Consumer complaint received 2016-06-09
Company: Paypal Holdings, Inc
State: UT
Product: Money transfers
Sub-product: International money transfer
Issue: Other service issues

Complaint:
I made an international purchase on eBay and attempted to make payment via PayPal. PayPal automatically defaults to having the money taken from your bank account, and you have to click additional screens to have it changed to credit card. When I attempted to make the payment the first time via credit card, the transaction was declined by my credit card company ( potential fraudulent transaction ). I immediately called my credit card company to authenticate myself and authorize the charge. The credit card company cleared the block from my account, and I kept them on the line while I attempted payment again. The second transaction went through, but unfortunately I noticed after submitting payment that PayPal had re-defaulted the funding source to my bank account instead of my credit card. As such, the transaction was processed out of my bank account instead of using my credit card as I originally specified. I called their customer service, and was on hold for XXXX minutes before talking to a representative, who told me she could n't help me, but could escalate me to their dispute resolution department, who could reverse the charge/withdrawal from my Bank account, and allow me to re-process the transaction with my credit card. I had to wait on hold for a further XXXX minutes for someone in that department, only to have them tell me once connected there was nothing they could do. Their only resolution was to have me dispute the charge with the eBay seller, who would hopefully refund my money and then I could process the transaction again. As I do n't want the eBay seller to think I 'm the one being an unreliable and deceptive business partner, I let the transfer from my bank account stand. 
I believe PayPal 's business practices are unfair, deceptive, and abusive for the following reasons : 1 ) Defaulting payment method to Bank account : the consumer should be able to permanently specify the default funding source, rather than having it always default to the linked bank account and having to change it for every transaction. I believe PayPal does this so that, by making other funding sources more difficult, they will have to pay fewer interchange fees for credit card processing, which increases their profit margins ( for business transactions, PayPal charges the recipient of the funds interchange fees regardless of the funding source, so if funded from a Bank account this difference goes straight into their pockets ). This also reduces the consumer protections available to the purchaser, since you then have to follow PayPal dispute processes if you have problems with the transaction ( which are generally not as favorable to the consumer than what is required by regulation and/or offered by most credit cards ), instead of having credit card protections in addition to PayPal dispute mechanisms. 
2 ) When processing international transactions through PayPal and funded from a Bank account, PayPal discloses the exchange rate you will receive, and deducts dollars from your Bank account. However, they do not clearly disclose at the time of the transaction that this exchange rate includes an embedded 3 % foreign transaction fee, nor give you the option of charging your bank account directly in the foreign currency. Transactions funded from a credit card are charged in the foreign currency. My bank account only charges a 2 % foreign transaction fee, and my credit card only charges a 1 % fee. By defaulting payment to my bank account and/or not giving me the option of charging my bank directly in the foreign currency, my transaction cost me more than it otherwise would have, to PayPal 's direct enrichment. 
3 ) Not unfair, deceptive, and abusive per se, but making customer service contact numbers difficult to find on the PayPal site and having wait times approaching an hour likely have the result of discouraging consumers from exercising their rights.

Company response to consumer: Closed with explanation