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Paypal's Ridiculous Business Practices

In Q3-2005 we discovered the power of online sales and started to market Wapsol's products extensively online. Just as importantly we decided to get into the trading business for WLAN accessories (antennae, cable, connectors etc) which entails buying from manufacturers and selling on online-retail. Needless to say ebay's 26 worldwide markets were lucrative points of sales.

We used Paypal for collecting most of payments from customers outside Germany. The numbers ticked up fast and we were hecticly building up infrastructure for shipping, online-support, product-portfolio and payment-systems.

One morning as I woke up in Germany I found that Paypal decided to lock up our account without any specific reason. There were no disputes or complaints from buyers or anything that suggested provocation. They just locked it. In it a few thousands of dollars of cash-flow and the account was listed as a favored payment option for some 100 pending auctions - now customers couldn't pay for purchases and we couldn't ship without payments. The business ground to a halt!

We of course rushed to contact the telephone-operators at Paypal (their official titles are something like Support-staff or Level-one Support, but they are useless otherwise except for answering the phone and collecting information). Overnight apparently Paypal decided to inform us that they need our supplier information as to where we purchased our product. As also they demanded names and phone numbers of our suppliers. Quoting..
1. Fax copies of the original bills of sale or invoices referencing your purchase or acquisition of the items you are selling along with the name and telephone number of your supplier(s).
This is illegal in Germany (and I presume in other countries as well), where Data Protection laws protect customer and supplier information.

So not only did Paypal decide out of the blue to cut-off our payment-system, they were now demanding us to break the law in the country we are based in.

We replied to the (effectively useless, at least in our case) support staff that we are not prepared to break German laws, and would like to consider our options for possibly not using Paypal. It would be sufficient if we could free up the funds and takes steps to errect other payment-systems ex. CC clearing. To this we got the reply that Paypal will not allow us to close our account. If we wished we could apply for closure and the funds would be released after 180 days.

The amount in question was large enough that we decided to comply - that is, break the law in this country and face the consequences. Fortunately we have a couple of suppliers who wouldn't mind letting the information be given out, and hence in a effort to free up cash-flow and continue business we complied.

I am still waiting for response, and am mentally preparing to take another ridiculous surprise.

This is a protest post.

I recommend customers around the world not to signup with Paypal unless it is registered as a business entity in your country. In our case we had to deal with Paypal Europe Ltd, which in incorporated in UK. Laws in UK and Germany are obviously different. So if they aren't registered to do business in your country, you can forget about having any rights over your money - notwithstanding the fact that even if you could sue, your ability to bear legal expenses is likely not more than Paypal's.

Bear in mind that just the fact that Paypal can associate your account to a bank in your country, doesn't mean their practices comply laws in your country.

For our part, we are going to discourage our customers from using this ridiculous operation for payments. I'm not a lawyer, but I think there is significant evidence that Paypal's business model and business practices are illegal in most countries, including most of Europe.

For other people's woes, read:


Alan said…
Hi, well as you found out, you are not alone in your problems with and, which are really the same company. They have been sued successfully before and will be sued again, I can assure you. Paypal has many people who are extremely angry at the way they have treated at Paypal.

Please, if you have problems with Paypal in the USA, complain to the and the attorney general's office in your state, the consumers affairs office in your state, the better business bureau in your town, and post about it on the internet. This will help the 1000's of people that have been victimized by Paypal.
Anonymous said…
Paypal is also responsible for being the source cause of much spam that is also sent to ecommerce sites that use their "add to cart" buttons and possibly other paypal buttons. This is an easy fact to verify. Simply find any site that uses an "add to cart" button for Paypal, then with your browser (Internet Explorer) use the View Source. You will see that Paypal identifies the emcommerce site by the "business" field which contains an email address.

Although site viewers can not see that portion, any spambot email harvesting program (which scan all websites) can easily find those email addresses and will collect them for purpose of sending spam to.

It is the responsibility of Paypal to add a proper identification account number rather than to rely upon an email address to identify the account. Alternatively (for most sites) simply the domain name should suffice instead of the email address.

According to one page found on the net, paypal has been aware of this problem since at least 2003.

PAYPAL is therefor responsible for much spam to those ecommerce sites, and Paypal is responsible party for making the correction to their system so that ecommerce sites would not be required to have their email address in the form data required by Paypal.

