Fortune Calls Out PayPal for Holding eBay Seller Funds

[newjerseymax]

Interesting...

LINK

eBay's got a PayPal problem, according to an article in today's Fortune Magazine about PayPal's 21-day holds policy on seller funds. The article says, "At issue is a mundane-sounding decision to send out notices to sellers informing them that all payments they receive through PayPal for items sold on eBay will now be put on hold for up to 21 days."

The article seems to imply that all sellers are getting this email, but that's not true, and the article goes on to state:

"Ebay spokesman Amanda Miller says the policy is being applied to sellers who "pose a higher than average risk of future transaction problems," but declined to explain why customers, who had been selling for years without complaint, were suddenly considered risks."

Fortune Small Business took a look at this issue in 2008, and EcommerceBytes has covered the issue of PayPal holds and rolling reserves for years - we recently did an in-depth piece for the Newsflash newsletter.

Today's Fortune article includes some interesting quotes from sellers impacted by PayPay's holds policy, and it confirms that PayPal does earn money from sellers' funds: "(Miller) declined to say how much money eBay earned on sellers' money, except to say it was "not material to our business." She also did not respond to questions asking if any of the money was invested in other instruments."

Previously PayPal allowed sellers to hold money in a money market fund, and claimed customers would earn interest on holds if they chose that option, but as I reported in June, PayPal no longer allows accountholder to earn interest on their accounts, be they buyer or seller.

Surprisingly the article doesn't mention the rolling reserves (see this Letter to the Editor, for example), nor the lawsuits sellers have filed against PayPal for the holds policy (see this Newsflash article from November).

Fortune asks if this could be PayPal's "Netflix moment." It's unlikely: consumers have a choice in how they watch movies, but sellers have little choice in online payments on eBay if they want to sell there.

[Sandy D]

Wow.

Glad to see someone with some power to call them out on something we all know they are totally wrong on.

Interested to see if PP responds.

[seanws30]

and it confirms that PayPal does earn money from sellers' funds

this is what caught my eye since ive been told numerous times on the phone they dont make money on our money.

21 day holds is nothing. its the 180 day holds that irk me.

[Sandy D]

Originally Posted by seanws30

this is what caught my eye since ive been told numerous times on the phone they dont make money on our money.

21 day holds is nothing. its the 180 day holds that irk me.

Dont believe it.

They dont do anything they cannot make money on.

I am with you on the holds but glad someone finally is calling them on it.

[Thankful]

Good find.

The only thing i didn't like about this article is the claims of eBay tarnishing PayPal's name. *facepalm much?*

The author of this article obviously doesn't have much knowledge about PayPal.

Overall good article and some good points.

[GrannyT]

Excellent post

Try this

Simon Read: Is PayPal right to freeze customers' accounts? - Spend & Save - Money - The Independent

[newjerseymax]

Originally Posted by GrannyT

Excellent post

Try this

Simon Read: Is PayPal right to freeze customers' accounts? - Spend & Save - Money - The Independent

Very interesting! She is right though that so many do not have the ability and knowledge to fight paypal.

[biggunn]

Nice link... The 21-day hold policy is pretty lame. Unfortunately, I don't see ebay/paypal making any changes..

[ehcydotcom]

I think it's time to find other alternative way to sell to break the monopoly of eBay. Someone please create something like eBay but better than eBay.

[biggunn]

Originally Posted by ehcydotcom

I think it's time to find other alternative way to sell to break the monopoly of eBay. Someone please create something like eBay but better than eBay.

Yes, this is definitely the solution that we need.. But easier said than done... Ebay gets something like 600 Million visitors/mo and 75 million unique visitors/mo.. Unfortunately, it would be hard to match that. The only alternative that comes close I think is Amazon..

[jeffweico]

There was also a recent article in Forbes magazine. I think that something MAY actually happen on this front. PayPal has been doing this for a long time without suffering any negative consequences. They managed to avoid bad publicity by claiming it was to protect consumers against fraud and that it only affected a tiny percentage of users.

Now, however, it seems like there is a new article about their practices every other week. It is going to snowball as more news organizations pick up on it. Then, the government may get involved.

Of course, that can be a double edged sword. We may initially cheer them on, but be very unhappy with the final result.

But whatever happens, I will be happy to see PayPal called out on this for their heavy handed tactics. Their PR person pointed out that merchant account issuers do similar things. But there is a BIG DIFFERENCE... If your merchant account processor suspects fraud, they WILL freeze your funds and investigate. But, they do this very quickly and will release the funds if no fraud is found. They don't make you wait 6 months for your money. And, if you are going to be subject to a rolling reserve, they will tell you UP FRONT before you sign the contract. PayPal waits until after the fact, when you have no choice and they have you 'over a barrel' so to speak. That is a HUGE DIFFERENCE!

The outcome I would like to see is eBay FORCED to allow many, many more processors on their site and be PROHIBITED from favoring PayPal. If PayPal had to compete for the business, they wouldn't do business this way - suddenly, you would see the NEW, KINDER, FRIENDLIER PayPal. You would be able to speak with a live person who could actually HELP you, rather than just repeat the PayPal party line. And speak with a supervisor or manager as well. But, right now, as a monopoly, they can do whatever they like and we just have to take it.