Consumer Fraud Paypal Alert - Default Method of Payment

[Michael Wechsler]

It came to my attention this week that Paypal doesn't provide appropriate disclosures when you're engaging in transactions - and I'm hoping others can assist here if my investigation is incorrect. I've had complaints about them before including how your credit card was bypassed in favor of using Paypal as a transfer including small links so that it's easy to overlook using your credit card option in favor of using Paypal accounts.

One clear example: If you have a positive balance with Paypal, your pay by credit card option simply vanishes and automatically your Paypal balance is used even if credit card is the default option you've selected and used numerous times before. They call this "standard operation" that is stated in its fine print in the terms of use. Apparently you can click all day to try to find your credit card account to send money but there is nothing conspicuous that explains why this option disappears. I spoke to an operator at Paypal - instead of adequately providing a statement "Note, you have a positive balance in your Paypal account and your credit card options are not available to you" I was told that you - the consumer - should be searching for this in their terms of use and there is nothing illegal about this method. Perhaps not but it surely puts a stench in the manner in which Paypal chooses to conduct its affairs.

 

[mikewee]

Reason for PayPal's dishonest policy requiring a checking account for default payment

I recently became victimized (again) by a dishonest policy that exists for PayPal user's. Millions of other people have probably also been victimized by this needless policy (or they are at risk of being victimized, too). It costs consumers about $20.00 each time they are victimized.

As you probably know, PayPal is an eBay company and it is the nation's largest internet service for online transactions. Basically, consumer's use PayPal to collect or make payments for goods bought on the internet, such as eBay items. Together, PayPal and eBay both earn billions of dollars a year from internet transactions.

One reason that PayPal makes so much money with online transactions is because they have a dishonest policy that permits them to get paid for their service--even if the consumer has an empty checking account. PayPal has a policy that requires user's to choose only a checking account as their default method of payment. Alternatively, they could also permit their user's to choose a credit card as their default method of payment, but the transaction will be declined if the PayPal user has exceeded the limit of the credit card. By requiring that ONLY a checking account be used as the default method of payment, the transaction will be approved--even if the user's checking account is essentially empty or has insufficient funds! Hence, PayPal gets paid even if the consumer has an empty checking account. If the consumer is not careful to select an alternative method of payment (besides their checking account), the transaction will be robotically approved--even if their is insufficient funds. Most people just hurry up through the process and do not carefully choose an alternate method of payment. However, when a PayPal user does remember to select an alternate method of payment, another screen opens and asks the consumer--in an alarming manner--if they really want to choose an alternate method of payment.

Few people are aware of this dishonest policy / practice. PayPal will not disclose why they have this dishonest policy. Basically, PayPal will indicate that this has been their policy for years, and they like it. [Of course they do because they get paid--even if the user's checking account is empty. The payment would be declined if the credit card limit was exceeded.]

The first couple of times that I was victimized by this dishonest policy, I simply accepted PayPal's refusal to change their policy and permit user's to use a credit card as their default method of payment. I paid my bank the $20.00 insufficient fee and forgot about it. However, this final time, I called PayPal and complained, which was extremely difficult to finally talk to a human being.

Since PayPal would not give me any logical answer why they have this policy, I thought about it and figured it out on my own. They have this dishonest policy because they want to get paid [instantly] for all transactions--even if the customer does not have sufficient funds in their checking account.

I have filed a complaint with the California State Attorney General and the Federal Trade Commission, but I doubt that they will pursue this complaint. My complaint will be buried amongst the thousands of other consumer complaints that they get weekly. PayPal basically laughed at me on the phone when I complained to a senior official that I would complain to the above authorities.

maphound@hotmail.com