PayPal insures its customers' money, but only against theft. You get in line with other creditors, hoping to get most or all of your money back. There are no indications that any of these companies are having financial problems. Regulation E Even trickier is the question of what is covered under Regulation E, which governs some, but not all, electronic transactions. This is the regulation that spells out the procedures a bank must follow if you complain that an automated teller machine shortchanged you and sets the maximum amount you can lose if someone steals your ATM card and password.
Regulation E applies in cases involving financial institutions.
Right now the Federal Reserve is trying to untangle the knotty problem of whether an Internet company is a financial institution if it just keeps track of your various bank, credit card and brokerage accounts and helps you move money back and forth. While you're doing something interesting at work, regulators are drinking potfuls of coffee so they can remain awake to ponder whether your home computer or a Web site count as access devices, like ATMs. Regulation E. Instead, you have to hope that the payment service can solve the problem through contract law. Most of these services deal with mistakes by freezing users' accounts until disputes are settled. That drives frequent users crazy.