Fighting PayPal Rolling Reserves

by Henrietta
http://200westmain.com/redinkdiary

PayPal Background Overview

In Europe PayPal (Europe) Sarl et Cie SCA,
is legally registered as a bank and is
regulated centrally by the Luxembourg
bank authority.

In the USA PayPal is not a bank and is not
directly regulated by the U.S. federal
government although it is subject to
reporting provisions of the Bank Secrecy
Act. Because PayPal serves as a payment
intermediary, it is treated as a money
transmitter or a money service business.
PayPal is subject to state regulation,
but state laws vary, as do their definitions
of banks, money services businesses and
money transmitters. PayPal is not subject
to the provisions of the Electronic Funds
Transfer Act and Regulation E (EFTA/E).
Consumers using PayPal with a credit card
(not debit card) are covered by the
provisions of the Truth In Lending Act
and Regulation Z, (TILA/Z) through the
card issuing bank.

Keyword = State Regulation

The Banking Departments of states which
regulate money service businesses website
is maintained by the Association of Regulators
from states which do regulate and has
many valuable links.

Most states have links to the laws and
statutes which regulate money services
businesses, many have links to the
Attorney General.

Keywords to help in your search:

• MSBs or Money Service Businesses
• Consumer Protection
• Money Transmitter
• Department of Financial Institutions
• Banking Department

Most Regulatory Statutes for MSBs contain
wording that states the maximum time period
within which money transmitters must perform
the function they are licensed to do,
ie. give you the money

I have not seen a single statute with a period
of 180 days or 60 days. Most seem to be 10
business days, unless you are suspected of
committing a crime. This is America, you are
innocent until proven guilty. PayPal will not
be able to say that every seller who has had a
reserve imposed is suspected of criminal activity,
especially since no action has been taken to
report that suspicion to the appropriate
authorities or police.

The Federal Trade Commission (FTC) does not
resolve individual consumer complaints. The
FTC collects complaints about companies and
business practices. The FTC enters all complaints
it receives into Consumer Sentinel, a secure
online database that is used by thousands of
civil and criminal law enforcement authorities
worldwide. These collected complaints can help
detect patterns of wrong-doing, and lead to i
nvestigations and prosecutions.

Tough Talk

You can sit there in your office and tell
yourself “I am not selling in a high risk
category. I will not be affected by reserves”

You should know that the phrase “high risk
category” is BaySpeak, meaningless. “High
risk category” sellers who have had reserve
accounts imposed include:

• Collectibles
• Toys and Hobbies
• Pottery & Glass
• Antiques
• Baby - Nursery Bedding

as well as the categories that we would
expect to see like Cell Phones & PDAs.

Yes ALL Merchant Credit Processors have the
ability to require a reserve account in
their legal agreements. However, it is not
something which is implemented across the
board for all accounts regardless of risk.
If you have zero or bad credit and a bad
track record or history of chargebacks
(if they will even accept you) then you
should expect a reserve.

PayPal are not following accepted industry
procedures or risk standards. I have been
told that when PayPal have all the planned
reserve accounts in place on eBay they
will be requiring them on websites. Seems
like fair warning to me. Our Australian
friends proved that when everyday people
get off their rear ends and make noise
consumer protection happens. PayPal
backed down.

If you don’t like it make a written complaint.
If you can’t be bothered to take action you
must bear the consequences of your inaction.