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Paypal “guilty until proven innocent” account freeze

January 8th, 2013 Leave a comment Go to comments

This issue is now resolved – please see http://www.xbmc4xbox.org.uk/2013/01/good-news-paypal-account-restored/

We have a donation page where we have accepted donations via Paypal for the project and site. This money goes towards the project, with money sent to developers, and helps covering costs etc.

Today I received an email from Paypal informing they have frozen my account.

Dear Julian Wills,

We are hereby notifying you that, after a recent review of your account
activity, it has been determined that you are in violation of PayPal's
Acceptable Use Policy regarding your sales / offers on
www.xbmc4xbox.org.uk/forum.

Please refer to: 
- Transaction x
- Transaction x
- Transaction x

Therefore, your account has been permanently limited. 

Per the User Agreement, when PayPal permanently limits an account due to an
Acceptable Use Policy violation, we may hold your funds up to 180 days. We
will review your account at 30 days from the date of this email, we will
calculate our exposure and will release any excess funds to you for
withdrawal. If there are any funds remaining in your account at this time,
we will review your account every 30 days until either all your funds have
been made available to you for withdrawal, or a period of 180 days from the
date your account was limited is reached. Please log in to your PayPal
account and verify that your account information is accurate, as PayPal
cannot be held responsible for incorrect information provided by the
account holder.

You will need to remove all references to PayPal from your website/s and/or
auction/s. This includes not only removing PayPal as a payment option, but
also the PayPal logo and/or shopping cart. 

The PayPal User Agreement states that PayPal, at its sole discretion,
reserves the right to limit an account for any violation of the User
Agreement, including the Acceptable Use Policy.

Under the Acceptable Use Policy, PayPal may not be used to send or receive
payments for items that encourage, promote, facilitate or instruct others
to engage in illegal activity.

The complete Acceptable Use Policy can be found at the following URL:
https://cms.paypal.com/uk/cgi-bin/?cmd=_render-content&content_ID=ua/AcceptableUse_full&locale.x=en_GB

To learn more about the Acceptable Use Policy, please refer to our Help
Centre page here:
https://www.paypal.com/uk/cgi-bin/helpweb?cmd=_help

We thank you in advance for your cooperation. If you have any questions,
please contact the PayPal Brand Risk Management Department at
euaup@paypal.co.uk.

Sincerely,
Nadine
PayPal, Brand Risk Management

So it looks like I am guilty until I have proved my innocence. It is strange they refer to the forum link rather than the main site url. Am I being accused of something they have found on the forum? Hard to know since they give no real information at all to what I am guilty of. “PayPal may not be used to send or receive payments for items that encourage, promote, facilitate or instruct others to engage in illegal activity.” – in reference to? Are they suggesting XBMC4XBOX facilitates/encourages or instructs people to engage in illegal activity? Are they referring to the software itself or some specific forum discussion ? Hard to know, but no project donations have been used for anything like this. The transactions they listed in the email are just donations to the project from users. All money goes towards project costs, and to developers for their time.

Googling for this sort of email shows it happens by mistake time and time again. From freezing charity donation funds, to other cases similar to ours. I have had my Paypal account frozen twice before, firstly when a card expired (some random security audit), and a second time when I made a transaction from another country and it was frozen since I was connecting from a different geographic location. Both times were a pain to resolve, even though I did nothing wrong, which seems to be the way Paypal like it.

I have already spoken to them on the phone. But guess what, they can’t do anything, because I need to speak to the “AUP” team, who of course only have an email account. Email has been sent. I wonder how long this will take to resolve. I suspect later rather than sooner. It’s also worth noting that a note on my paypal account states “This limitation cannot be appealed against. – that’s fair!

*update*
I realise the article title with “Guilty until proven innocent” is not that well worded, and this is in relation to the AUP and not a court case. In hindsight I could have made it clearer. In fact it has been decided I am guilty of breaking the rules, with no real information as to how, and with no right to appeal the decision. Oh and hi to all the visitors from reddit that have kept me up late making sure the server doesn’t fall over :) Interesting to read other peoples stories and opinions.