At "> click upon the "If it doesn't fit..." button then click on the "Paypal spam risk" button.

This article was written May 2006. FTC and Paypal were contacted. Paypal merely replied giving a link to an individual's site that has a minor javascript fix and they had also commented that improvements take time.

Paypal really did not properly address the problem nor did they state that they would take any kind of prompt action to correct the problem.

Until the requirement to identify an ecommerce site by the "business" field with an email address is corrected or changed, Paypal (owned by Ebay) is responsible for a large amount of spam.

I also feel that this problem may be a violation of privacy rights of individuals.

If anyone desires to link to my article, please link to the main site and make reference to the buttons to select.

This issue could be possible grounds for a class action lawsuit for ecommerce site owners. It could also be cause for criminal action wherein many states have laws against spam. Paypal is a party to such spamming.
terradeity said…
I will continue to file complaints for this. I never gave PP this address or put this wrong address in my profile. It was an old address that PP got from somewhere else (6 years old...didn't even have PP then, and PP didn't even include the apt. #!). It caused me to lose $50 because the package got stolen. They blame me for the error. I can't fix it since PP doesn't even have the address that they gave a seller in my profile for me to change! They are rude and condescending (Kevin, Tom, Michelle). They refuse to give me contact information for their management or someone else to whom I may file a complaint. A customer service rep (Jay) even hung on on me on Saturday, July 1 at 11:56 when I asked for contact information to elevate this complaint. PP claims that they get their info from eBay. Why do PP and eBay have separate registration processes if they are going to share data and refuse to honor the data on my PP profile? I'm taking this to small claims court where it will make a record for others.
More power to you pal... Atleast you are on better ground. You are able to sue in a US court. Where I live here in Germany, Paypal isn't even a registered business. When I suffered at Paypal's hands the closest option I had for suing was to travel to UK, hire a lawyer there and try to start a process. You can imagine, most online sellers can't afford that, and hence Paypal continues to take victims here.

For the record, paypal continues to sign up customers here inspite of not being registered as a legal business in most EU countries (exception of UK). So effectively there is no legal basis for any of these people who sign up when they put their money in Paypal's hands
David O'Hanlon said…
PayPal, in their arrogance, has limited my account withno previous notice. Two eBay sellers had shipped my pruchases and had the money pulled back from PayPal. My website had over $1200 to be paid and the payments were refused. My business and my personal intregity have been greatly affected. The reason, after actually finding a real person to talk to at their '800 number, turned out to be that I had logged in and made a transaction using an anonymous service that blocks my real IP address. There were no indications of fraudulant transactions or report of them. I live in Thailand most of the year and am now trying to jump through the PayPal hoops to restore my account. If they had the decency to inform of suspicious activity all problems could have been taken care of with one phone call. I, after speaking with a man named John who inspected my account during a phone call, received an email saying the limits were lifted from my account. However, they were not. There seems to be no way that human intervention can stop the crushing automatic process once it has begun. I am wondering if I could take PayPal to court for libel as they have pretty much ruined my reputation, both business and personal for no apparent reason.
David O'Hanlon
Anonymous said…

I'm not a lawyer to comment/recommend on if legal action is possible. But this is an option that I considered when my business was on the cliff's edge of being ruined, because Paypal locked up a large amount of my cash-flow and I couldn't pay my suppliers.

Where I live, in Germany, Paypal is not a registered business and hence cannot be held legally accountable for anything! Knowing business law here a bit, I suspect most of Paypal's business practices are plain illegeal in Germany (and many/most other EU countries), which explains why they operate from remotely in USA and UK. So my only option at that time was to travel to either of those countries and start legal processes - which was simply impossible given the size of my business.

Google for "paypal warning" should help to discover others facing your situation.

