Thanks to Damian for posting this..  Dont miss your opportunity to get in on the fun and excitement of a Class Action Lawsuit against PayPal:

Thank you for your inquiry regarding PayPal. We recently filed a lawsuit on behalf of people who have had money held by PayPal without justification. I have attached a copy of that complaint for your review. I would like to get some background information from you to add you to our database:

1) What is your address and phone number?
2) How long and how frequent have you been using paypal as a seller?
3) When did Paypal first start holding funds?
4) Are they still holding funds?
5) How much money is being held?
6) Did Paypal say how long they will hold the funds for and/or why they are holding funds?
7) Do you have any emails or messages from Paypal regarding the hold on your account that you can send us?
8 ) Before PayPal started holding your funds, did you have any complaints filed against you/what was your “rating” (e.g. top seller, 99% positive feedback, etc)?

Please feel free to contact us by phone or email if you have any additional questions.

Vincent Francone
Legal Assistant
FREED & WEISS LLC
111 West Washington Street
Suite 1331
Chicago, IL 60602

Toll Free: 866-779-9610
Firm Phone: 312-220-0000
Firm Fax: 312-220-7777
http://www.freedweiss.com

I would join-in, but PayPal already returned my money after i threatened action. But for those weren’t helped by my letter to Paypal, this might be your only option.

You can read the actual complaint/proposal for class action filed in United States District Court Northern District of California, San Jose, CA here: Paypal Class Action Complain PDF

This mailbag question comes from Brian who seems to have run-afoul of PayPal’s rules:

I participated in a paypal transaction that was a violation of the paypal user agreement (although perfectly legal).  The other party states their account has been locked along with his balance “that paypal will now keep.”  My account has no indication that a violation has occurred, nor that it is locked.  Can paypal keep funds in a persons account even if they were a violation of it’s use policy?  I could understand the 180 days thing, and closing an account, but keeping all the funds seems just wrong!  Is there any way I can at least get my money back since the guy isn’t going to deliver the product I purchased?
Thanks
Brian

I have never heard of PayPal holding money indefinitely for violating their user-agreement.  In every case that I have read about (and in my own experience), Paypal will hold the money of one or both parties for the dreaded 180 days, but not “keep” it.  If you have sent your money to the seller and you know he is not or did not ship the goods, I would follow the standard dispute procedure in the PayPal resolution center to request a refund and let PayPal work it out.  I can think of no reason why PayPal would not return your money to you.  To be safe though, I would withdraw any money from your PayPal account before you bring any attention to it – just to be safe. I also recall that when my PayPal account was temporarily banned, and they were holding my funds, I could still log-in and issue refunds to buyers – so I think your seller may be confused.. or a liar..

This mailbag question is fresh out of the inbox from Johanna:

… I’ve been using paypal for over 3 years to sell my crafts online. Recently I applied for the debit card, but my application was denied, and my account frozen because they said they couldn’t verify my ssn. I was really confused. After several weeks I finally discovered that it’s because I have no credit history, which is quite true. I had no idea that lack of credit history would cause any kind of trouble!

Now Paypal is going to close my account, and they are going to hold my funds for 180 days. They said I could have my account reviewed again after I have built up some credit history, but that could take quite a while, and in the meantime, they have my money which I am really needing.
I promised a friend I would photograph her wedding in a couple of months as a gift to her, and I really need that money to buy some equipment.

Do you know of any way I can convince paypal to give my money back to me? I only have $100 there, I know that’s not much, but on the other hand I don’t have that much money in the first place.
There’s no chance of any customers filing disputes against me, my customers are always happy, and in the 3 years I’ve been there, not one single customer has complained, so it just seems silly for them to keep my money for that long.

It would be great if I could convince them to just reopen my account, I think I shouldn’t have to have a credit history, but at least I could surely get my money back!

Thank you in advance for any advice you have to offer.