Please do tweet/facebook/link to this post. If it gets some attention you never know, Paypal might actually look into it.

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  1. Geoffrey Dijkstra
    January 8th, 2013 at 17:48 | #1

    This is definitely a huge fail…

  2. Daniel Malmgren
    January 8th, 2013 at 18:01 | #2

    That’s just plain evil!

  3. Taylor B
    January 8th, 2013 at 19:43 | #3

    not surprised. i’ve had my fair share of squabble with paypal. at one point i had a limit of $100 withdrawls from my bank account. so i chose to do two seperate $100 withdrawals. woke up to the fancy surprise of them making FIVE withdrawls, while the money never actually got transferred to my account. furthermore, they caused me to get 3 NSF fees from my bank, which also equaled up to hundreds of dollars.

    i was met with the same type of response. was told it could be appealed, but when i did so, they replied stating that there was “not enough evidence of my claim” ….. but failed to explain why, and what dictated that decision. never got shit out of them, as they continued to ignore further contact. disgusting

  4. Stephan Raue
    January 8th, 2013 at 20:28 | #4

    Hi,

    I have heard often similiar situations in the past, please read:
    http://tortoisesvn.net/howpaypalscrewsopensourceprojects.html
    http://sourceforge.net/blog/warning-to-open-source-projects-know-your-rights-with-paypal/

    maybe you can contact this persons to get infos/help and tips to solve this?

    greetings

    Stephan

    • BuZz
      January 8th, 2013 at 21:06 | #5

      Interesting links. thanks

  5. Rocket Hazmat
    January 8th, 2013 at 20:43 | #6

    May I suggest leaving PayPal, and using another service to accept donations? How about BitCoins, or Dwolla?

    • BuZz
      January 8th, 2013 at 20:44 | #7

      We certainly will be looking at other options. Thanks for the suggestions – I’ll check them out.

  6. Horse
    January 8th, 2013 at 21:25 | #8

    PayPal are absolute scum, and deserve none of your money. Their chokehold on the online payment market, fuelled mostly by their mandatory presence on all eBay auctions, has allowed them to get away with dishonest and just plain evil business for years and years.

    Personally, I’m lucky enough to only have had minor altercations with them, including them holding my money for up to a week (earning interest, of course) before “releasing” it to me (oh thank you, PayPal, for that favour!).

    Don’t give one penny of your money to these crooks.

    http://articles.businessinsider.com/2012-01-04/strategy/30587786_1_paypal-counterfeit-goods-antique-violin
    http://www.paypalwarning.com/
    http://www.aboutpaypal.org/

  7. Oz
    January 8th, 2013 at 21:40 | #9

    @Taylor B

    Amazing. Seriously, you should have gotten a judgement against them in small claims court. You still may be able to. Pretty easy to do, process service to any authorized location of their corporate offices (easy to discover) is cheap.

    Once you get a court date, promote the shit out of it on the web, to create a PR problem for them.

  8. nick
    January 8th, 2013 at 22:01 | #10

    Accoridng to their policy you need prior approval to collect donations.

    “Airlines and scheduled or non-scheduled charters/jets/air taxi operators; collecting donations as a charity or non-profit organization;”

    Although they cannot determine if you are truly a non-profit or charity which you would have to be to fall under the blanket of this rule. Someone most certainly blocked your account because of this.

    • BuZz
      January 8th, 2013 at 22:11 | #11

      There is this however:

      http://tortoisesvn.net/howpaypalscrewsopensourceprojects.html

      also paypal state:

      “Note: This button is intended for fundraising. If you are not raising money for a cause, please choose another option. Nonprofits must verify their status to withdraw donations they receive. Users that are not verified nonprofits must demonstrate how their donations will be used, once they raise more than $10,000.”

      and if you read the previous link they say it is ok to collect for open source projects. I wonder though if that is the case here, since they point to a legality issue and a link to the forum. If they gave me more information I would be able to check.