This site: has links to a law firm that successfully sued the perpetrator a few years ago.

susan said…
I am fairly new to Ebay & Pay Pal.Am a 239 star! whooee. Well, first,I had a transaction with a buyer who felt she overbid on a purchase. The auction listing said sold as is, stated all and even said no refund/return.She never contacted me, just filed a dispute with Square trade, they ignored her,so she resorted to Pay Pal.First she said she never received the item, later changed and said she did.Pay Pal sent me an email to respond, which I tried for days to contact them via phone, email and the dispute resolution "form", which prompted me to pick and option, like total refund crap, which I was not willing to do, no other useable option, or way to contact them, so they just refunded out of my account w/o my permission or knowledge until after the fact, the full amount to the purchaser. To date, I still have not gotten my expensive item back from the buyer. Thanks PP. By the way, by them doing that, it made me checks with my bank account bounce and I am paying NSF for the bills I paid. Next, the following week, I purchased some mannequins from Joe in NJ from Ebay, cosmetique, Ebay message kept "saying" item not paid,so I paid again. Charged twice and also shipped 2, he shipped that night, too late to stop. I received the 2 mannequins, told him I would return one, opened one up and it was useless, faulty, wobbly. So, I said to myself, use the other one,it was exactly the same problem. So, I contacted Joe, the seller in NJ for a refund, he replied, pleasure. It cost me $25 to ship/return them.Next, he acted like he did not got them, then he said he did. Did take pics of them, the defects, I said no.Did I gete an authorization to return them , again no, but I had told him I was returning and expected to be refunded fully plus shipping. He said I must not have read the instructions for putting them together.Well, there were no instructions, he later told me I could go to his website and could have "fixed" them. Well, it was not a simple matter as such, they were factory flawed.Next, he filed a dispute with Ebay & Pay Pal. Again, I could not fix the option to get a reply/explantion in.So, in one day, they closed the dispute, he wanted his list fees paid back to him, and they let him refund me $10.50 on the first mannequin.So, I lost money there. The other mannequin is still in dispute. Hence, I already know the outcome of that. He has the 2 mannequins and all my money minus $11.50.Also, since this just happened, again, NSF checks bouncing from them taking money from my bank account. $270 NSF I have had to pay out this month. Merry Christmas to Ebay & Pay Pal. They need to be stopped/shut down for being allowed to steal from folks and "decide" the resolution w/o knowing the full details!! Needless, to say, I will give up this ridiculous way to make extra money.It cost too much. Also, they say they will refund listing fees when an item does not sell, etc. LIars! THey charge way too much. Crazy things have happened on my site,very little of the info. is ever correct, full of glitches. They must be overloaded now.It is a scarry thing, now I know why people are leary of EBAY deals and especially Pay Pal. I have gotten numerous emails wanting my acct. info. I think now I will change my credit card info and change my bank acct number also.AND I will NEVER give ANYONE that Control again.So, Folks please beware. I have learned the hard way. At least I did not have my measley account frozen, etc. and I now know why some folks on EBAY say they do not accept PP.I am soooooooo glad I happened upon this site. I will put a "signature" on all emails now that I send out. Oh, by the way, if you are using UPS, the brown truck---BEWARE! I paid for extra insurance with them to ship an Ebay item, it was totally destroyed, they ignored my claim. I took them to court,lost,as their fine print I signed w/o reading, said "pkg. is NOT INSURED once it leaves our building WHILE in transit. Now why would I buy insurance, to insure it just while I was standing there? Each UPS store is a franchise, you will lose, as the local court KNOWS they get more revenue from them than YOU! I have since "advertised" for them for free, like I will do for PP and EBAY, so beware. Boycott UPS !!! Thanks, a good place to vent, but better to let folks know, wish I had known all this, about this site before now!! Susan
John Pesonen said…
Paypal has $568 of mine and all I get are the same emails back and forth i've spent hours on the phone, how much interest do you suppose they are earning on customers money in limited accounts?? I've posted my gripe at my website at, if you own a website I recommend you do the same.
Anonymous said…
I would like to comment on paypal's practices. I had used palpal many times before, with deductions connected to my checking acct with the visa logo. This time I was purchasing a piece of furniture and wanted to purchase it with my american express. Before I made the transaction I added the card, selected it to be my primary, then made the purchase. I thought that would be enough. Well they took the money out of my checking acct anyway, and when I called them they said Oh well! Their policy is that, even if you have a credit card listed as a primary it always reverts back to the default bank acct!! Well how was I supposed to know that!! You would think select as primary means first funding source.
Anonymous said…
Yep, another victim for breaking paypal policies.. UGH! although I tried to contact them to ask and got no reply. Been with paypal for years with no problem and out of the blue do this to me.
When I appealed, they sent me a response saying my site XXXXXXXX was against the policies, although the site they sent me, was not my site, had never seen it or had any dealings with it.

