Last week I read yet another “How to Fix eBay” article written by Garland Pollard, who I believe is a non-seller, and quite possibly a non-user. The article is written from a seller-centric viewpoint. There are a few valid points made in the article and to balance them, several ‘just doesn’t get it’ moments. Here is one.
” … PayPal is the central banker and post-modern currency that makes eBay tick.”
As a cash cow, or revenue generator for eBay, yes, PayPal makes eBay tick. From a seller point of view divestment of PayPal or a complete management separation would be a good thing. Is it going to happen? No, not until someone in government realizes that PayPal as a money exchanger is essentially unregulated and free to abuse consumers at will. PayPal represents a sizable revenue stream and eBay will continue to milk that as hard as it can.
It is important to realize that PayPal has different User Agreements for each country in which it does business. This is because each country has differing laws and regulations. On Monday Sue Bailey at TameBay wrote “PayPal reserves: here’s what’s really happening” about increasing implementation (in the UK) of PayPal’s ability to require a reserve from merchants trading on eBay.
This is not a new policy for website owners in the USA.
The first mention of Reserves in PayPal’s User Agreement amendment dated January 25th 2008 is shown:
This was updated July 9th 2008 to read:
Reserves.
PayPal, in its sole discretion, may place a Reserve on funds held in your Account when PayPal believes there may be a high level of risk associated with your Account. If PayPal places a Reserve on funds in your Account, they will be shown as “pending” in your PayPal Balance. If your Account is subject to a Reserve, PayPal will provide you with notice specifying the terms of the reserve. The terms may require that a certain percentage of the amounts received into your Account are held for a certain period of time, or that a certain amount of money is held in reserve, or anything else that PayPal determines is necessary to protect against the risk associated with your Account. PayPal may change the terms of the Reserve at any time by providing you with notice of the new terms.
This amendment makes life a great deal simpler for PayPal, they can enforce a Reserve whenever they feel like it, no more pesky “reasonable judgement” required.
Please note both these excerpts above are from the PayPal Pro/Virtual Terminal Agreements found under the heading of Merchants and Businesses for US users. Changes to business agreements are relatively easy to track through the policy updates archive, however I do not see (and this may be me) the same transparency with the changes in the general User Agreement applying to ALL USERS, including eBay sellers which most recently changed, very quietly, January 11 2009
So there it is and what does it mean?
eBay has historically tested new policies on smaller marketplaces. Remember the PayPal Only in Australia debacle? TameBay’s Sue Bailey reported increased implementation of the PayPal account Reserve in the UK. A seller since 2002 with 100% positive feedback and last 30 days gross sales volume over $65,000 said on the UK boards
“We received an email out of the blue from PayPal on Saturday to let us know that our account that we have held for six years will now be subject to a rolling reserve of 6%.
When I asked why we had not had any notice and when this was announced I was told by the PayPal agent that this was an ongoing process that started at the beginning of the year and that they had 60 million accounts to go through.”
eBay Inc had a poor fourth quarter, Motley Fool said
Revenue fell by 7%, as double-digit top-line gains at PayPal and Skype weren’t enough to offset a 16% decline for its flagship marketplace business.
The payments division of eBay Inc processed $60.29 billion in 2008 yielding revenue of $2.4 billion. Estimated revenue from float was a relatively miniscule $10 million per quarter. Implementing 180 day rolling account reserves on eBay sellers who are required to offer PayPal as a condition of trading would substantially raise float revenue.
Got milk?
Y’all come back!
Updated to fix TameBay link 2/20/09 7.53 am
I think I just threw up a bit in my mouth….
Floating checks is illegal. Why is eBay/PayPal not being held to the same type of standards? This is beyond wrong.
Posted by BleuMoonsATtic on February 19th, 2009.
Henrietta Hi
I’ve had a random thought this morning (during my “waiting for first coffee” period) …
… I’m wondering how much we would all be bothered about these reserves if on-eBay trading was still as vibrant as it was in Q4-2005 / Q1-2006 and subjected to the same rules as back then?
Is the new culture of “over-attention” to the details of eBay/PayPal rules both an after-effect of last years changes blitz, and the eBay-predicted cause for creating further conditions to clear out the “old hands” and bring in a new wave of fresh and unknowing customers, who have no knowledge of the previous terms and conditions?
If so, should we all play them at their own game - open new accounts in the names of spouses/partners, registered at their parental homesteads, using fresh and new bank accounts for verification … leading eBay to think the new accounts are numpty newbies … then have a “quiet quarter” before a summer blitz of complaints about the rules and regulations and site functions.
Or, should we all just march on San Jose with truckloads of rotten tomatoes and demand JD show himself on the front lawn?
Gaz
Posted by Gaz on February 19th, 2009.
Oh and forgot to add - when PayPal places funds on hold or reserve, they do not show as “pending” - the entire transaction from which the transaction came shows as “pending” … and that rolls off the dashboard into the archives after 7 days.
The currency balances table has no indicator there are funds “pending” nor that there are funds on reserve - in fact no where does it show you the balance of your funds that PayPal are holding off the radar “for security reasons”.
Perhaps the thinking is that after 180 days, you will have forgotten PayPal are holding them and they can just pocket them?
This action needs governmental intervention in all countries in which PayPal operates.
Gaz
Posted by Gaz on February 19th, 2009.