  9. L
    January 8th, 2013 at 22:09 | #12

    This has happened to me multiple times for over TEN years as I am a large ebay merchant. Unfortuntely, you will have to wait 180 days (6 whole months!) before the ban is “lifted”, after which you will still not hear from them. You will then have to file a complaint with the Better Business Bureau, after which they will release your money. Their AUP email department will only send you bullshit form letters, and unfortunately, there is nothing anyone there can/is willing to do to help you. They are a necessary evil for me, and the worst of the worst. Good luck to you.

  10. Throw Away
  11. Nathan
    January 8th, 2013 at 22:21 | #14

    In Europe Paypal is licensed as a bank in Luxemberg. Your best bet to getting your money quickly is to open a case involving them violating banking laws by freezing your account. Keep in mind that Paypal’s Terms of Service do not trump banking laws.

    If you do go this route never expect paypal to let you use their services again.

  12. Lindsay Druart
    January 8th, 2013 at 22:24 | #15

    I have had this happen to me and it’s all systematic. It’s a pain to deal with and I have been leary of Paypal every since but this is how you at least get the money out of the account. They aren’t going to let you reopen it but you can get the money.
    When you call, do not call from the number on your account and ask to speak to an Executive Specialist. Call from a number not registered to an account because if you do, they will just serve you the same crap after your account pulls up. Don’t tell them why you want to speak to a specialist. Just demand that you speak to someone. Most likely you will be transferred to someone’s voicemail but you may get a live person right away. Explain the situation and make a reasonable deal with them for period release of the funds. If you don’t do this, they WILL hold it for 180 days but they will do periodic releases over time depending on the amount.
    I had over $10,000 in my account when they did it to me and they release my funds to me over 6 months but I was an eBay store. Donations are a little different. They may ask you to supply tax documentation to prove you are a registered body with the IRS and they will probably ask for some personally identifying information as well.
    Don’t settle with the email. Keep bitching and complaining until you get with someone on the Executive Team. Hope it works out for you. Try using Alertpay or get a low cost merchant account.

  13. DNAgent
    January 8th, 2013 at 22:38 | #16

    FAILPal. Great.

  14. Paul
    January 8th, 2013 at 22:41 | #17

    This PayPal policy has been in place for countless years, its nothing new.

    I was on the shitty end of this policy several years ago, because the social networking site I run was suddenly deemed by PayPal to be (and I quote), adult-orientated.
    Cue a sudden termination of my account, and freezing of all my funds for 6 months

    PayPal are way too big to give a shit about one merchant.
    It would be nice to think it will be their downfall, but we all know they are monopolised so heavily that it wont matter one jot to them.
    Even Google Checkout has failed to make significant inroads into PayPals market share.

    The way PayPal arbitrarily applies its policies is retarded, but then it this has always been the case, even from the days they first started

  15. Mark
    January 8th, 2013 at 22:48 | #18

    Another reason to get on board with Bitcoin…

  16. Phil Freeman
    January 8th, 2013 at 23:03 | #19

    Paypal was the worst decision you’ve ever made. Star far far away.

    I used to use them exclusively for ebay, and it worked fine for several hundred thousand dollars of transactions. Then all of a sudden after 4 years of a perfect record, all of a sudden my account was limited because I was selling items in a “high fraud” category. (Which happened to be electronics. I sold a lot of cameras and accessories). So even though I had been selling the same stuff for 4 years, with no problems whatsoever, I was limited, and couldn’t retrieve funds from any transaction until that transaction was 30 days old. Basically they held my money for 30 days while they waited to make sure the transaction was legit. (All the while earning interest on my funds). When that happened, I quit selling on ebay and quit using paypal.

  17. John
    January 8th, 2013 at 23:14 | #20

    I’ve had similar problems with Paypal, plus the annoying fees. So I finally jumped ship and went to this site call http://www.theservicevault.net. They don’t have fees and you can pay for part of a project now or pay whenever. I’ve had pretty good success with them.

