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AboutPaypal.org is an Anti-Paypal website created with the sole purpose of exposing the horrors of doing business "The PayPal Way". We are committed to assisting the public in making an informed decision about PayPal.
This website is a collection of horror stories, news reports and other information addressing problems with Paypal, Inc..
By Bernd Schneider
I am convinced that the PayPal system of operating is essentially unethical, and I believe a case can be made that in one form or another, their modus operandi is not in accordance to laws and regulations.
I am not a lawyer, only a writer. My sentences are not designed to convince judges that paragraphs have been violated, but rather to appeal to a general audience and its sense of fairness.
All law is based on ethics, and while paragraphs have loopholes that only become obvious when tested through time, our sense of what is ethical and what is not can easily adapt to new situations.
PayPal’s modus operandi is unethical because it is based on them promising the public that one can send money to just anybody with an email address, and that one can do so easily. However, there are many steps to be taken until money can be sent, or until the recipient can withdraw the amount that arrived at his or her email address. According to our own trials, it can take up two month to finalize a transaction.
To sign up with PayPal indeed is easy and only takes a few minutes. Based on how they present themselves, practically everybody believes that signing up with PayPal means: establishing a working account with PayPal. With a working account, we believe we should be able to send and receive money.
How naive! How wrong!
Signing up with PayPal means: initiating a time-consuming process of proving one’s identity by complying to multiple requests that would be considered strange if they were brought forward by a bank where one opens an account.
However, PayPal do accept money being channelled into their system by people whose accounts have not yet been properly approved, and they accept money to be sent to recipients without sufficiently informing the sender that they will only turn over the amount sent after requiring extensive documentation, or that, often enough, the recipient will not be able to receive the money at all, even though he or she possesses standard ID’s.
PayPal’s approach is unethical because if they require personal identification and proof of it to conduct transactions, then they should request such identification and proof BEFORE they accept a transaction. It is not proper business conduct of PayPal to accept money transfers and later to give the intended recipient a run for his or her money.
If I send a postal money order to anybody in the world, the recipient will be paid upon showing standard personal identification such as a national ID card or passport. That’s in order.
If the money is sent via PayPal, the recipient has to be in possession of a credit card. Before a recipient gets his or her money, he or she will also have to sign up with PayPal, and wait until a test withdrawal has been done from his or her credit card account, and until this withdrawal shows on his or her card billing statement. This alone can cause a delay of up to one month.
Thereafter, the recipient will have to fax a copy of a utility bill, a driver’s licence, and a credit card statement. The recipient will have to shoulder associated expenses.
All in all, signing up an account through PayPal is considerably more difficult than signing up an account with a bank. It is a fair assumption that a very large percentage of PayPal account holders would not have signed up with PayPal if they would have been aware that signing up is that messy.
To say the least, PayPal obtained an unfair advantage through the way they built their client base. Whether it was in a deceptive or fraudulent manner, would be for a court to decide.
The client base was built at the expense not only of millions of individuals who have spent many hours complying with PayPal’s strange requests, but also at the expense of traditional financial institutions who do not try to capture clients with deceptive tactics.
Apart from taking advantage of their clients by burdening them with a time-consuming process of personal identification of which these clients have not been aware at the time they channelled money into the PayPal system or tried to get it out of the PayPal system as intended recipients, PayPal also takes direct financial advantage of their clients, especially those who have problems complying with PayPal’s personal identification requests.
All amounts that are channelled into the PayPal system are pooled and deposited into bank accounts were they earn interest for PayPal. It is advantageous for PayPal if it is difficult for clients to comply with the personal identification requests, as money then remains in their system for longer than would otherwise be the case, and thus earns more interest.
PayPal’s term for refusing clients access to their money is “account restriction”. Accounts can be restricted temporarily or permanently. In case of a “permanent” restriction, it is unclear how clients can get back their money at all.
I am a great admirer of the US legal system. It is by far the best-developed legal system in the world, and it plays a major role in the dominance of the US economic system around the globe.
Economic progress needs the certainty of the law.
That the US has the best-developed legal system of the world is not just in response to the fact that the US Congress passes better laws than the parliaments of other countries. Rather, it has to do with the contribution of court decisions and their regulatory power.
A case in point is the manner in which suits for damages are handled. Sure, an injured party can claim damages in court in virtually every country of the world. Damages are a financial redress for any kind of loss or injury one has suffered.
From the perspective of a corporation, having to pay damages in some instances is part of the risk of doing business. Unfortunately, worldwide, corporations all too often get away with paying damages out of their small-expenses cash box.
I know of one case where an injured party sued PayPal (without the need for a lawyer; see the subscriber section for details) over a restricted fund of some 1300 dollars plus some 1700 dollars in damages, and won the case in a matter of minutes. PayPal didn’t bother to contest the case. The 1300 dollars, they owed the customer anyway, and what’s 1700 in damages to them? Nothing in comparison to what they make from the kind of transactions that landed them in court in the first place.
I don’t think that having been convicted to pay 1700 dollars in damages will cause PayPal to change their ways. Even if they will lose similar cases 10 times or 100 times, they probably won’t abandon policies of which they know that they would have a hard time defending them in a court.
