When you sell a item you want paying A.S.A.P. don't we. One of the most successful payment avenues is "Paypal" If you already sell on ebay then you know you have to accept paypal. Now paypal take a cut of your selling price it could be for example 3.4% + 20p depends on who you are. There are about 14 million sellers using paypal in the UK that is alot of money being paid into their account. There was a article today from a national tabloid which i am going to cut and paste so you can have a very good read about paypal. Sit up and take notice there is a lesson to be learn't which could affect you wether you like it or not.
The payments processing company used by up to 14 million people has been accused of using anti-fraud measures “too zealously”
PayPal has been accused of holding small businesses and amateur traders on eBay hostage by barring customers from accessing their money for up to six months.
The processing company used by up to 14 million people in the UK boasts of being “the fastest, safest payment service on the planet”. But thousands of customers, from medium-sized enterprises to amateur traders on eBay, have their accounts “limited” each year on unproven and automatically generated suspicions of fraud, and are prevented from cashing payments. For individual customers this is frustrating but for small businesses it can be fatal.
Phil McCabe, a senior policy adviser of the Forum of Private Businesses, says: “With small firms across the UK already owed some £24 billion in late payments, PayPal’s withholding of payments is extremely frustrating.”
Most people encounter PayPal on eBay, the internet marketplace, which offers a cheap and easy way for small and medium-sized enterprises to sell goods and services. Anyone selling on eBay must have a PayPal account, and in many cases business proceeds smoothly. However, under PayPal’s terms and conditions it can freeze an account and keep cash on hold for 180 days if a transaction is flagged as “high-risk”.
While customers accept that this helps to prevent fraud, they say that PayPal employs the practice too zealously. It has also been accused of being obstructive to customers desperate to get their accounts unlocked. This has led to anger in the small-business community as it can leave enterprises already struggling in the tough economic environment without essential cash.
Christopher Taylor, operations manager of Mobile Distribution Solutions, Liverpool, has vowed never to use Pay-Pal again after it withheld £900 of payments and sent e-mails to customers wrongly implying there had been fraudulent activity on his business’s account.
Mr Taylor, 31, says: “We are a mobile handset distributor and mainly operate in the wholesale market but earlier this year we decided to sell to retail customers via eBay. It was going quite successfully for a number of weeks until PayPal said that it was going to limit our account for 180 days.”
When this occurred there were payments worth £900 in the company’s account, which the business was suddenly unable to access. To make matters worse, money held in a PayPal account earns no interest for the customer. Pay-Pal, though, can earn interest on the balances left in its system.
Mr Taylor says: “We have a high enough turnover not to worry but for some companies £900 can be the difference between making it or breaking it. It was only when we threatened legal action that, lo and behold, the account was unfrozen.”
PayPal’s criteria for determining what transactions are “high risk” can catch sellers out, warns Anthony Trollope, managing director of The Wholesale Forums, a networking website. He says: “Many businesses cite PayPal’s often complex and long-winded rules as the ultimate reason their PayPal accounts were suspended — in some cases with thousands of pounds held for an indeterminate time period as a result. These are not merely isolated cases of business naivety but catch even the most experienced business owners out.”
In Mr Taylor’s case the fact that he was dealing in mobile phones was enough to put him into the “high-risk” category.
Hugo Costa, 22, had his account frozen because he did not have enough positive “feedback” comments, a situation that he found maddening because it was out of his control.
Mr Costa, of Ealing, West London, set up HD Station, a business selling electrical equipment, computer games and film merchandise, in July last year. After he had made four or five sales on eBay he received an e-mail saying that PayPal was freezing his account and the funds wouldn’t be released until he received positive customer feedback. Regular users of eBay will know that the website displays sellers’ positive and negative feedback ratings from buyers.
Mr Costa says: “After we got 30 good feedback statements the limit was removed but that meant we were left three months without access to our money.”
It wasn’t long before his account was frozen again, this time because he was doing an increasing amount of trade on eBay. This time it was a “sudden change in selling activities” that marked him out as high-risk.