  18. Matty
    January 8th, 2013 at 23:16 | #21

    Had the same experience. Call them, and they’ll take you through an arduous verification process. It should take about a week to get back in full force.

  19. BuZz
    January 8th, 2013 at 23:59 | #22

    @Matty
    Unfortunately this is not a temporary freeze where you need to re-verify some information :(

  20. @plantmaven
    January 9th, 2013 at 00:05 | #23

    I quit eBay and Paypal a few years ago. They are rife with criminal activity. It’s ironic they picked on you for no reason, but they allowed my item to be stolen by the buyer and ignored my claims.

  21. Mark
    January 9th, 2013 at 00:36 | #24

    I got screwed over by PayPal once very similarly, and have since then refused to accept them for incoming money of any kind. I’ll use it to send out money for an eBay item under $40 because eBay will not allow me to use anything else. As soon as there is a viable PayPal alternative I intend to support it as vigorously as possible.

    I’m sorry you got screwed over. It’s almost impossible to fix these unless you can get a huge social media uproar.

  22. anon
    January 9th, 2013 at 00:38 | #26

    I don’t have much sympathy for anyone who gets screwed by paypal anymore. So many people have been screwed by them, and there’s so much information about it out there that it’s really “willful ignorance” at this point if you’re not up to date on how badly they suck.

    This kind of stuff has been going on with them for more than a decade.

  23. Reb
    January 9th, 2013 at 00:46 | #27

    I worked at PayPal for two years (one of those years specifically in the limitations department working on accounts like this.) So for starters. If you’re not nice to them they are going to tell you that you need to talk to someone in AUP who deal directly with email and that is part of their daily job so i would say worst case scenario you are looking about a weeks time for response. Since it’s a no appeals account you are looking at people being afraid to remove the limitation. Often times these can be removed with certain information being faxed in or emailed. If you are selling software they will want receipts from the wholesaler and they will verify it. If you didn’t respond to their first couple of requests for this they will put the no appeals limitation on it as well. But again, this can be removed you just have to work with them rather than against them. I had only had one account that I felt for the person but couldn’t remove the limitation but that was due to credit, which doesn’t seem to be your case. So i would suggest talking to them nicely and then asking to talk to their supervisor nicely. Let them know it’s not them but that you just want to deal with someone higher. MAKE SURE YOU REMAIN CALM. This is honestly the best piece of advice I can give you. If you are willing to work with them most of the time they will work with you. Also, if you aren’t truly doing anything wrong they will remove (it won’t probably happen that day so don’t get your hopes up, it could take another 2-3 days or so.) I hope this helps.

  24. mario
    January 9th, 2013 at 00:52 | #28

    I have been fucked by paypal many times. They are the scum of the earth and I have already started to move all accounts away from them. One time, I purchased a calling card online. But the card never worked. I made a complaint to paypal and they said it would be reimbursed. After a month, they closed the case and said there would be no reimbursement. No explanation. I called for info and they said since the card was a “virtual item” that they never issue reimbursements. The woman just kept saying, “I understand your frustration, but this is out policy.” So.. I told her from then on my policy would just be to sell bogus virtual goods and rip everybody off.. she repeated her policy..

    Second time, I was in a foreign country and I wanted to make a $10 purchase (phone top up again). But I was in Cuba. Well.. paypal froze my account. Thanks a lot. They said since it was on an embargo, they were forced to freeze the account. So, I was shit out of luck. I wasn’t buying the card from Cuba, I was just using a computer in cuba… Fucking idiots!! It took forever to get my account back and they said if I did it again they would fine my $10 000.. seriously.. that’s what they said. Well.. fuck you paypal, you can all go to hell. And has anyone else noticed that their site has not modernized at all in the last 10 years? It’s slow, unorganized crap. There guys are being managed into the ground..

  25. John-Jones
    January 9th, 2013 at 01:15 | #29

    Why on earth do people store money in their PayPal account. Why? It’s not a bank. I’ve been using PayPal for over 5 years, running an online store without any problems. As soon as money goes in, take it out!

