PayPal is a business partner in this setup, and they are shouldering a lot of risk on the developers behalf. I can understand not wanting to share something as intimate as a business/developement plan, but PayPal is within their rights, boty legally and morally, to ask for one. If the developers are having trouble with this, they should find another partner for their venture. (imho)
That said, PayPal can be real douchebags. Too many friends, business partners and colleagues has been burnt by them in the past. If you're doing something nonprofit, move elsewhere.
> but PayPal is within their rights, boty legally and morally
No and no. They're a payment provider, a utility, not a partner. They could have stated up front that they want a business plan or could have denied acting as payment provider. They could have demanded the backers to waive their refund rights. I'd even be on their side if they kept a percentage of the funds as security.
The backers have a moral right to see a business plan, if any person at all has one. It's their money and they did not give it to paypal so that paypal can collect interest on it, they gave it to mailpile and they collectively are shouldering a much bigger risk than paypal in that transaction.
> they collectively are shouldering a much bigger risk than paypal in that transaction.
No, they are not. Financially, PayPal is the one shouldering the biggest risk.
Edit:
> No and no. They're a payment provider,
They most likely have legal obligations in various jurisdictions and with the credit card providers to do due diligence. And looking at business plans and how payments like this will be used is an important part of that. Try getting the same funding directly from a bank rather than going through a middleman and see what they ask for.
Every time a PayPal story comes up, I'm always reading at how the people are innocent and everything is fine, and yet, they are doing something shady.
Here you have an organization that's effectively asking for donations to support a project, but it's not, from what I can tell, certified as a non-profit.
So suddenly yes, that does become high risk. Any banker in the world is going to look at this scenario and know that it's high risk.
> No, they are not. Financially, PayPal is the one shouldering the biggest risk.
Actually not. Let's assume a chargeback rate of 100%. The donated amount was 135 000 USD, the amount PayPal handled was 45 000 USD, so the remaining backers collectively shoulder about twice as much risk as PayPal.
> They most likely have legal obligations in various jurisdictions and with the credit card providers to do due diligence.
They're an official payment provider for IGG. I assume they know what IGG is by now and the risks associated with that. So they can either
a) choose to forfeit that business because it's too risky. Fair enough.
b) Lay out the conditions early: Hey, we'll take the money and keep it for a year. But would would IGG then still offer PayPal as payment provider?
c) eat the risk and honor the implied contract.
> Here you have an organization that's effectively asking for donations to support a project, but it's not, from what I can tell, certified as a non-profit.
Yes, that's what they do. Every backer voluntarily decided to support that business. I backed kickstarter campaings because the project sounded nice and I wanted those people to have a chance to finish their project, because I thought it was a worthy thing to back. I never even touched the finished goods. A lot of open-source projects ask for donations without being non-profits, for example nginx do. Point is: everyone can decide under which conditions he'd like to support a project - certified non-profit or not, but that's not PayPals business.
> So suddenly yes, that does become high risk.
Sure. Nobody denies that crowdfunding is not inherently risky. But see above. Either don't participate or live with the risk. But PayPal is trying to eat the cake and still have it too: They happily took the money and kept the fees, but will neither refund it to the backers nor cash it out. That's shady in my opinion.
Which is the only part relevant to this discussion. PayPal's risk is far greater than 45,000. This depends on how much PayPal is charged for chargebacks, a rate I cannot know.
> They're an official payment provider for IGG. I assume they know what IGG is by now and the risks associated with that.
Yes. Hence the reason for the additional due diligence. Understanding IGG's operations, it makes complete sense that the would oversee individual projects going through on IGG, and doing additional due diligence on top of IGG. You are making a unwarranted assumption that they their diligence stops at IGG. Having dealt directly with situations like this (essentially acting as an IPSP, or basically, something akin to IGG), banks are still required to do their part.
> Point is: everyone can decide under which conditions he'd like to support a project - certified non-profit or not, but that's not PayPals business.
Just because you say it's not PayPal's business doesn't make it so. It's very much their business. The belief that it shouldn't be their business shows a lack of understanding of the area that PayPal operates.
> Nobody denies that crowdfunding is not inherently risky.
Except no one understands all the risks that are involved. Otherwise, you'd understand why PayPal should be asking for how the money will be used, the business plan, etc. These are additional steps that should be taken precisely because of the risks that exist.
Stopping diligence at IGG would be horribly, horribly wrong.
> Either don't participate or live with the risk.
They are trying to participate. They are being denied.
> Every backer voluntarily decided to support that business
But they can still change their mind and go crying foul to their credit card provider. If there was some way to indicate to the card provider "for this transaction I understand the risks and forfeit my right to a chargeback", this wouldn't be a problem. But as it is now, people can say "oh yeah I'm all for crowdfunding", then when the project fails say "fuck it, I'm getting my money back", and PayPal is shouldering that risk.
> They happily took the money and kept the fees, but will neither refund it to the backers nor cash it out
I'm willing to bet if Mailpile told PayPal, "OK, just refund the backers", they would do it in an instant. If they refunded everyone with no discussion or attempts to resolve anything then people would be even angrier.
"They could have stated up front..." - IIRC their ToS stated up front that you can't accept that money at all (i.e., no pre-sales) - but they didn't catch you in time, so they are holding the funds. It's essentially as an escrow, but better than that - escrow would release funds only AFTER shipment, but they are presumably offering to release part of it before shipment according to the requested business plans. And they have no obligation to catch 100% of violating merchants immediately, it's your responsibility to not request payments breaking the ToS.
"They could have demanded the backers to waive their refund rights." : No, they can't demand that - the refund rights are mandated by law and nothing can waive that, consumers have them no matter what any merchant (like you) or intermediary (like paypal) might want or put in agreements; some chargeback rights apply even if they sign in blood "this is an nonrefundable donation".
PayPal is a business partner in this setup, and they are shouldering a lot of risk on the developers behalf. I can understand not wanting to share something as intimate as a business/developement plan, but PayPal is within their rights, boty legally and morally, to ask for one. If the developers are having trouble with this, they should find another partner for their venture. (imho)
That said, PayPal can be real douchebags. Too many friends, business partners and colleagues has been burnt by them in the past. If you're doing something nonprofit, move elsewhere.