Paypal Upsetting It's Customers Again

This Time It's CNN.Money in USA who reported on this item: (Feb 9th 2008)

"In the uproar that erupted over the planned fee hikes and other policy changes eBay announced last week, one drew particular ire and incredulity: eBay's plan to hold payments sent through its PayPal payment service for up to 21 days in certain circumstances.

The freeze will apply to transactions eBay (EBAY, Fortune 500) considers high-risk, and is intended to protect buyers from the hazards of a bad transaction. By hanging on to funds, eBay can easily refund them if a seller doesn't ship a purchased item or sends damaged goods.

What is sparking reactions ranging from annoyance to panic among some of eBay's sellers is the company's criteria for determining what transactions fall into the "high-risk" category. Factors beyond sellers' control, including the number of "feedback" comments they have from previous buyers and how many of those comments are positive, can trigger the freeze.

"It's like a bad dream, really," said Dana White, an eBay seller who lives outside Ocean City, Md., and deals in used clothing, shoes and accessories. "I'm a small seller. All I need is two negatives in a 30-day period, and they will hold funds."

Editors Note: Yes Dana, eBay & Paypal respectively, are both living nightmares...

"Representatives from PayPal, which eBay acquired in 2002, declined to comment on how the new policy would affect individual cases, but noted that the changes are paired with increased protections for merchants who use the service.

If Paypal deems a transaction fraudulent, it currently covers merchants for up to $5,000 per year. That cap will be lifted for eBay's PowerSellers, the site's highest-volume merchants, who will now receive unlimited coverage. PayPal will also offer PowerSellers protection on items sent to any address (not just confirmed addresses, the current policy) and expand its merchant coverage for international sales.

PayPal estimates that its new hold policy will affect less than 5% of eBay transactions, and it emphasizes that only relatively untested sellers risk incurring a freeze. Merchants who have been registered with eBay for more than six months, have a feedback score of 100 or higher (meaning they've received positive comments for at least that many transactions), and have a "dissatisfied buyer" rate of less than 5% will never have their funds held.

But on a site that hosts an estimated 113 million listings worldwide at any given time, a policy affecting as many as 5% of those transactions puts millions in jeopardy. If funds are frozen after a sale, PayPal will release them after the buyer leaves positive feedback, three days after the item's confirmed delivery, or at the end of 21 days without a dispute, whichever happens first.

Paypal says the factors that will play into its formula for triggering a hold include the length of time a seller has been on eBay, the seller's feedback rating, and the final cost and shipping fees for the item.

Because PayPal has sole discretion over whether to freeze funds, sellers are upset about a perceived lack of accountability. They're also grouchy about eBay's efforts to force buyers to rely on PayPal: in some categories and for all new sellers, eBay requires vendors to offer PayPal as an option or have their own merchant credit card account. The site has blocked rival payment systems such as Google (GOOG, Fortune 500) Checkout, saying they are not yet proven safe."

Editors Note: I think Google have more experince in payment processing than Paypal, they have been paying their affiliates & publishers for years before eBay even went live!