Cathy Donald, a 23-year-old PR consultant from Watford, Hertfordshire, felt equally poorly treated when her account was frozen because of one piece of negative feedback.
Ms Donald is not a small-business woman but one of the army of part-time traders who sells items on eBay to make a little extra money. When some clothing she sold went missing in the post the buyer posted a poor review on the eBay website. As a result, her account was frozen and she was unable to withdraw any of her money. Although she has offered a refund to the buyer, she has been told that until she has more positive feedback she will have to wait 21 days before she can get her hands on payments made into her account.
She says: “Until I get more positive feedback PayPal are going to keep withholding my money each time I receive a payment, so I don’t particularly want to sell on eBay again because I know this is going to keep happening. It’s a bit of a catch-22.”
Rob Skinner, of PayPal, says: “It’s certainly true that we treat some goods as higher risk than others. Top smartphones and computers, for example, are tempting targets for fraudsters because of their value and the overwhelming demand for them. Other factors we consider are a seller’s track record, complaints and the number of chargebacks received — and a sudden large spike in money being received. Our aim is to protect other customers and PayPal from losses.”
PayPal refuses to say how many accounts are frozen each year, and it emphasises that it is mainly new and untested sellers who risk a freeze. But even if only a small percentage of total sellers are affected, that still runs into hundreds of thousands of users. When it does happen traders say that the company’s poor customer service adds to their frustration.
Mr Taylor says: “The attitude of the staff was derogatory. I was told that PayPal was like a bank, as if that excused everything. But if NatWest told me it was freezing my account for 180 days I would move to another bank. You don’t have that choice on eBay.”
Shelley Michaels, a 25-year-old trainee lawyer from Bedfordshire, was so incensed when PayPal refused to unfreeze her account and hand over her money that she took the company to court.
She says: “I called them 12 times and provided them with the information they asked for but the customer support was very unhelpful.”
Mr Skinner says: “I would like to apologise to any customer who’s had a poor experience with PayPal. This is unacceptable, and we’re keen to learn from these experiences.”
He adds: “The 180-day period was traditionally used because consumers often had up to 180 days to raise a chargeback on their credit card. It’s important to note that the 180-day period does not apply to all customers — many have no such restrictions, while others may see funds withheld for shorter periods. We are continually reviewing our approach and developing more sophisticated ways of assessing the risk, and in many cases releasing funds sooner. It’s worth remembering that we have over 14 million customers in the UK, and the vast majority of transactions go like clockwork.”
Case study: ‘No justification for holding on to my funds’
Many eBay traders who discover that their PayPal account has been frozen dejectedly accept it, while some release their frustration through websites such as PayPalSucks.com and PayPalWarning.com. Others take their complaint to the Financial Ombudsman Service. But Shelley Michaels, a trainee lawyer from Bedfordshire, was so angered by how she was treated that she took PayPal to court — and won.
Ms Michaels has been using eBay for five years, recently to sell DVDs, video games and iPads, and had never had a problem. Then earlier this year she sold goods worth £1,814 — a higher amount than usual, triggering a “high-risk” alert. The next thing she knew, her account had been frozen.
She says: “I provided receipts for the computer tablets and the video games consoles to show that I had lawfully obtained the items. I also supplied information to prove that buyers had received the items. I had even received positive feedback for some of the electronics in question.”
But even after 12 phone calls to request that her money be released PayPal still refused to budge. Fearing that her money would be in limbo for 180 days, she bought a County Court claim against PayPal and won her case in Milton Keynes this month.
She says: “The judge said that PayPal had no justification for withholding my funds and ordered it to pay interest and costs.”
Rob Skinner, of PayPal, says: “We accept we handled this case badly and have apologised to the customer.”
We are told they do this to protect themselves from fraud. The lesson here is you need to have multiple avenues for getting funds quickly in case your money is held by paypal or the banks etc. If one vault is locked you need to find the key quickly to carry on trading. I am informed this is business in the real world.
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