Hi I open this thread to discuss the Legal aspect of Account Limitation policy regulated by Paypal. I understand that there is user agreement within paypal signup process but there is a set of protocol or law with which all financial agencies are regulated. Some of the point that are directly arised after having account limitation from Paypal -> Why Paypal turn on account limitation while people having their funds within their Paypal account (Since I have never heard of people complaining of having account limitation with no funds) -> If Paypal thinks that credit/debit card verification is a required aspect then why dont they make it a pre-requisite for opening Paypal account -> Why Paypal blocks account for 180 days and keep people's money whereas only Banks are allowed to block accounts of people only when someone complaints about it (in written) Paypal is still the first choice of people do transaction online but How can we ignore Paypal users who have lost their precious money for no reason. Is there no way to raise our voice against the un predictable actions regulated by Paypal ?
Visa and MC liability for a transaction is 180 days from the date the transaction is complete. This is a customer protection policy that they set about 30 years ago. Since paypal is processing the transactions for their customers (IE: 3rd Party Processor) they are liable for all of the funds that go through their system. In the case where they think a business processing with them poses risk, they pass on the limit that Visa / MC set. Personally, I think that they are far too ready to put an account on hold, but it's perfectly within their legal power to do so. The main problem as you suggested is that there is no pre-validation of Paypal users. If users had any screening process before they could create an account, then Paypal would limit accounts far less. They have essentially created their own poor system, by making it too easy to get setup, but they wouldn't have become so popular if it were harder to setup.
Paypal account limitations can occur for various reasons. The most common reason is when you receive up to a certain amount of money and they are required by law to 'know their customer' and in which case, they will require you to submit more information such as Photo ID, Utility Bill and so on. This is to prevent or minimize the risk of money laundering through their service. The other reason when Paypal limts your account is when you violates your contractual agreement or engaged in one or more prohibited activities which you agree not to violate. However, at times their system may raise a red flag when you deal with legitimate activities and in which case, you are given the ability to redeem your account by providing invoices and proof of delivery and the likes. Paypal does not limit your account because you have funds in it but rather it is because of one or more of the above. It is more likely because of the financial limits or if you are engaging in some activities which are prohibited. The funds being in your account is because of engaging in receiving activities. Yes, account verification is always required and the reason why you can use an unverified account is so that you can be up and ready to receive funds or to spend right away over paypal with limits. I believe they know that not all banks offer online realtime credit card statement and if they stop you from using your account until you verify your account, you may need to wait up to 30 days before you can send or receive money. If that is the case, you may lose sales or the one you plan to buy from may lose your business. The Unverified status is never supposed to be a permanent solution. As to the 180 days blocked during limitation, it is not because paypal wants to earn interest from you. The main reason is that the money is already suspected to be illegally obtained and since you did not satisfy them by providing them with information or documentations to lift the limits, the money would be kept in limbo to allow your customer to raise a dispute or a chargeback. As you are well aware, as a credit card holder, you are provided up to 180 days from the time purchase to raise a chargeback. This 180 days limitation by paypal would coincide with the 180 days the bank offers the credit card customer the rights to raise a chargeback. Once the 180 days lapse, the credit card owner cannot raise any chargebacks and the money transferred is a done deal. Paypal is not a bank. A Bank merely ensures that the money you send is sent to the party you ask them to send to and is that is pretty much it. The Bank does not act as a payment processor like Paypal. Paypal role is to allow you to pay other parties or receive money for goods or services. So Paypal funds are linked to the delivery of the goods and services. There is actually no such thing as losing money for no reasons on Paypal. Paypal merely does funds transfers and remember that they are not physically there to ensure that funds are clean and that the goods and services are transferred. If you as a merchant faces chargebacks or disputes, it is your customers who done you wrong. I mean if you are in business, you will know that there is something call Business risk and you need to do your due diligence to minimize that risk. If you send money via wire transfer to your shop and they do not deliver, you cannot sue the bank for stealing your money, same here with paypal. Most of the time an account get limited or funds get lost is usually because the account holders provided fake information, use a personal account to receive funds, sign up as a business account without actually having a registered business, verify using VCC or other fake means thus negating the purpose of verification or signed up from an unsupported country or engaged in prohibited activities and the likes. Also when you do business over Paypal, Never Ever have your customer send you the money via Send Money option, that is usually where most of the problem happens. That Send Money option should not be used for business. You should use the Send Invoice or Request Money option or even the Subscription or Buy Now option. Those are merchant tools. As long as you do things above board and do your due diligence, you should be fine.
It's totally legally on their behalf. It shouldn't be legal ,but it is because PayPal isn't a bank. Sometimes I feel it is though.