got a brief from the Director of engineering, who got it from meeting with a dozen scientists and engineers. So you can see that along the way, stuff got simplified and bastardized to the utmost.
And you run a bank which operates across the entire world with hundreds of millions of customers?
Don't make the mistake of imagining that because you've worked in the same space as paypal that you have a grasp on the true scale of the problems they face.
Amen - you hit the nail on the head. Their CS phone people are truly loathsome individuals, seemingly on a never ending mission to patronize the person on the other end of the phone.
No. It is ALSO a problem that they are freezing accounts. They shouldn't be doing that. It's not really Paypal's job to pretend to be policing fraud in this way.
They have no business arbitrarily freezing accounts for months. None. It doesn't matter how much or how little customer support they have. That's wrong.
It is their job. They assume the risk, they have a responsibility to their shareholders and their legitimate customers and they have a regulatory responsibility to police fraud as best they can.
If paypal was letting chargebacks run out of control because they refused to police fraud they would have to raise the fee percentage to something like 10%, assuming they could even continue to have any sort of relationship with credit card processors. If that happened their customers would be screaming bloody murder and demanding they do something about fraud to keep things under control.
Not only that, but they would be shut down in just about every country in the world for helping to support terrorism and organized crime by failing at basic do diligence in stopping money laundering et al.
Every other payment processor does the same thing, dude. Especially when you go out of your way and violate the T&C (which as a practicing business, you have no excuse not to read and understand). If they say "You can't do X Y and Z" , where X is say, "Take payments for something that is greater than 20 days from shipping", and then you go ahead and do it anyways..
Welp. It's your own fault. Read the paperwork next time.
The freezes would be reduced to an inconvenience instead of an all-hands emergency if they didn't go out of their way to avoid talking to you. I cannot fathom what kind of boneheaded moron decided that an automatic system flagging your account means you are now persona-non-grata.
Not sure why you are using the words "you" and "your". I'm not the OP and never had my PayPal frozen. I just think they are being unreasonable. :) Also not sure why that opinion is being downvoted, but hey.
I reiterate: I don't care what their T&C says. It's not good business practice to freeze an account for months with no recourse. Period, paragraph.
I don't have a problem with them freezing accounts pending review, or with them going after fraud, etc.
What I do have a problem with is freezing accounts for 180 days with basically no input from their legitimate customers. Yes, I have had Paypal accounts frozen in the past. They are extremely trigger happy here and they do not work with their customers to unfreeze accounts or even get customer information for their review process. Every other processor I know of including ones which address high risk areas of processing (like porn sites), engages in such freezes largely on the short term while review is done in order to determine what steps need to be done in order to bring the site into compliance or terminate the account. In no case is money held for such a period of time or with so little feedback.
Hey! What's with all the down-voting in this thread? I understood HN was a place where down-voting was reserved for trolls, not disagreement ... and "good" down voters explain reasons not immediately obvious.
>Hey! What's with all the down-voting in this thread? I understood HN was a place where down-voting was reserved for trolls, not disagreement ... and "good" down voters explain reasons not immediately obvious.
It's also reserved for stupid, uneducated opinions. Saying that "no, they shouldn't freeze accounts, no matter what, full stop, regardless of how good their CS is" not only adds nothing to the discussion, it's completely silly and flies in the face of the very logical and sensical reasons why accounts are blocked.
I'll say it again here: The problem isn't the automated blocking (which all payment processors do), it's the lack of an appeals process.
Going even further, it is the stated position of most credit card companies that at the time of purchase you are only allowed to take out an "authorization" (hold) on the funds: you cannot "capture" (get) the money until you are pretty much just about to (within 24-48 hours) ship the product.
you cannot "capture" (get) the money until you are pretty much just about to (within 24-48 hours) ship the product.
I'm not sure what the general worldwide fact is for all kinds of payment processing. But it is general practice (not federal law, as I thought before editing this) in the United States that a seller can't actually get money from a transaction paid by a credit card unless the item ordered has actually entered the shipment process.
That's the way Amazon has always billed me, and I think it's the reason that Amazon sends me partial shipments even when I didn't ask for separate shipments when I order several items at once.
I think it's the reason that Amazon sends me partial shipments even when I didn't ask for separate shipments when I order several items at once.
That might be one of the reasons, but I'm sure the usual reason is that the items are coming from different warehouses and the logistics are easier (/cheaper) for each to ship to you directly than for them to shuffle their product around so they can send everything to you in one box.
Same in the UK: You cannot (legally) charge someone for a product ordered over the internet until you have shipped it under the distance-selling regulations.
Kickstarter seems to have interestingly set itself up as a workable intermediary for that: you can set up a Kickstarter that is basically a glorified way of taking preorders, people can pay for them via Paypal, and generally Paypal doesn't cause trouble in those cases.
