Background Overview
In Europe PayPal (Europe) Sarl et Cie SCA, is legally registered as a bank and is regulated centrally by the Luxembourg bank authority.
In the USA PayPal is not a bank and is not directly regulated by the U.S. federal government although it is subject to reporting provisions of the Bank Secrecy Act. Because PayPal serves as a payment intermediary, it is treated as a money transmitter or a money service business. PayPal is subject to state regulation, but state laws vary, as do their definitions of banks, money services businesses and money transmitters. PayPal is not subject to the provisions of the Electronic Funds Transfer Act and Regulation E (EFTA/E). Consumers using PayPal with a credit card (not debit card) are covered by the provisions of the Truth In Lending Act and Regulation Z, (TILA/Z) through the card issuing bank.
PayPal, as Auntie May would say, is “Neither fish, fowl nor good red herring”
Keyword = State Regulation
A link to the list of states in which PayPal is licensed. Each link on that page shows a copy of that state license. PayPal has not been diligent in updating that portion of their site.
Links to the Banking Departments of states which regulate money service businesses. This website is maintained by the Association of Regulators from states which do regulate and has many valuable links.
Most states have links to the laws and statutes which regulate money services businesses, many have links to Attorney General. Key words to help in your search:
- MSBs or Money Service Businesses
- Consumer Protection
- Money Transmitter
- Department of Financial Institutions
- Banking Department
Most Regulatory Statutes for MSBs contain wording that states the maximum time period within which money transmitters must perform the function they are licensed to do, ie. give you the money
I have not seen a single statute with a period of 180 days or 60 days. Most seem to be 10 business days, unless you are suspected of committing a crime. This is America, you are innocent until proven guilty. PayPal will not be able to say that every seller who has had a reserve imposed is suspected of criminal activity, especially since no action has been taken to report that suspicion to the appropriate authorities or police.
The Federal Trade Commission (FTC) does not resolve individual consumer complaints. The FTC collects complaints about companies and business practices. The FTC enters all complaints it receives into Consumer Sentinel, a secure online database that is used by thousands of civil and criminal law enforcement authorities worldwide. These collected complaints can help detect patterns of wrong-doing, and lead to investigations and prosecutions.
Tough Talk
You can sit there in your office and tell yourself “I am not selling in a high risk category. I will not be affected by reserves”
You should know that the phrase “high risk category” is BaySpeak, meaningless. “High risk category” sellers who have had reserve accounts imposed include:
- Collectibles
- Toys and Hobbies
- Pottery & Glass
- Antiques
- Baby - Nursery Bedding
as well as the categories that we would expect to see like Cell Phones & PDAs.
Yes ALL Merchant Credit Processors have the ability to require a reserve account in their legal agreements. However, it is not something which is implemented across the board for all accounts regardless of risk. If you have zero or bad credit and a bad track record or history of chargebacks (if they will even accept you) then you should expect a reserve.
PayPal are not following accepted industry procedures or risk standards. I have been told that when PayPal have all the planned reserve accounts in place on eBay they will be requiring them on websites. Seems like fair warning to me. Our Australian friends proved that when everyday people get off their rear ends and make noise consumer protection happens. PayPal backed down.
If you don’t like it make a written complaint. If you can’t be bothered to take action you must bear the consequences of your inaction.
Y’all come back!
Related posts:
And to write a complaint, you might want to keep an eye on paypal’s “government relations” page, just started, filling in soon I hope.
What better way than to send a copy of your complaints to the authorities Henrietta mentions, along with a copy to the legislators paypal conveniently asks you to link to, and using the paypal site itself ? Perhaps ironic, but might be useful.
They do indicate they will help you craft your letter :-)
see
https://www.paypal-mainstreet.com/write-your-legislators/
Posted by vince jelenic on July 3rd, 2009.
I’ve had a lot of problems with Paypal. Thanks for the links.
Posted by Seattle Wedding Photographer on January 3rd, 2010.