For a corporation like PayPal, it’s simple mathematics. One the one side is the figure they have to pay in damages after lost court cases; on the other side are the profits they reap in from continuing with practices that are unethical but do not fall under existing laws and therefore do not invite public prosecution.
In such cases, for courts to exert their regulatory power, they must be entitled to convict a company to paying damages in an amount high enough to force the company to at least think twice about their policies.
This is where “punitive damages” come into play.
What is at stake here is the PayPal model of doing business, which, in short, consists of two parts: 1) enticing the public to channel funds into their system under the presumption that their services are easy to use and an email address is practically all that is needed; and 2) making it difficult to withdraw these funds by locking customer accounts and demanding customer identification in an awkward and time-consuming process, while at the same time earning interest from that customer funds.
I believe they should be stopped operating in this manner, and the most convenient avenue would be through the US justice system.
The beautiful thing about the US justice system is that when the government doesn’t stop an abusive business practice, citizens can do so via court action. Judge and juries can decide that a citizen or a group of citizens are awarded punitive damages which do not just cover the actual loss and actual expenses of the injured party, but are proportional to the gain, a corporation derived from an improper manner of making profit.
Moreover, such cases can be filed through lawyers or law firms working for a “contingency fee”, which is a percentage of the rewarded damages that can be negotiated between the client(s) and his/their attorney(s).
Outside the US, the concepts both of punitive damages and contingency fees are often misunderstood as a commercialisation of justice. What receives coverage in the media are only prime cases, such as when big tobacco is ordered to pay hundreds of millions of US dollars, or when a fast-food chain has to pay punitive damages for serving its coffee too hot. Sensationalism, of course, causes a distorted picture.
Rather than focusing on injured parties availing of damages much larger than the financial equivalent of the loss or injury they suffered, one ought to take view of the great taming power the concepts of punitive damages and contingency fees have on the US corporate culture.
The US corporate world has a long history of pursuing profits rather ruthlessly. What’s the kind of chance the consumer stands? It takes enormous resources to sue a large corporation. Corporations easily can send batteries of lawyers into court after court, totally wearing down an individual, and bleeding him or her financially to death before a case has gone to the final instance.
If a corporation of the size of PayPal in a specific case isn’t willing to settle a damages claim out of court, or not willing to accept the verdict of a lower court, it takes enormous resources to fight for one’s rights through the instances. Only large law firms have these resources, and the costs of these resources can only be recovered if punitive damages are rewarded, and when the law firm involved can pocket a substantial share of these punitive damages.
Therefore, for the benefit of effective consumer protection, it is a necessity that large law firms willing to dedicate prime resources can make a hefty profit from taking errand corporations through all instances of the justice system. They should with PayPal, and they do. Several class action suits have already been filed against PayPal, and more seem to be in the pipeline. (The subscriber section is dedicated to the topic.)
My own relationship with PayPal is clearly one of an injured party. After having used PayPal for some time, and after having provided all the personal identification they requested, my account has been “permanently restricted” and I have been informed about this with that famous PayPal two-liner, which is quoted several pages of this domain.
After several weeks during which I have mainly worked and written on PayPal, as well as having suffered considerable stress, the restrictions have been lifted and I was able to withdraw my money.
But I am not done yet. I have had a lot of work, related to the recovery of my money, and restricting the funds in the first place has been such blatant injustice that it was emotionally difficult to bear beyond what a loss of 467 dollars would normally have meant. I have spent many thousand dollars worth of my professional energy on efforts to recover my money.
Among the efforts I have taken has been setting up the domain AboutPayPal.org of which this article is part. To set up this domain, I have spent nights researching PayPal, and days writing articles about them. It is obvious that giving publicity to one’s own case carries a high likelihood that PayPal will give in.
I believe PayPal should be obliged to pay me damages, and I would proceed to demand such damages if I could work out how to best go about it.
However, my own chances of receiving damages by going through a justice system are, sadly, very slim. I am not a US citicen or a US resident; I am German; but I am also not based in Germany. I signed up from Southeast Asia, and I currently work in Southeast Asia. A Southeast Asian court decision against PayPal would not bother them. And I do not have the resources to file a case against PayPal in Germany or the US. Because of an ear condition, I even have a hard time boarding airplanes.
But I’m a damned German, and damned hard-headed. And I am not inclined to give in.
I bet that at PayPal they thought that my anger will eventually die down, and that I will leave this site unattended.
This could happen if this site just were an expenses-incuring venture. I don’t have money for hobbies.
So, I decided to pursue this on a more professional basis by providing detailed information on how people who suffered at the hands of PayPal can proceed against the company, and charging a subscription fee for this service.
I would have liked to be part of a class action suit against PayPal, but after having discussed the matter with several lawyers who were proceeding in this direction, I realized that I am not a prime candidate, mainly because I am not based in the US. Furthermore, the principal sum involved (467 US dollars) fades in comparison to the amounts other people have stuck in the PayPal system (more than 30,000 US dollars in one case on which I received information).
Posted: April 20, 2012 at 12:36 pm