Simon Read: Is PayPal right to freeze customers' accounts?
Saturday 24 September 2011
E-money pioneer PayPal has been accused of heavy-handedness and "unfair commercial practices" by fed-up Independent readers. In one alarming case earlier this month, a reader was forced to take the eBay-owned company to court to claw back almost £2,000 of her cash the company had withheld from her for six months.
Shelley Michaels, a 25-year-old trainee lawyer from Bedfordshire, had been a regular eBay seller when, earlier this year she sold £1,814-worth of goods through the online auction site. Because it was a higher than normal transaction, it flagged an alert at PayPal as a possible high-risk transaction. The company's standard response is to freeze the cash pending an investigation.
This makes perfect sense and is an important tool in combatting fraud. But under PayPal's terms and conditions, they can keep cash for 180 days. That's obviously so that they can investigate any suspicious activity, but you'd expect that once provided with evidence that all is above board, they would release money.
That's not what happened in Shelley's case. "I provided them with receipts for the computer tablets and games consoles I sold as well as tracking information to prove that the buyers had received the items," she says. "I also actually had positive feedback on eBay from the buyers."
But despite her calling PayPal 12 times, they refused to hand back her cash. "They had all the evidence to show that my account wasn't suspicious but they went ahead and closed it and kept my money."
With the cash being crucial to her, and the expectation that she would see none of it before 180 days had passed, Shelley decided to take legal action against PayPal. "My contention is that they unlawfully withheld the money and reading around the subject led me to believe they have often been guilty of doing this."
She brought a county court claim against PayPal and won her case in Milton Keynes earlier this month. "The judge decided PayPal had provided no good reason for withholding my funds and awarded me statutory interest and costs," she says.
At our request, PayPal responded to Shelley's case. "The judgment reflected how we had handled the customer's complaint, rather than our procedures and policies," it says. "The judge decided we had given ambiguous information to Ms Michaels about whether we would restore her account, and decided in her favour as a result. The decision did not concern PayPal's user agreement or our ability to apply limitations to customers' accounts as part of our risk controls."
But Shelley believes her case is far from unusual and wants to warn others of the practice. She also hopes to persuade PayPal to rethink its actions. "The company continues to arbitrarily freeze accounts and withhold customers' funds for up to 180 days. The extremely unfair practice could adversely affect thousands if not millions of PayPal customers.
"My concern is that PayPal's practice of arbitrarily freezing accounts could cause a business to fail or an innocent person to suffer financial hardship, particularly in the current tough ecnomic climate." But the company denies her claims. "We do not arbitrarily freeze accounts – instead, we may apply restrictions for a large number of reasons, including the need to protect a seller's buyers; in response to negative buyer feedback or an unusual spike in payments received; to protect PayPal against possible financial loss; and to comply with anti-money laundering regulations."
The company's spokesman Rob Skinner points out that PayPal has made it easier for a huge number of people to start a business online, without needing to set up merchant accounts with banks and credit card companies. "It's important to remember that other financial institutions also have risk and credit controls which can affect their business customers," he says.
But Shelley isn't the only disgruntled PayPal customer to contact The Independent. Among others, 49-year-old Steve Hudgell says his account was frozen with £350 in it when he moved to China. "They refused to unfreeze my account even after I explained my circumstances. It took around three months of emails before they relented and gave me my cash but the experience annoyed me so much I'll never use their services again."
PayPal's Rob Skinner is keen to suggest that the company is improving its customer service. "I'd like to say sorry to any PayPal customer who has had a bad experience. We've invested significantly in customer service over the last couple of years, with a new European customer service centre in Dublin.
"We've also significantly improved our buyer and seller protection programmes, helping our customers when things go wrong," says Skinner. "Most of our 14 million UK customers find that things go smoothly, and like the fact we don't share their financial details with the people and businesses they're paying."
Shelley's not convinced. "My legal background gave me the confidence to challenge PayPal's terms and I won," she says. "However, the vast majority of people do not challenge such terms. I believe this is due in part to PayPal's monopoly as an e-money issuer and customers' lack of legal expertise. My judgment has drawn attention to PayPal's unfair commercial practice and it needs to be addressed."
Derek Pain: I'm cautious, but remain one of the few bulls in the market
Donald MacInnes: Who would want to be a Barbie girl in a non-Barbie world?