  26. Kevin
    January 9th, 2013 at 01:44 | #30

    Years ago gaypal froze my account because they claimed the text of my password violated their TOS. I’ve never been sure exactly how they knew what the text of my password was.

  27. Majik
    January 9th, 2013 at 01:46 | #31

    Yep they are horrible.

    9 years ago, I sold some ram on ebay, stated that if it does not work when they arrive, to send it back to me (at my shipping cost) I would test the ram from a third party, and if it comes back as ok I will send it back (my shipping cost again) and will keep the 80$.

    The guy I guess did a charge back on his credit card, never emailed me, never contacted me. Paypal says I owed THEM 80$ and account frozen until paid. I contacted stated I did not have the ram in my hands and explained the auction, even had the auction listing for them. They stated there was nothing they can do, when a credit card agency takes the money they take the money no questions asked. Thats the way it works.

    I told them until I get the product back in my hands they will NOT get 80$ from me.

    9 years later I called them and asked if I am still banned, because my wife could not even get on paypal because they knew she was linked to me in some way.

    They stated, that 9 years ago was majorly different and things are not that way now, but still there is nothing they can do as the computers still want the 80$ lol

    Sounds like they still are doing the same crappy service they did 9 years ago.

    Good luck

  28. J Roby
    January 9th, 2013 at 01:58 | #32

    PayPal used to be a good service but no longer. Aside from the many incidents like the one described here, they are overpriced and theoretically make every transaction risky because of their unilateral policies.

    I have a small business, I subscribe to a credit card service. For the least expensive rate offered I can run a card from my cell phone and never have to worry about PayPal’s draconian business practices. By continuing to use PayPal you’re just asking for trouble.

  29. ron
    January 9th, 2013 at 02:49 | #33

    Typical Paypal.
    They froze my business account not once but 3 times with $32000 in it for a total of more than a month. This was through no fault of my own. A simple change of address issue.
    I lost a successful business and my only source of income. I had a mental breakdown and damn near killed myself.
    Any sympathy from PayPal? NO. I am putting the pieces together in an entry level job and squeaking by.
    Good luck with the 800 lb. Gorilla.

  30. MoneyBuddy
    January 9th, 2013 at 03:00 | #34

    PayPal once stole $500 out of my bank account. My bank account wasn’t even linked to PayPal. They just decided to reach in and grab $500 from someone, and I was it. The bank finally got my money back, and I have never used PayPal since. Screw them!

  31. Jordan N.
    January 9th, 2013 at 03:00 | #35

    This is a pretty common practice with Paypal, sadly. They confiscate your funds and freeze your account, and you have little leverage or capacity to fight back (especially when they hold their terms of service that no one reads over your head). I had this happen to me before and had a friend who got screwed in similar fashion. Fortunately for my case, I had already taken all the money out of my account, so when they reversed the transactions my account went negative, but I basically walked away from it with no harm no foul. My friend was not so fortunate.

    @J Roby:
    It’s all about eBay. Ever since they bought Paypal, they want to make it as buyer-friendly as possible, which explains their draconian policies. Unfortunately, if you use eBay at all, you pretty much HAVE to use Paypal. In some instances eBay will allow you to accept other forms of payment, but my understanding is that Paypal MUST always be offered for anything you sell. What’s more infuriating is that it’s like a double tax, since you pay eBay fees, and then you pay transaction fees for Paypal on top of that. I really wish someone would come along and take both of them down.

  32. Jordan N.
    January 9th, 2013 at 03:05 | #36

    @Majik
    Dude, this exact sort of thing happened to me. I sold some used DVDs on eBay, and over a month after they left positive feedback about the transaction, they complained the DVDs were scratched and wanted their money back. They complained to paypal and got their money back. There was nothing I could do. They didn’t even make the people return the items they got from me, so they got the DVDs for free, while I had to pay transaction fees for money they tried to take back (fortunately I had already withdrawn the funds).

