It's good that Paypal does the right thing here, so a big kudos to MailPile, not just for fighting the fight, but for getting others to care about it.
But... am I the only one that wishes I had the megaphone that is Hacker News and Ars Technica to right wrongs? I get into these situations and find myself fighting the situation alone because my business is not that much interest to a mass audience, and therefore, those in the media who can shine a light on it don't have interest in relaying my plight.
So, while a few folks can get the limelight and get THEIR problems solved, the rest of us fight in vain against the machine knowing full well that the odds are stacked against us and we can't get the world's attention in the same way.
TL;DR - Yay for MailPile, that's good, but I still feel kicked and not able to get the same sort of help. And in the end, it's Paypal solving a PR problem and not something that might be more systemic.
To be fair to Paypal, their CEO claims he is trying to fix the systemic issues. In their response to this, they write: "We understand that the way in which we are complying to these rules can be frustrating in some cases and we've made significant changes in North America to adapt to the unique needs of crowd funding campaigns. We are currently working to roll these improvements out around the world."
The reason I think this might not be the typical corporate waffle is that they actually have been admitting that their market dominance made them soft and lazy, but that since Square, et al, are now kicking their ass, they have woken up to the problem: http://pandodaily.com/2013/08/12/if-its-not-broke-break-it-h...
Definitely interesting to see the higher-ups insert themselves like this, but I honestly don't think the temperature between users and PayPal is going to remain at subzero.
Yet so far there haven't been any major changes in how they treat businesses or people. The only major changes have been the designs of the websites and apps.
I use to hold stories like these as an example of a broken internal process, because someone outside your company had to tell the world about their problems with you, instead of just fixing it by telling you. Now, it just feels normal. Perhaps, it has always been like this and I just didn't notice.
But it's the same reason big companies hire management consultants, because sometimes something is broken and internally it is impossible to see. You need that fresh pair of eyes without all the baggage to get a fresh perspective.
Not saying this is the case here, but I can see how it happens.
Yeah, the real solution is not vigilante activism, but tougher financial regulation with actual penalties under the law for screwing people around (and over). It's much much harder for a bank to freeze assets.
> It's much much harder for a bank to freeze assets.
Not really. Banks establish reserve holds (i.e. you keep processing credit cards but the money is not reaching your bank account) all the time. They also freeze accounts and keep that held money for 180 days, all the time. None of it requires any exceptional circumstance nor is there any way for you to dispute the decision to establish a reserve or to close your account and hold the funds. Don't confuse savings accounts with merchant accounts; they are not treated the same even at banks.
I speak from first-hand experience. I had to continue providing service to customers while their payments for that service were held for 6 months by the largest private bank in the country (FNBO, $17 bn in assets). That was an interesting time cashflow-wise when bootstrapping one of my earlier businesses. It was all triggered by a single incident of fraud where someone made 6 separate purchases through my website, which were all charged back at the same time. As a relatively low-volume merchant at the time, that made me look like a huge risk the bank wasn't willing to work with anymore. I've considered fraud screening from the start of everything I've worked on since.
You're right, I was confusing savings accounts with merchant accounts. So given your experience, why do you think people make so much noise about PayPal if this kind of behavior is par for the course with banks?
According to Wikipedia, between 2003 to 2006 the FBI sent out >200 National Security Letters (secret information demands) per day.
In addition, Anti Money Laundering (AML) compliance requires significant expense, process, staff and training investment from financial service providers. Know Your Customer (KYC) rules also increase the overheads.
Any large business such as PayPal is essentially between a rock and a hard place: eiter allow government spying and perform proactive account seizures and lock-outs which create these issues, or wind up targeted for removal and find partner relationships pressured away and severed.
The problem is US dot gov and their existing 'regulation'. While I agree that better consumer-protection laws in financial services might help here, ultimately the government's right hand will cut off their left to maintain spy and seizure capabilities. As Schneier said: we're the technologists, we made the problems, and we have to fix things.
The main thing you can do is to not use PayPal. Unfortunately there's not really a good international online payment system. Netherland has the excellent iDeal system, and I wish the rest of the world would start using that or something indistinguishable from it. PayPal and credit cards are just too unreliable.