Wow! Now Paypal is freezing accounts and holding money for no credit history? Or is Paypal so incompetent that they cant simply ask you to go through the Social Security Number verification process? Every time I read (yet another) PayPal horror story about someone’s account being closed and their money being held, it seems more and more obvious to me that either Paypal is just a big scam, their employees are totally incompetent, or as a company, paypal is just plain ‘broken’. Of course, I’m taking your word that everything you say is true, and you aren’t actually trafficking body parts or drugs or something, but assuming you aren’t breaking any Paypal rules I am shocked at how Paypal treats it’s customers. I know $100 is not a huge amount of money, but it’s the principal! Just imagine how much money/interest Paypal makes every month by just screwing-over 0.1% of their customers by holding on to their money for 180 days. Even if Paypal isn’t intentionally scamming customers I think they should take a good look at the negative PR generated each time they unilaterally seize the funds of a long-time customer.

Sorry for the rant.. Ok, on to my answer:

It seems to me that you need to nail Paypal down to the real reason they have closed your account and are holding your funds.

If Paypal is firm that the reason they have closed your account is because you have no credit history, go through the PayPal terms very carefully and find where it says you must have a credit history to use the Paypal service. If there is no mention of credit history in the terms/rules, then send them a letter (or email), similar to my Paypal letter pointing out that you are not in violation of their terms simply because of your credit history.

If Paypal tells you that the real reason for holding your money and closing your account is because they can’t verify your Social Security Number, check through their terms again (this might be a valid reason), then check through their help pages to see what the process is to verify your SSN (and do it!).. If there is nothing in the rules about SSN verification, send them a letter/email like I mentioned above. Of course you will have to change the wording in the email a bit to fit your situation, but it seems that to really get Paypal’s attention, sometimes you have to threaten them a bit.

I wish you the best of luck. Please come post a comment and let us know how it works out for you.

To submit a question just bop-over to my contact page.

The other day I was contacted by Pete who’s Paypal account was recently closed. I’ve posted his questions here in the blog since I’m not sure what the best course of action to get his account re-opened or to get his money back should be. Heck, I’m not even sure if he was breaking and Paypal or eBay rules (not that it matters to Paypal).

Here is Pete’s email:

Here is the situation with Paypal that I need help with….

I was working with two Ebay/Paypal accounts that are in relative’s names. I only logged into each account from their prospective houses hoping to avoid them being linked.

Account A I used to sell on Ebay. Account B has a seasoned Paypal Business Account w/ debit card.

Over the weekend I was selling quite a bit from A on Ebay and was transferring money to B. 6 transfers and a total of $2135. This morning I got the dreaded kiss of death from Paypal on Account A stating the closing of account due to suspicious activity and 180 day waiting period. There is only $680 left in that account so it’s not the end of the world. I’d like to get it lifted and access the money but the bigger problem is that on account B (where the $2135 was transfered) they have a hold on the transfers.

On account B I purchased some product and withdrew some funds that totaled about $1000, leaving $1300 or so in there. Paypal now shows a negative balance of over $1000. They are asking for info on the 6 transfers. When I made the transfers, I chose “personal” and gift or moneys owed on the reasons. Paypal wants more info and I need to know how to respond in order to get those funds released. Again account B is in good standing if I handle this properly.

I thought about sending a dummy item to account A’s address and getting tracking info but when I transferred I used “gift” and “money owed” as the reason. I also thought about stating that Account B was account A’s landlord and that was rent that was due. I could easily produce a lease agreement between the two.

I need your expert advice on how to respond as I only have one shot at it.

My other question is… If Paypal does not allow the transferred funds through… what happens to the negative balance? Can Paypal take it from the bank account without my consent?

I’m anxiously awaiting your response. Thanks, Pete

Pete: I can’t answer the first part of your question – I’m posting it here in my blog in hopes that other readers might be able to post a comment with advice. As to your second question regarding Paypal taking money from your bank account if your Paypal balance goes negative: I have read that Paypal can and will take money from your bank account in the event that your balance goes negative. However, since that has not happened to me, I don’t know for sure if this is true or correct.

Good luck in getting your money back from Paypal. Please come back and post comments to keep us updated.