Now paypal have just broken the privacy and confidentiality policy because I dont think that the owner of the site they gave me would be too impressed I knew their site was breaching policies..... Will contact them and let them know.

I hope they take paypal to the cleaners.
Anonymous said…
Hi, Paypal limited my account as they said that my private website is against their policies. My website sells nothing illegal! How can Paypal tell me what to do with my own private websites??
rmleisure said…
I recently had a problem with Paypal limiting my account and your website was very useful in getting this corrected. I am now part of a company called Prepaid Legal Services Inc. Prepaid Legal offers affordable legal plans for anyone in North America. They provide unlimited phone consultation with a law firm in your area as well as unlimited letters or phone calls made on your behalf. They offer a number of other things as well, but I know the letters and phone calls would help a lot of people on this website. The service is only $16 with no contract, it's month to month and the services start immediately.
Anonymous said…
Italienische Mafia Killer werden in Deutschland ja auch verfolgt. ist es den nicht möglich die deutschen paypal Angestellten , die ja vermutlich wissen, daß ihre Firma paypal eventuell gegen deutsche und europäische Gesezte verstößt strafrechtlich zu belangen??

Hier einige Zeilen aus einem Schreiben der Paypal Konfliktlösungsabteilung vom 17. 8.07an mich: (Es geht um die Wiederherstellung meines Paßworts , Passord Recovery. Ichhatte von Paypa angeforderte Unterlagen am 30.07 an Paypal per Einschreiben versandt )

vielen Dank für Ihre Anfrage an PayPal. Mein Name ist Fiona Thomsen und
ich werde Ihnen gerne bezüglich Ihrer Anfrage zum vorgang der
Passwortwiederherstellung behilflich sein.

Sie hatten uns mitgeteilt, dass Sie am 30. Juli bereits alle Dokumente
zur Passwortwiederherstellung per Post an uns gesendet haben und dass
Sie informiert worden sind, dass der Vorgang 7-10 Tage dauere.

Ich muss Ihnen nun aber leider mitteilen, dass dieser Zeitrahmen für
gefaxte Dokumente zutrifft und nicht für Dokumente die per Post gesendet
werden. Wenn Sie Dokumente per Post senden, kann die Bearbeitungszeit
bis zu mehreren Wochen betragen.

Ich habe aber soeben einmal eine Anfrage in Ihrem Namen an die
zuständige Abteilung eröffnet, damit geprüft wird, ob die Dokumente
evenuell bereits angekommen sind.

Ich war vor meiner Beschwerde von Paypal Revovery in Deutschland informiert worden daß eine
Password Recovery, Paßwort Wiederherstellung nur 7-10 Werktage in Anspruch nähme .
Ich empfand das schon als blitzartig, wenn ich bedenke , daß die bei bei meiner Bank dafür immerhin zwei Minuten gebaucht haben.

Nach diesem aufklärendem Schreiben würde ich nie auf die Idee kommen, daß Paypal bzw. Paypal Mitarbeiter versuchen könnten , mir den Zugriff auf mein Konto bewußt zu verweigern. Es wird doch deutlich, daß Kundenzufriedenheit vermutlich eines der obersten Unternehmensziele von Paypal ist.
Mir ist nach diesen Zeilen vollkommen unverständlich , daß einige Leute behaupten, Paypal versuche Kunden zu zermürben bis sie Ansprüche auf ihre Guthaben entnervt aufgeben, willkürlich Konten zu sperren etc. Das angeblich in tausenden von Fällen . Nein, das kann alles nicht wahr sein. Ein Problem mit Papal????
Anonymous said…
Zur Information:
Ich ahbe bis heute 26. August 07 immer noch keinen Zugriff auf mein Konto. Ganz nebenbei Die deutshce BaFIN nicht zuständig und verweist auf die CSSF Luxembourg, die ab 2. Juli 07 für paypal (Europe) zuständig sei. Eine in diesme Zusammenhagn nützlich eAdresse könnte auch :
Palais de Justice Luxembourg

Adresse :
12, Côte d'Eich

B.P. 15 L-2010 Luxembourg


Téléphone :

47 59 81 - 231

sarah said…
Hi, I have filed a small claims case against PayPal - the first court hearing was yesterday, November 24th. They did not appear but filed a motion to dismiss and sent a copy of the user agreement - an adjournment was given and the next court date hearing is set on January 6th. I think they have to be there then.

