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PayPal's $2,000 Spending Limit | 91 comments (91 topical) | Post A Comment
Is PayPal an online financial service company?[ Reply to This ] (none / 0) (#3)
by RocDoc on Mon Aug 30, 2004 at 08:17:29 AM PDT

I question the statement that PayPal is an online financial service company. I, too, have a personal horror story dealing with PayPal, to the tune of a $200 loss and having to close all my banking and credit card accounts associated with them to stop an even higher dollar amount loss.

I chose to become "verified" with PayPal several years ago, so that I could do an online trading business on eBay and other web-based sales systems. In doing so, I added my personal checking and VISA account information (with "Bank A") with PayPal per their requirements.

In August 2003, I added a business checking account with a new bank ("Bank B") and updated my PayPal accounts to reflect the removal of the personal checking and VISA information through "Bank A". I replaced it with the business checking and VISA information through "Bank B" so that I could properly manage my online business transactions.

Six months later (February, 2004), I received an unsolicited debit from my "Bank A" personal checking account through PayPal. This is the one that was supposedly removed from PayPal's records. The debit was from an online web hosting agency that had decided to automatically renew my annual subscriptions with them without my permission (fodder for another story, but I digress).

I protested the debit with my bank, only to be told that the debit was pre-authorized and that I'd have to deal with PayPal to have the transaction stopped. It was then I was told by my banking accounts representative that PayPal is NOT a "financial institution" as defined by federal statutes and does not have to comply with federal banking regulations. They are, instead, a financial "clearing house" for credit card and certain types of ACH and EFT transactions, similar to a brokerage, with a completely different set of rules. (However, I understand that this status may have changed within the last six months.)

PayPal refused to rescind the transaction, even after repeated attempts to stop this issue. My only recourse was to close my personal checking and VISA account with my bank of 15 years in order to stop the possible additional unauthorized transactions. I also closed my PayPal account immediately, as well as my business checking and VISA accounts since they were on file with PayPal. Side note, I also closed my account with the web host, but only because of their decision to start the auto renewal billing system without my approval.

Final thoughts and warning: Do Not Trust Paypal With Your Personal Or Business Financial Information. And, yes, I have registered in the class action suit against PayPal as my experience in this issue qualifies me to do so. I feel fortunate as my loss was small, comparatively speaking, and I view it as another tuition payment in the school of hard knocks.

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Re;[ Parent | Reply to This ] (none / 0) (#72)
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PayPal's $2,000 Spending Limit | 91 comments (91 topical) | Post A Comment
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