Better Business Bureau

Robb Hicken: Handy PayPal can pose pitfalls for eBay business sellers

ROBB HICKEN, chief storyteller for the Better Business Bureau serving the Snake River RegionDecember 17, 2013 

Robb Hicken

Boise resident Rick Douglas could be considered the average eBay business seller. Sell an item online, make a little profit and then look for the next item.

"I have been a frequent customer of eBay for nearly 10 years and a seller since 2006," he proudly states.

Selling on eBay is a full-time business for some people, but not for the average person using the service and its accompanying payment-processing company, PayPal.

"The transactions processed through PayPal - a necessary evil now, given that PayPal is a wholly owned subsidiary of eBay - have been problem-free until this week," the KBOI Morning News anchor says. "I logged into my PayPal account to transfer the funds to my checking account and discovered the payment was 'pending.'"

When a business provides a product or service to a customer or client, the expectation is to get paid. Most businesses have struggled at one time or another to get paid for their work. If you are a small company, not getting paid for your services could be particularly detrimental to your business.

Because of its convenience and thoroughness, PayPal has captured a large market share of small business owners. PayPal's fraud filters, with their impenetrable verification process, have left users somewhat frustrated when trying to retrieve their payments.

PayPal strives to keep fraudsters from using its process, but sometimes it traps legitimate businesses and charities in its filters, and proving you're valid is tedious paperwork and a time-intensive process.

Douglas has filed a written complaint against PayPal, claiming it didn't provide adequate notification of the change of status.

"There is no appropriate reason for them to put a hold on money that doesn't belong to them," he says. "I now have to pay out of pocket to ship the item in question. And I don't know if the transaction will be fraud-proof until well after the item has been shipped."

PayPal is not a traditional credit card processor, since merchants cannot use card-processing equipment.

But it does offer merchants special services. A merchant account supplied by a credit card processor typically transfers the money within 48 hours to a bank account. An eBay merchant or business must request the transfer of funds from their PayPal accounts to their checking accounts.

The current system typically freezes funds for 21 days if PayPal believes fraudulent activity occurred.

Douglas says there appears to be no good reason for the sudden change of status he encountered, except "to enhance the company coffers by withholding funds to earn eBay interest on those withheld funds."

PayPal offers small businesses services such as shopping cart integration, "buy now" buttons and donation buttons. It also offers a credit card reader virtual terminal that plugs into most computers' USB ports. The virtual terminal allows merchants to enter credit card data themselves to use PayPal much like a traditional merchant account. Additionally, PayPal has introduced a mobile payment app and card reader dubbed "PayPal Here" that's smartphone compatible.

A point of transparency: PayPal is a BBB accredited business Other products that have a similar function include WePay, Square, Stripe and Google Wallet.

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rhicken@boise.bbb.org, 947-2115

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