Mark Dampier: How to get an income now that savings are past the 'use by' date
Thousands of UK investors could lose out following collapse of Secured Energy Bonds
Bargain Hunter: Fly off for a winter break in France or Portugal for well under £100
- 1 Venezuela Expo Tattoo 2015: Extreme body art from 'Vampire Woman' to 109mm earlobes
- 3 Ball pool for adults opens in London
- 4 Amal Clooney gives excellent response to fashion question at European Court of Human Rights
9 reasons Greece's experiment with the radical left is doomed to failure
Have we reached 'peak food'? Shortages loom as global production rates slow
Greece elections: Syriza and EU on collision course after election win for left-wing party
British grandmother Lindsay Sandiford faces execution by firing squad in Indonesia
Liberal Democrat minister defends comments suggesting immigration causes pub closures
King Abdullah dead: We can't afford not to hold Saudi Arabia's royals to account
iJobs Money & Business
£40000 - £50000 per annum: Recruitment Genius: This is an exciting opportunity...
£30000 - £35000 per annum + Benefits: Ashdown Group: Marketing Manager - Marke...
£13000 per annum: Recruitment Genius: This Pension Specialist was established ...
£23000 - £26000 per annum + Benefits: Ashdown Group: Market Research Executive...
Day In a Page
A minimnalist four-bedroom home designed to the highest spec, featuring glass walls and a kitchen space lit by a glass roof
Hibernate during winter and make your living during the summer at this busy guesthouse with panoramic sea views, in the village of Lynton
A four-bedroom penthouse next to the Tate with direct views of St Paul's from two floors of luxurious living space
A four-bedroom detached home surrounded by spacious gardens and woodland, close to New Pudsey
An 18th-century, three-bedroom home near Langstone Harbour built from ships beams with vaulted ceilings and wood burning stoves
A five-bedroom semi-detached home with a mix of period and modern features in a popular and convenient location
This five-bedroom red-brick beauty overlooks the village green and sits in just under two acres of land
A three-bedroom villa with self-contained flat, minutes from Lake Windermere
A deceptively spacious, beautifully presented Georgian home with 3000sq ft of living space and five reception rooms
A five-bedroom Victorian home with four receptions, superb gardens and paddock in Pembury
An eight-bedroom house on the south side of the The Green with cinema, wine cellars and summer house
This 17th century beauty is full of rustic cosiness, while the detached home office means you can also run a business
Four exclusive apartments in a Grade II-listed former medical school with 2,275 sq ft of living space and 18ft ceilings
A five-bedroom terraced house on the popular Peterborough Estate, ideally located for both Eel Brook Common and South Park
A state-of-the-art farm-building conversion on the former Cliveden Estate, with 11,420sq ft of internal space, cinema and wine cellar
A three-bedroom, 15th-century cottage with original features in the picturesque village of Sissinghurst
A six-bedroom terraced house with large south-facing roof terrace, cinema room and wine cellar
A new seven-bedroom home built in Queen Anne-style with swimming pool and parkland views in Mortimer
A listed, four-bedroom farmhouse in the rural hamlet of Rushall with detached barn, four acres of gardens and paddocks
A first-floor flat with two bedrooms, a spacious reception room and communal grounds in a leafy part of London
A three-bedroom flat with a spacious rootop terrace and balcony, accessed from a private gated courtyard
A Grade II-listed pile with six bedrooms, stables and 39 acres of grounds in Standlake
A two-bedroom flat with boutique hotel-style interiors, close to the foodie haunt of West End Lane
A two-bedroom flat in a beautiful old vicarage, with many original features, close to the city centre
A three-bedroom 16th-century home with an aga kitchen, private gardens and heated outdoor pool, in Hadleigh
A three-bedrom home in sought-after Queen's Gate Mews, with Italian marble-finished bathrooms
Surrounded by glorious countryside in the village of Udimore, sits this impressive four-kiln oast and barn conversion
A five-bedroom house in the picturesque village of Kettlewell, north Yorkshire
An 18th-century former coaching inn with original staircase, open fireplaces and beams throughout
A Grade II-listed Georgian town house with three bedrooms and a south-facing courtyard, near Arundel Castle
Feel on top of the world at this über chic penthouse on the 37th floor of one of Europe’s tallest blocks.
A Grade II-listed Victorian villa with six bedrooms and two further cottages, all with spectacular sea views
A grade II-listed, Georgian cottage with mature 50ft garden, perfect for summer entertaining
A magnificent Georgian pile with turrets, seven bedrooms, a heated pool and four acres of gardens
Fairoak Farm has five bedroom suites, gym, outdoor swimming pool and golf course
Chic two-bedroom river-fronted flat with a private lift that delivers you directly to your home
A spectacular seven-bedroom Tudor pile, once owned by Henry VIII, with 18 acres of land
A seven-bedroom Georgian property previously used as a picturesque wedding venue
A split-level flat in a church conversion with two en suite bedrooms and 1,200sq ft of living space
A three-bedroom bungalow situated behind an impressive stone wall, £645,000
Windsor Castle overlooks this three-bedroom Victorian cottage located on one of Windsor's smartest roads
Chapel House is a former vicarage with nine bedrooms in the beautiful Upper Wye Valley
A five-bedroom B&B and separate owner's accomodation with potential for conversion