From a business perspective, maybe. But from a consumers perspective? Every time I have the option iDeal vs. PayPal I go PayPal, much easier and faster (just password and go!) -- and better uptime to boot.
> If past freezes are any indication, the best way forward is almost certainly to abandon attempts at redress through customer service and simply make as much noise as possible in the press to get PayPal's upper management to take notice.
As just proven by PayPal releasing the funds after Ars ran a story.
Congrats to Mailpile, I guess; who knows; they chose to agree on terms and do business with Paypal; Paypal played by the book. Until next time... when we "all" play arm-chair CO and "DDoS" a business we really have no idea on what it's like to operate. If you haven't already, read patio11's comment that will stick at the top of https://news.ycombinator.com/item?id=6333203
Because it's easy for them and they don't directly suffer the consequences. They get their money either way. But if Paypal makes their business suffer by compelling folks to go elsewhere, it will be their problem. But they probably won't see it that way. They'll simply continue to offer Paypal as one choice for payments, and the problems their customers face are their customer's problems.
I'd still use IndieGogo, just not Paypal. The only alternative, however, is to use IndieGogo's own credit card processor, which charges 3%, but it might be worth it because funds are automatically ACH'd and you don't have to deal with Paypal... and the customer feedback is more direct.
But the big downside of this is that you don't get ANY of your money until the campaign is over (and up to 15 days after that), while with Paypal, you get your funds immediately (minus a 9% IndieGogo fee) if you elected for Flexible Funding. See http://support.indiegogo.com/entries/20578596 for more.
Given they only have two options: Credit Card from Indiegogo, which means no Paypal (yay), but also no money until the end (maybe boo) or Paypal (boo), but money right away (yay), it forces many folks to Paypal. They need to look at Stripe or Balanced or Braintree or something else.
"They need to look at Stripe or Balanced or Braintree or something else."
That changes nothing. Indigogo has that policy to protect themselves from fraud. Any money they can't recover from a fraudulent project (or fraudulent charges because someone funded it using a stolen credit card, for example), comes straight out of Indiegogo's pocket. That's true whether they use a bank, Stripe, Braintree or anyone else.
This is exactly what PayPal was trying to control, and they got criticized for it.
At the end of the day, no payment processor wants to be on the hook for 100k+ that they get less than 1% of in profits, that goes to fund a project with no clear timetable, no guarantee of delivery to the customer, no budget, etc, etc, etc.
How could anyone demand a refund from a project they funded with no clear timetable, no guarantee of delivery, and no budget? Projects don't have to be successful, so I see no way that Indiegogo could be held responsible.
You're assuming no fraud at all exists on Indiegogo.
Someone could demand a refund because:
1) Their credit card was stolen and used to fund a project. They never agreed to the charge,they're entitled to a refund.
2) The project was fraudulent. The creators never intended to fund the project using the money. They ran off with it instead. Those people were deceived, and are entitled to a refund (in general, but also under the credit card associations rules).
Some potion of transaction on Indiegogo will be fraudulent. Paypal or Indiegogo must have a way of recovering that money.. if they don't then they will have to cover it themselves. That's the way it works. That's why payment processors create reserves for high-risk businesses.
This. As much as I hate PayPal (esp their "customer service"), this policy makes perfect sense to me.
With stories of fraud on Kickstarter, due diligence is your friend! So with Kickstarter (and IGG, I don't know their policy) taking 5% and no responsibility, users only have chargebacks as a course of action. I don't think it is the $25 donationsusers that care, what about the users who donate $2500?
The timetable, guarantees, etc. hold no relevance outside of a courtroom. Banks do not hold a trial before honoring a request to reverse a charge; they take the cardholder's word. Unless the merchant can provide a signature and proof of delivery of some item, they're not going to be able to dispute the chargeback either; the bank is leaving it up to the court system to resolve payment disputes outside of a few narrow circumstances. Nobody's going to take every funder that charges back a payment to court to prove they are not owed that refund, so in practice, everyone involved in crowdfunding has to deal with the fact that some of the money is going to disappear no matter what is written.
