Paypal or not

[Dylan Couper]

Hey guys, I split this thead on Paypal from the How I Lost My DVX100 thread. Fire at will!

[JM Underwood]

Which one's Will? :-))

Thanks Dylan. Hopefully a lot of folks will find this discussion helpful.

You know, I hate to bring it up, but PayPal is kindof like politicians -- it's the least of the available evils.

[Ari Shomair]

Two years ago I had a payment for $300 USD taken out of my account over 50 days after an auction had been completed. When asked how on earth I was supposed to trust Paypal when they are reversing transactions which are over a month old, I was told that the funds used for the transaction were obtained illegaly.

Of course, how the hell was I supposed to know 50 days after an auction closed that the funds were obtained illegally? Couldn't they have told me this earlier then 48 days after I shipped the item?

Their customer service was horrible. I was told if I read their user agreement they have the right to reverse a transaction at any time for any reason, as well as freeze my account at any time for any reason.

I was also told by Paypal this is only in the non-american user agreements, and that if I was an American they would have not reversed the transaction.

I don't know if either of these facts still hold true, but that experience made the decision for me.

Obviously, I no longer accept payments through paypal anymore.

[Dylan Couper]

Paypal through your bank account is a long way from safe. Paypal through your credit card is much better. It offers you one more buffer before getting screwed.

[Josh Bass]

Damn. I really am going to cancel it.

[JM Underwood]

<<<-- Originally posted by Ari Shomair : Two years ago I had a payment for $300 USD taken out of my account over 50 days after an auction had been completed. When asked how on earth I was supposed to trust Paypal when they are reversing transactions which are over a month old, I was told that the funds used for the transaction were obtained illegaly.
-->>>

Ari,

Sorry to hear about that. I'm sure that was a real bummer. :-(

A few questions if you don't mind.

Did PayPal take the funds out of your PayPal account, or out of your bank account?

What did they mean by "obtained illegally"? Who obtained the funds illegallly, and from where?

Did they have the Seller Protection Policy at that time, and if so, did you follow it?

Did you ever talk to an attorney? [I know an attorney would probably cost more than the amt in dispute :-(( ]

Did they give you an opportunity to rebut the claim?

[JM Underwood]

<<<-- Originally posted by Dylan Couper : Paypal through your bank account is a long way from safe. -->>>

Hey Dylan,

Could you please explain what you mean by this?

[Dylan Couper]

Paypal I believe can withdraw funds not just from your Paypal account, but right from your bank account if you have one connected to it.

I have a Paypal account that is not connected to my bank account, it is only connected to my credit card. If I want to pay for something, it has to come out of my credit card. If someone pays me for something, I can put it back on my credit card, or keep the balance in my Paypal account.

I forget that people keep a balance in their Paypal accounts. I never do. As soon as that money is mine, I want it out of their hands and back into mine. That should be one of the rules of a seller, never keep a balance in your Paypal account.

[JM Underwood]

Dylan,

<<<-- Originally posted by Dylan Couper : Paypal I believe can withdraw funds not just from your Paypal account, but right from your bank account if you have one connected to it. -->>>

Not according to the Payments (Sending, Receiving, and Withdrawals) Policy, Section I.2., Electronic Transfers:

Electronic Transfers. When you make a payment through PayPal that is funded by Instant Transfer or eCheck, and when you initiate an "Add Funds" transaction you are requesting an electronic transfer from your bank account. Upon such request, PayPal will make electronic transfers via the Automated Clearing House (ACH) system from your U.S. or Canadian bank account in the amount you specify. You agree that such requests constitute your authorization for such transfers. PayPal will never make transfers from your bank account without your authorization.

Now, since PayPal has the technical means to make a ACH debit to your checking account, it could always happen in error. That's why I do two things:

1. LIke you, I withdraw my funds from PayPal immediately.
2. I have a separate checking account that is associated with PayPal. This account is always kept at a balance of $5.00 or less.

Therefore my exposure to PayPal adverse actions is very, very limited, at the most only 1-2 days.

Again, if someone can give me a better alternative to PayPal, I'm all ears. :-)

[Jeff Donald]

Jim, your quote is in reference to payments, not deposits.

[JM Underwood]

Jeff,

That is correct. I'm not sure I understand your point. Deposits?

[Jeff Donald]

If you are the seller and the buyer uses PayPal, the funds are deposited and in the sellers account. The section you reference covers withdrawls of funds from the buyers account, not how deposits are handled into the sellers accounts.

[JM Underwood]

Jeff,

<<<-- Originally posted by Jeff Donald : The section you reference covers withdrawls of funds from the buyers account, not how deposits are handled into the sellers accounts. -->>>

Perhaps so, but still PayPal has made the statement "PayPal will never make transfers from your bank account without your authorization." I am not a lawyer, but it could be argued that since that statement was a very broad statement ("PayPal will never ...") that it would apply in general.

In any case, no where does the PayPal member give PayPal explicit permission to debit his bank account without specific approval. Here's the Section II.2. on Receiving Payments:

Receipt of Payments; Risk of Reversal of Transactions; Collection of Funds you owe PayPal. When you receive a payment through the Service, unless you follow the steps necessary to qualify for our Seller Protection Policy, you are not protected against a subsequent reversal of the transaction. In the event that the sender's transaction is reversed for any reason and you do not qualify for the Seller Protection Policy for that transaction, you will owe PayPal for the amount of the reversed transaction plus any fees imposed on PayPal as a result of the reversal. Examples of such a reversal include, but are not limited to, a credit card reversal by the sender of the payment, and a reversal of the transaction because the sender of the payment was using a stolen credit card or unauthorized bank account. PayPal will seek to recover the funds from you by debiting your PayPal balance and, if there are not sufficient funds in your PayPal balance, PayPal reserves the right to collect your debt to PayPal by any other legal means.

Again, nowhere here does it state that you are authorizing PayPal to debit your checking account. The only item of concern is the last phrase "...if there are not sufficient funds in your PayPal balance, PayPal reserves the right to collect your debt to PayPal by any other legal means."

But I don't see that as different any other debt you owe. Just because you owe someone or some company money does not give that company the right to just debit any bank account your have. In fact, it first requires a legal judgement against you, and even then a private company may not attach your bank account without some very specific legal processes. In the end it requires a court order to do this.

For starters, the amount may be in dispute, and you are entitled to your day in court before any funds change hands.

Conclusion: PayPal can not debit your bank account without your specific permission on a case by case basis.

Once again, I AM NOT A LAWYER, AND THIS IS NOT A LEGAL OPINION.

[Dylan Couper]

Jim, I'm 90% certain of one case of fraud where Paypal withdrew a payment from the sellers bank account to return the money to the buyer. The seller had defrauded the buyer, police were involved, but Paypal only recovered a fraction of the initial payment. It's an extreme case, granted.

[Jeff Donald]

Your making plenty of assumptions Jim. It's actually pretty easy for a bank to find out about other accounts you may have and put a hold on the accounts, pending court action. Is a bank likely to do this for a $10 item, probably not. However, for a $5,000 camera or an auto, you can bet they will.