Isn't Kickstarter sort of like an escrow service in that case? Not sure how that would work, but do know that here in the Netherlands most companies accepting payments on behalf of others (i.e payment providers), have some sort of trust/foundation that owns the company or holds the money.
Huh, you're correct. I had this memory of having funded someone via Paypal, even could visualize the Paypal email confirmation, and I go and look, and it is indeed an Amazon Payments confirmation instead. Weird lapse of memory; sorry for the noise!
In fact, it is specifically due to Amazon Payments simple mechanism for getting a pre-authorized token that can later be captured that allows Kickstarter to run that business
(PayPal now supports this through PayPal X, but did not at the time that Kickstarter was being first released. Getting access to this API from PayPal requires more authorization than from Amazon, but the result is also more powerful: you can hold tokens with no expiration and seemingly no cap.)
Looking through the AdaptivePayments API, the limits on preapproval are one year and $2000, although you can ask to raise those limits on a case-by-case basis.
why dont all these pre-order things sell coupon codes for the actual product? "Buy a Product X Code NOW for 19,99* *product may not ship til dd/mm/yy". wouldnt that solve the problem?
PayPal has horrendous customer service even compared to the worst credit card processor. For example, if you have somebody dispute a charge with a CC processor, you have a chance to refute. Not so much with PayPal.
In fact, they might order the allegedly scammed buyer to simply destroy the thing you sold them instead of letting you refund the money and take it as a return:
Here's something else. When we were planning on setting up PayPal payments to integrate with our app, we went thru the process blah de blah, upgraded our account to Web Payments Pro III or whatever, and suddenly… we weren't able to access our money any more. They decided to hold 30% of all our revenue for 90 days. Forever.
Not just via this new mechanism. But every dollar that passed through our account.
This was after years and years of happily using PayPal and having hundreds of thousands of dollars pass through the account without incident or customer complaint.
Meanwhile when we were a brand new LLC without a credit record to our name, we had no problem getting set up with real "big boy" credit card processing, merchant account, etc., all of which deposits daily. No 30-day holds.
More importantly, if there ever were an issue, these companies have clear, firm policies, and great phone support. I loathe Auth.net for all kinds of reasons, but if you call them, they actually help you. There's none of this "No, I cannot discuss it, and no, you cannot talk to anyone else" crap that PayPal loooooves to pull.
So, while PayPal would like you to think that they actually offer better service, that their hands are tied, that it's somehow not due to them being total capricious assholes… that's just one big stinking lie.
I thought I'd have a very quick look at the claim that PayPal is particularly small compared to credit card companies.
PayPal is a direct subsidiary of Ebay Inc. which has around 11 billion dollars in revenue, so compared to American Express, which has 29 billion in revenue, it is smaller but in the same sort of ballpark.
You know, despite their tiny size, I think they might just about have the available funds and resources to work out fairly quickly if a book for a known cancer charity featuring popular authors is likely to be fraudulent or not. And to provide proper arbitration.
Some customer tells their bank "this charge from Paypal is fraudulent" or "this charge from Paypal is for an item that was never delivered". The bank says to Paypal "prove this is a valid charge or we will take the money back." How does Paypal not have to do fraud investigations in that case?
Even if we accept that Paypal has no place in protecting people from fraud, it's hard to accept that paypal should not try to protect themselves from fraud.
Consider that criminal gangs are huge multi-million dollar businesses that run complex scams and money routing tricks that can confuse governments[1] it's not surprising that PayPal wants to try to protect itself.
Paypal integrates with existing (non-Paypal-run) bank accounts, debit cards, credit cards, and more, and they have to work within the requirements of the integrated financial products, and those products all have fraud-related rules/clauses/legal stuff I don't understand. Paypal has to minimize their liability toward all the other financial institutions they work with. I sincerely doubt Paypal would be able to work with all those other businesses if their stated policy was to just pretend fraud didn't exist.
I did business with paypal about 10 years ago. I had a similar bad experience with them. Despite me doing nothing wrong, and my customers being quite happy with what I was delivering to them, paypal decided to get involved and screw things up.
Attempting to resolve the issue with them resulted in an unending series of demands, many of which were asinine (e.g.: show the original manufacturer invoice for this used piece of clothing you sold on ebay, or show us a contract with the creator of the software you're selling proving you have the right to sell it-- I was the creator, and obviously, of course, a contract from me, signed by me would not be acceptable to them.)
I sent them endless amounts of documentation, but they demanded more, and they lost half of it. Their CSR reps are complete and total assholes-- after all, according to them, I was committing fraud otherwise I wouldn't be dealing with the fraud department, right? (this despite not a single chargeback or dispute on paypal from customers.)