Credit Card Chargebacks. It's easier for a card company to agree with their customer who says "I paid for this thing on the internet and the company never delivered", than to dig into the details of a random crowd funded project, and read through any promises or lack thereof of deliverables, etc...
I'm not sure how Indiegogo or Paypal are on the hook for anything. Suppose for the sake of discussion for a second that MP is a complete and overt fraud, and they intend to do nothing but take the money and run. So I contributed to the project, in hope to get the product eventually, but instead I just out of $X and have my faith in humanity dinged. But both Indiegogo and Paypal are just middlemen, as far as I can see, they guarantee me nothing. How are they on the hook for anything?
Don't know where you are... but in the US, visa/mc/etc all protect their customers from fraud. In fact, in US law, consumers are not liable for more than $50 of a fraudulent charge on a credit card (and most banks reduce that to $0). So first, the consumer WILL get their money back because they have a contract that says they will in the case of fraud.
Your bank recoups that money from PayPal/indiegogos processor, and that processor will recoup the money from Indigogo, and indiegogo recoups it from the project. Whoever can't recover their money in that chain, is where it ends. That company is out of luck.
Saying, 'Oops.. we let one of our customers commit fraud, too bad for you'... isn't a permitted excuse.
And this applies to PayPal as well.. since consumers get their money into a PayPal account using a credit card or bank transfer. So PayPal is no different than any other processor in this case.
So you funded mailpile, and you want them to have your money. Seems cut and dry... but it's not.
If it's a credit card, you might not pay your debt. That's a risk borne by Visa and MC.
If it turns out to be a stolen card, all parties on the receiving end might be obligated to return the money. If Mailpile is honest, they will comply, but if Mailpile is responsible for the fraudulent payment, they just successfully laundered some stolen credit into their bank account.
Maybe they can't get the whole $100k in cash, so it's not realistic since AML says they can't have more than 10k at a time. I would be very suspicious if I was mailpile's bank and they came in to close the account tomorrow. But, I don't think that's how AML works.
Having worked in crowdfunding domain in previous company, it iss extremely difficult to solve marketplace payments. It is now good that payment services like SudoPay start emerging to address these issues.
This is good news for Mailpile, and an interesting project I have donated. Anyone looking to raise funds needs to take note however that the decision was only reversed by PayPal because of the bad publicity, they wouldn't give a shit otherwise and they aren't going to change. Just don't consider PayPal as an option, they have proven time and time again to be complete scum merchants. how they have managed to dodge any serious regulation is a complete mystery to me.
Ever notice how you only receive one email about deposited
funds? I wonder how many people forget they have funds in Paypal? And how much interest they make off the deposited
funds?
Plus, why doesn't Paypal give you the interest if they "need"to put a hold on your funds. The last time I used Paypal, I had to wait--21 days in order to withdraw?
(I vaguely remember they claim to hold the money in a non-interest account, but my point is I'm still out 21 days
interest(interest will matter again), and use of the money. Simple answer; Don't
use Paypal, and stop complaining. Answer--I try not too,
along with Ebay. (While I'm on the box--I've noticed too
many people paying close to retail on Ebay--especially
on laptops.)
WHY on God's Green Earth does Paypal keep repeating this seize and release?
If you're going to make the decision to SEIZE $45,000 of a vocal entrepreneur's hard earned cash - you are much better off keeping it and justifying your actions, then not acting so aggressively next time.
I still use Paypal, but I also transfer any money to my bank account immediately. Never have more money in your pp account than you are willing to lose.
But... am I the only one that wishes I had the megaphone that is Hacker News and Ars Technica to right wrongs? I get into these situations and find myself fighting the situation alone because my business is not that much interest to a mass audience, and therefore, those in the media who can shine a light on it don't have interest in relaying my plight.
So, while a few folks can get the limelight and get THEIR problems solved, the rest of us fight in vain against the machine knowing full well that the odds are stacked against us and we can't get the world's attention in the same way.
TL;DR - Yay for MailPile, that's good, but I still feel kicked and not able to get the same sort of help. And in the end, it's Paypal solving a PR problem and not something that might be more systemic.