I've created a website documenting the case. Please help me to spread the word about the website!! :)

I've decided to make this website into a blog documenting my problems with PayPal rather than just this one case.
Anonymous said…
After over a decade with a verified account with Paypal which was linked to our business checking account, Paypal all of a sudden wouldn't let me make payments from may balance despite my paypal balance being over $1,000 US.

So I called customer support. First time: put on hold and dropped. Second time I get this slimey guy who asks me if I am married (I'm female). Yuk.

I advise everyone to avoid Paypal like the plague. Their so-called customer service is abusive, sexually harrassing and doesn't help at all...just a waste of cellular minutes.

After over a decade I'm changing to google checkout. It may be just as bad but no way am I going to use Paypal again.
My first problems with this company were in 2005. 5 years down, sad to see that Paypal continues to abuse customer money!
Anonymous said…
Hello Ashant, thanks for putting this together.

I have recently had my paypal (portugal) account limited because I tried to transfer money from my paypal portugal account to my paypal UK account. Before I setup the paypal portugal, I had checked with paypal UK about taking payments into a portuguese account and they had said I had to open an account with paypal portugal. So, I don't think I have done anything illegal by having two Paypal accounts in different countries.

I am absolutely incensed at how Paypal has treated me since December 2009 when they placed a limit on my account. My account balance is only about 350 Euros, but on principle there is no way I am going to walk away from this and leave them to get away with this scam.

Now, being as you seem to have researched this already, please can you confirm that I can actually take legal action against Paypal in the UK as the parent company to their European operations (including Portugal). Thanks in advance for info/comments.

I intend to make as much noise (raise as much publicity) as possible, make complaints in as many places as possible, and take a legal action is possible. They are trying to steal 350 Euros from me, and I intend to ensure it will cost them thousands of times more.
Anonymous said…
My name is Lisa Kozak I was browsing internet and found your blog. The author did a great job. I will subscribe to your RSS feeds. Thank you for your contribution. I am a web designer myself. And here some examples of the websites that I designed for bad credit loans payday loan company.
In the Summer of 2009 we were approached by a client to build a website for their project. The site was complete; approved and went live in the fall. We invoiced via PayPal and were paid in November 2009 to our PayPal account.

Fast forward to March 2010. We received notice from PayPal that a chargeback has been placed on our PayPal account. We contact the client. The client relays to us that they did not know what the charge was for and were thus advised by their credit card company to refute the charge. Now that they know that the charge was for us they apologize profusely, and promises to reverse the chargeback straight away.

We supply the following evidence to PayPal:

• A copy of the original proposal
• The Invoice from us to the client.
• A copy of the email from the client confirming that we had been paid (with headers)
• A signed letter from the client admitting that the charge-back was in error
• An affidavit from the customer stating that the charge-back was in error
• Copies of the clients (Buyers) credit card statements showing the re-billing and withdrawal of funds

Should be cut and dry to get this one resolved .... Or so you would think. It has now been over 100 days. Our account is frozen, and money denied to us. You can read the full account of the misery that is having PayPal as your Payment Agent, and the comedy of errors and hard fought for incompetence that passes for PayPal's Chargeback Support Team at
Gusy, great souce of information is shared over here with us. It was really interesting to read your post. I expect more post from you guys. Thanks!
Anonymous said…
People it is illegal for any bank, States for Drivers license, Paypal, University, I.R.S. to require your SSI#
Gr8 source of information, thanx for sharing:-)
jackmartin said…
really amazing blog and I was thankful to you for sharing such a useful information.
- CRM Solutions
Jim edward battle said…
Pay Pal will lie or do anything to shift liability for not paying your overdraft that they caused. Pay pal promised that they would settle an account error that they were responsible for, it never happened even though they found themselves neglegent. What a piece of work, there should be Federal guidelines in place, this is how they make millions.
Such a useful information sharing and its helpful for everyone.
- Tend Skin Products
I often use Paypal. sometimes I prefer use check. it is much better.
Woody Allen Co said…
There is the way of paypal. But so many people are extremely angry with Paypal what they have been treated by Paypal.
it was just informative news and thanks for sharing such a useful information.
- resort reservations
maruthi said…
This comment has been removed by the author.
maruthi said…
The blog is really informative and i like to share it with my friends. Got a lot of information from this post. Please give us some more news. Thanks for your post in fact it is an excellent post.

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