Consumer complaint received 2022-06-10
Product: Money transfer, virtual currency, or money service — Mobile or digital wallet
Issue: Managing, opening, or closing your mobile wallet account — 
Company: Paypal Holdings, Inc (NE)

This complaint concerns PayPal , Inc. and its policy of impounding and sequestering customer funds and converting the funds to its own use without advance notice to or permission from the customer. 

I have been a PayPal user for XXXX years, signing up for the service in XXXX, a mere XXXX years after PayPal was founded in XXXX on the advice of a friend who was then working for PayPal. 

During that XXXX  yearshundreds of transaction have passed through my account, including receipt of funds in amounts as large as {$20000.00} and more from my customers. 

In XX/XX/XXXX PayPal instituted a policy of impounding and sequestering money from user accounts if it " suspects '' that that a transaction may involve some sort of risk to PayPal. How it assesses that risk is a mystery. In its User Agreement under " Holds, Limitations, and Reserves '', PayPal states : " We may place a hold on payments sent to your PayPal account if, in our sole discretion, we believe that there may be a high level of risk associated with you, your PayPal account, or your transactions .... We make decisions about whether to place a payment hold based on a number of factors, including information available to us from both internal sources and third parties. '' Here is how it is done : Based on its risk assessment, PayPal decides on a maximum amount that may be paid into an account by an account-owner 's customer. Any amount over this maximum is seized and impounded for 21 days. While it is impounded, Paypal uses the money for its own account, as it admits in its User Agreement : " PayPal ... combines your PayPal funds with the PayPal funds of other PayPal users and invests those funds in liquid investments .... PayPal owns the interest or other earnings on these investments. '' How is the risk determined? We don't know. PayPal indicates three factors it considers : - New sellers or sellers who have limited selling activity.

- Payments for higher-risk categories like electronics or tickets.

- Sellers who have performance issues, or a high rate of buyer dissatisfaction or disputes.

But other factors play a part. PayPal identifies these factors only as " ... confidential criteria that are essential to our management of risk and the protection of PayPal, our customers and/or service providers. We may use proprietary fraud and risk modeling when assessing the risk associated with your PayPal account. '' I am a XXXX XXXX, not a high risk seller of electronics or tickets. I have been with PayPal for XXXX decades, so I am not a new seller with " limited selling activity. '' I have never had a dispute with a customer that affected PayPal in any way in my entire history of dealing with PayPal. 

So, if PayPal identified the complainant as involved in a " high risk '' transaction, they there is an obvious problem with the criteria by which PayPal assesses risk, whatever that secret criteria may be. 

PayPal places the funds limit restriction of a user 's account without notice to the user or an opportunity to appeal the limit. The first time a user finds out that a funds limits has been imposed is when his funds have already been impounded. Then and only then does PayPal reveal that there is a funds limit and the amount of that limit. 

In my case, the funds limit was {$5000.00} received in any one month. ( The term " month '' is not defined or explained. I don't know if it measn a calendar month, an arbitrary 30-day period or some other period. ) I found out about it only after PayPal had seized and impounded nearly {$1000.00}. 

I use that money to pay subcontractors and vendors, so not having access to the sequestered funds can be a real burden, virtually ensuring that at least some of my payments will be late. 

Had I known about the {$5000.00} funds limit in advance, I would have made arrangements for payment other than PayPal. My bank uses XXXX which is cheaper than PayPal although a little more trouble to use.

The only option that PayPal gives me now is to go back to my customer and ask him to confirm to PayPal that the work he paid for is done and done satisfactorily. If I do this, PayPal says it will release the Impounded funds.

Of course this request would immediately suggest to my customer that sometimes my work is not done or not done satisfactorily, otherwise why would PayPal be asking for such confirmation? This is not the sort of notion I wish to suggest to my customer, so I will not do anything so incredibly stupid.

I respect the fact that PayPal needs to protect itself from unscrupulous users whose actions may costs PayPal money, but the company should do it the right way.

First, it should notify users when a funds limit is placed on the user 's account and explain why it is being imposed. Not some general statement like " we have determined that you may be a risk '', but the specific risk factors that lead to its decision. 

Second, PayPal should institute an appeals process that permits a user to dispute the funds limit and provide information possibly unknown to PayPal that would suggest there is no substantial risk. No such process now exists. 

The only option PayPal now offers is requesting that the funds limit be raised -- not removed -- just raised. I tried that and it does not work. I never heard back from PayPal regarding my request for a raise. 

Third, if PayPal is going to impound and use my money for its own account, it should be paying me interest on the impounded funds. 

When I asked for specifics about why a limitation was placed on my account since I have none of the risk factors identified by PayPal, a spokesperson for the company informed me that despite the absence of such factors, there was still the " possibility '' of a problem with the transaction. 

Of course, there is a possibility. There is always a " possibility. '' And if the true criteria is that there is may be " possibility '' of a risk, then all PayPal user accounts should be funds-limited. They all have the " possibility '' of risk. 

I will keep my PayPal account. It's handy for buying stuff from XXXX and the like, but I will NEVER AGAIN take a customer payment through the company. I get a better deal from XXXX with no possibility of a funds impoundment without prior notice.