The sad thing was, I did many tens of thousands in business thru them, payed them thousands in fees, had very few customer complaints (and issued refunds when I did or otherwise resolved it)... but they don't care.
I think that my experience and others experience has been out there for over a decade. I'm shocked that people actually use this company-- they are not trustworthy. As far as I'm concerned, they are straight up thieves. (and I'd LOVE them to sue me for saying so-- I'd love to go to court on that issue.)
You do business with paypal, you do it at your own risk. They are not a reputable business.
I don't like Amazon (for a variety of reasons) but at least they are a reputable business. I have my beefs with other companies, but they aren't criminals.
Paypal is a criminal organization, as far as I'm concerned.
In the end, they managed to steal about $600 from me. (I was lucky it wasn't more.)
"I don't like Amazon (for a variety of reasons) but at least they are a reputable business. I have my beefs with other companies, but they aren't criminals."
I have a similar story with Amazon. I was doing business with them for a couple of years. I passed all of their tests (in the beginning, your account is put on hold for 30 days).
2 months ago, I had my first complaint (I have nearly 100% feedback, no complaints, and if there are any problems, I always pay return shipping and give a full refund).
The customer was nasty, spiteful, and didn't want to send me back my goods (it was worth $100+). This was after I immediately apologized for any issues (which to this day, I'm still not sure the exact problem. The message I received was a babbling mess of terrible English) and gave them a return label. I think they scammed me.
Amazon takes the customer's side and gives them a full refund and they got to keep the item. When you email them for support, you get automated responses signed with a name. In the automated response, they told me that I most likely just didn't make the customer happy enough. I should have answered their messages faster (I answered within 5 minutes on a Friday night at 10pm), or I should have made it easier for them to return my product (they just needed to print out the pre-paid label and mail it back).
2 days after this, my account was permanently suspended without warning (they are also keeping $5K of my cash for 3 months). I called them many times and was told that I can only get support through email (this was from a call center in India).
Email support gets you absolutely nowhere. I don't even know if there's a person on the other end. Just automated cookie-cutter responses signed with a name. They most likely do this because they pay people peanuts to answer emails and don't want the backlash of having broken English in the responses. Amazon is also the biggest marketplace for sellers besides Ebay, and they know they can get away with it.
As a marketplace seller, I was giving them thousands of dollars per-month in fees+$50/month for a pro account.
They don't respect sellers at all and I advise anyone wanting to business with them to steer clear.
Perhaps the issue here is that these companies have become too dominate in their markets. Google Adsense, eBay, Amazon, PayPal: they essentially control their niches and there is very little competition to keep them honest.
You should have gone to small claims court, I think it is up to 10000$. You're within your rights to demand money and if your documents are in order then you might even claim punitive damages. IANAL, but I won't sit around when someone steals from me.
If you are not in US and Amazon has no representation then you might be SOL.
What gets me is why these people don't go to court. It would be the best to win in a court of law and plaster that everywhere that that corporation is a crook not publish stories of butthurt and how life's is unfair.
Court sucks, period. Even if you are the plaintiff.
I live in Indiana, where I believe the limit for small claims is 5000$. It costs 135$ to file with the court. Then you are given a date 1-4 months out on a random non-Friday weekday. And you are at the mercy purely of the judge. The last case I was in (medical bills owed), the judge read a spy novel.
The court systems aren't made for any sort of speed or cost. And there's that possibility that you'll lose. Maybe that judge didn't get to smoke his favorite cigar...
Pay for a domain name or web development with PayPal and the person flat out scams you and PayPal will do nothing about it. Nor punish the person who stole your money. They'll just quote you the section of their terms that says virtual goods are not covered and close your case.
Unfortunately they are a necessary evil until somebody disrupts them.
What should they be doing about it? How do they determine whether you were scammed, or you're now scamming the domain/development seller to get whatever you bought for free? As any merchant doing any volume will tell you, the latter is the more common case! A scamming seller will get enough disputes that they'll lose the account fairly quickly, but there's a couple billion buyers out there for whom risking a PayPal account to get free product/service is no big deal.
It's not really something a payment service SHOULD be deciding. That's the job of small claims court.
Same post as most of the time. Someone takes money through Paypal for a product that does not (yet) exist, without reading Paypals terms, then money gets frozen, then people start to cry.
PayPal Acceptable Use Policy: "(d) are for the sale of certain items before the seller has control or possession of the item [...] collecting donations as a charity or non-profit organization"
Paypal terms (and here my English might not be good enough): "Initiation of transactions considered to be cash advances or assisting in cash advances; [...] and listing items for sale that have a delayed delivery date of 20 days or more after the transaction list."
I also found that interesting: "Use of an anonymizing proxy;"