  33. Alex
    January 9th, 2013 at 04:00 | #37

    I’m lead dev for a company that works extensively with non-profits, and we’ve been working closely with a payment provider called WePay for a few months now. I’m not deep in with the ins and outs of their policies, but my bosses like them a LOT and both their API, and their helpdesk, are significantly better than PayPal’s. IDK about any specific issues (those haven’t really come up yet), but I’ve been super happy working with them so far.

  34. john
    January 9th, 2013 at 05:10 | #38

    I was making £30,000 net profit a year on ebay. After 4 years they permanently limited my account and made me wait 180 to withdraw my money. I still dont know what they did it. I have 99.9% positive feedback, top rated seller, powerseller, etc. If paypal ever builds an office in the uk i will burn it down.

  35. k
    January 9th, 2013 at 05:33 | #39

    Hey Buzz, is there a way I can reach out to you directly? I work at PayPal and I can tell you first hand we are making huge strides to start to make sure this type of thing does not happen without reason. I would like to see if I can look into this further and perhaps get some of this action reversed.

    • BuZz
      January 9th, 2013 at 05:36 | #40

      I can be contacted at buzz [at] exotica.org.uk – Thanks.

  36. k
    January 9th, 2013 at 05:55 | #41

    @BuZz
    Sent an e-mail, from my PayPal e-mail. Hope to hear from you soon.

    • BuZz
      January 9th, 2013 at 08:06 | #42

      Thanks – I appreciate your help in this. Everything is now resolved, so if that was down to you – Cheers!

  37. Benjamin Smith
    January 9th, 2013 at 05:55 | #43

    A google search for “Paypal Sucks” will show that this is nothing new. I only use PayPal when more reasonable alternatives are simply out. Working with PayPal as a partner is something like Lando dealing with Darth Vader: “I have altered the deal. Pray I do not alter it further”.

  38. Interfect
    January 9th, 2013 at 06:27 | #44

    It must be because of all that illegal using an Xbox for anything other than to play Microsoft-licensed games with an age-appropriate ESRB rating. Or perhaps the part where you make software that allows people to manage and enjoy a large and varied collection of media files–some of which might be PIRATED!

  39. Hope
    January 9th, 2013 at 06:51 | #45

    I absolutely hate PayPal. I used to use eBay to make some quick cash on the side selling things I’d kept since childhood. They would hold my money for 30 days basically to confirm that the transaction was legit. So for every sale I made I had to wait an entire month to eve receive my profits. Needless to say I do not use PayPal or eBay any longer.

  40. Justin
    January 9th, 2013 at 07:53 | #46

    This is why Bitcoin will soon take over.

  41. Lynne
    January 9th, 2013 at 07:53 | #47

    Check out Amazon’s. You just need to have an amazon account to accept or make payments.
    https://payments.amazon.com

    PP froze my account several years ago when I was trying to buy a Christmas present on ebay. The credit card I was trying to use was shared with my husband, and he had used it on his account. There was no appeal process, no help line. I don’t know why people still use it.

  42. Redditor
    January 9th, 2013 at 08:31 | #48

    Hi from a redditor – hope it gets resolved…

  43. dave
    January 9th, 2013 at 09:20 | #50

    This is one of the major reasons that I will never have a paypal account, there is no documented procedure to prove guilt or show innocence, it is literally all at someone at paypal’s whim and often they are unwilling to even communicate the actual reasons for the suspension.

    It’s safer to pay the larger % to a credit card clearing service, they at least have written rules and support personnel that can be reached and will respond to you if there is an issue.

  44. Wujek_Marcin
    January 9th, 2013 at 13:09 | #51

    It should be solved in other way.

  45. LUGDOR
    January 11th, 2013 at 08:16 | #52

    If nobody else has, might I suggest accepting bitcoin donations?

    Bitcoin is interesting for this project specifically given we’re all functional nerds of some sort. Hell, even unemployed nerds visiting may have some BTC to spare now and again. Maybe I will hook up my GPU and start mining for xbmc4xbox.

    If anybody has a BTC without purpose, surely it would fare the XBMC4XBOX team well if you solicited your donation – conditionally of course, so that BTC might become and official form of donation.

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