We all have heard about Paypal horror stories from many legitimate merchants, but this one is just way too much. Brian Rose is well respected Warrior Forum member who used Paypal for many of his products he sells online until Paypal decided to freeze his money and hold it for 6 months.
But that’s not the whole story either. Here is the kicker, Brian called Paypal and made sure they were aware of the fact that he is going to process a large number of transactions from his webinar he was going to do. The rep from Paypal told him that he can go ahead and take payments and they were going to make sure no red flags were raised. So Brian did the webinar and after that double made sure everything was ok by calling Paypal again. The rep told him again that everything was looking good and he had nothing to worry about.
Now check this out, after 6 days his account was frozen Huh? Yes, they put all his funds on hold WHILE STILL CONTINUING taking payments from his customers. After a few days they finally stopped taking payment but his account was to remain frozen.
Brian asked if he could access the funds in case there is a refund request and guess what response he got? He can’t touch the money “in case there is a refund request” What?!!
So if there are refunds they would basically take out money from his personal checking account while holding the money that he has in his Paypal account and earning interest on it. Yes, Paypal simply makes money by freezing people’s accounts randomly for no reason at all sometimes and then collects interest from your hard work.
I use Paypal myself and haven’t had a problem with them, but I know personally people that have and I will never allow my entire business to depend on Paypal for payment processing.
Anyway, Brian decided to sue Paypal and rightfully so. I hope he doesn’t settle with them and just go all the way in. This is absolutely ridiculous and Paypal shouldn’t be able to get away with this. They have been doing this stuff for years to people and it’s time to pay up!
Personally, I think freezing people’s accounts is Paypal’s secret business model. Just imagine how many thousands of people (probably tens of thousands) had their accounts put on hold while Paypal was convienently earning interest on it? It’s probably a pretty big income stream for Paypal.
The problem is that most people settle outside of court with these cases. Paypal knows that the number of people who will actually complain or file a lawsuit is very small so they just continue to do what they do best …stealing other people’s money ( I wish there was a different way to say it but “stealing” is the first thing that came to my mind)
If you are a small business owner who is using Paypal as a payment processor you need to make sure to be prepared for the worst with them. Have a backup processor that you can use. Get your own merchant account etc.
There are 3rd party payment processors that use Paypal as a payment option without you having a Paypal account, for example Clickbank is one of them.
So I think Brian has a solid case here and I hope they pay for this. The killer is the fact he told them before the influx of sales and they acknowledged it by giving him a goahead. Makes no freaking sense.
Anyway, you can also read more about this story at the Warrior Forum here.