I so second BleuMoon!!! Makes me sick…this is beyond wrong. Glad I closed my store a year ago (when they held a couple of hundred dollars for no reason or explanation.) But this is even worse. To me, they have crossed into criminal activity. What is weird, is how many powersellers are putting up with it (and some are still defending them.) How far will they have to go before they finally lose everyone? We think that Wall Street is so bad or how one company is so terrible in how they have treated their customers…but so many of ebay’s customers sit back and just let it happen to them. This is a very strange thing to me.
Posted by CabinFever on February 19th, 2009.
I wish they’d stop trying to fix eBay. It’s working fine, leave it the heck alone. They always tinker when its not needed.
Posted by Hillary on February 19th, 2009.
The subject of PayPal Rolling Reserves needs much more exposure, so that the public, and PayPal’s paying customers are aware of it’s implications for their businesses.
This is a January thread that has been removed from the Ebay boards, but is cached on Google (as long as it lasts), outlining the stress experienced by a seller after 20 days, with $4800 tied up:
http://tinyurl.com/depk8s
There is something wrong with the balance of responsibilities in all of this. PayPal force their services onto most Ebay sellers, but sweeten the deal by offering “Seller Protection”, but the protection does not apply when a charge back is made claiming that credit card payment was made fraudulently. Thus, effectively, the seller is held to be responsible for screening the credit card payment of their buyer, even though one of PayPal’s buyer protection selling features over the last 12 months has been that the seller will never see your credit card details. Once PayPal has “cleared” a payment, the seller is required to promptly ship the item to the actual address supplied by PayPal, and to qualify for Seller Protection must either have proof of shipping or tracking details (depending on the country).
Somehow, Ebay and PayPal have ultimately shifted responsibility onto sellers for the fraudulent use of credit cards and postal addresses (usually changed when an existing Ebay account is hijacked), even though the seller is held at arms length from the financial details of the transaction, and Ebay and PayPal gather all of the shipping details on the buyers behalf. Something is fundamentally flawed in all of this.
Once this responsibility is shifted onto the seller, if they “allow” too many chargebacks they are given additional financial punishment in the form of working capital being tied up for long periods in the “rolling reserve” with PayPal. From what I can find so far, the usual rate is a percentage of either 5% or 6%% for either 3 months or 6 months (90 days or 180 days), sometimes with an additional security deposit. Alarmingly, I have seen two or three reports (including the one above) that indicate that if a seller is vigilangt enough to refund the fraudulent transaction before shipping, the percentage is STILL held in the rolling reserve for the 90 or 180 day duration.
I am attempting to keep a log of discussion on this topic in this forum thread:
http://www.thehowcafe.com/forum/showthread.php?t=12920
Kind Regards, Kevin
Posted by Kevin_T on February 20th, 2009.
Ebay/Paypal has long ago entered into unethical, probably illegal grounds. The problem is our government has way too many problems to solve before they can turn their attention to this one. Ebay know that and is taking full advantage of it. When or if Paypal starts taking a reserve out of my account to cover potential chargebacks, that’s the day I stop selling on Ebay. I’m a small seller and cannot afford it.
And just think: Meg has her eyes on being the next governor of California. Ebay is starting to make the Mafia look like good guys.
Posted by Lisa on February 20th, 2009.
eBay too many issues, no longer selling or buying there. Paypal, is a criminal’s friend! Took 3 months with assistance from the BBB, ICCC, & State Attorney General to get my money back. Paypal, no longer used or accepted, anywhere, by me.
Posted by Bobbi85710 on February 20th, 2009.
[...] PayPal, in its sole discretion, may place a Reserve on funds held in your Account when PayPal believes there may be a high level of risk associated with your Account. If PayPal places a Reserve on funds in your Account, …Continue Reading… [...]
Posted by What Should You GoSee? » Blog Archive » The Superglue Factor Ebay and Paypal | Red Ink Diary on February 20th, 2009.
Great article as usual Henrietta.
My take on eBay right now is that the company will try to back-peddle a little bit at a time, but that won’t work. The eBay sellers who have a lot of experience selling on the site, want a massive wholesale change. This is something that eBay says it will not do.
I don’t understand why eBay consistently refuses to listen to the people who know the site best, the veteran sellers who really made the site so successful.
I’ve got 10 years into eBay and I’m just tired of beating my head against the wall for the last 2 of them. I’m pretty much done with there. I will list a thing or two each month to keep my status current, but that’s it.
I would just like to make it crystal clear, that my frustration with eBay, is with it’s upper management and the CEO of the site, not the eBay users.
You and I both have blogs that many people read, and I feel bad when I write something critical of eBay, and an eBay seller takes it personal.
Many of these people depend on their eBay incomes in these tough economic times, and when we are critical it’s not because we want to see people lose money, it’s because the site is being run into the ground by the people heading it.
In my opinion, there are now easier and better platforms to buy and sell on.
If eBay wants to be the online Walmart, so be it.
But out of respect for the American small business person, my family doesn’t shop at Walmart unless it’s the absolute last choice. Now that am no longer active on eBay, we will very rarely if ever shop there.
Take care,
AW
Posted by AuctionWally on February 21st, 2009.
I just stumbled across your blog today as I was googling “eBay traffic slowing.”
The jeweler I work for had me create an eBay store in September 2008. Ever since, I’ve been attempting to get exposure to increase sales. We’re a fine jeweler in Chicago and have great offerings (35 years brick-and-mortar) but it has been rather challenging.
I am going to continue to read on. Thanks for this very informative piece.
I do have a question: what are people now using as alternatives to eBay (from the standpoint of a seller)?
Thanks
Kelly
Posted by Kelly on February 24th, 2009.