I agree that PayPal is acting horribly in this situation, but it is worthwhile to look at the world from their perspective.
From reading many of these stories, it's clear that PayPal wants to cap their risk. For a brick-and-mortar business, their risk is the difference between sales that have been billed and product that has been received by the customer. That might account for a week or two worth of sales volume on a rolling basis, so a business doing $100k a year of PayPal transactions will typically only have $3k-$4k at risk, which is on par with what PayPal will earn by serving such an account over 18-24 months.
For a conference, however, there might be six months of revenue for pre-registration before the actual event takes place. If the event planner then absconds with the money, PayPal could be on the hook for the entire amount, which has long-since been withdrawn and spent. Take that same hypothetical $100k business for a conference, now all $100k of it is at risk, and PayPal only stands to make $2,500 or so off of that.
It's pretty clear that the credit card companies have PayPal by the short-and-curlies, in the sense that PayPal themselves will be on the hook for any chargebacks.
I call this the "wash my Ferrari" problem. If you do a good job, you make $10. If you scratch the paint, you're out $10,000. Not a good risk.
Open question to HN: how could PayPal do a better job of handling the situation?
>Open question to HN: how could PayPal do a better job of handling the situation?
By simply being up front about their terms. If they don't care about events then they should set a policy not to support them, it's that simple. Don't lure people in and then make their lives a pain in the ass once you're holding their money. They know better than anyone how they can make events work, if at all.
I agree, PayPal is often over criticized considering the spectacular international fraud resolution and prevention work they do that goes, mostly, unthanked. True, we should remember the alternative is processing the payments ourselves, but if you are going to offer a product, offer a good one or not at all. Especially when so much money is at stake.
If what's described in the linked article is correct, they deserve the criticism. There's fraud prevention, and then there's organized harassment and extortion. The examples given are of the latter, and if it were me I'd just hire an attorney and file a lawsuit with enough zeroes in the damage claim to get wide press coverage and, thus, the attention of someone who's actually accountable.
As I mentioned, to criticize PayPal's inflexibility in situations like this as "harassment and extortion" is melodramatic and misunderstands both the work they really do, and the number of times you aren't saying this about the people on the other end of the transaction.
Step one of the process was repeated demands for verification, re-verification and re-re-verification, which in my book is harassment; there's a level of verification that's reasonable to protect against fraud, and there's a level of verification which adds nothing to the protection and serves only to frustrate.
Step two was "you don't want to play our game? Fine, we'll lock up your money". That's extortion, plain and simple. Given the reported background behind it, there is nothing reasonable about it. And no matter how much good work they may do in other cases, it provides no excuse for the conduct described in this case.
Or, more succinctly: there's a very good reason why Paypal has such an abysmal reputation, and it's not because they're portrayed unfairly in cases like this one.
>And no matter how much good work they may do in other cases, it provides no excuse for the conduct described in this case.
That's just not true. It completely disregards reality. In a fantasy world where life is totally fair you are correct. Back in the real world, failure rate is a VERY relevant stat, and is never expected to be 0. The system and processes in the company have been optimized to handle certain types of cases extremely well. They will fail on other cases (like this one).
My argument is that they should change their policy to simply not support the cases for which their system isn't perfected, but you are using a volvo and expecting a porsche. But just because this one case was a failure does not mean the system is failing in general. It's not, there is a reason PayPal is so successful.
From reading many of these stories, it's clear that PayPal wants to cap their risk.
From reading this story, there are two possibilities:
1. A Paypal employee is just being petty and vindictive, or
2. Paypal simply wanted to get rid of OpenCamp's account and used ongoing harassment through (re-re-re-re-)verification as a means to goad OpenCamp into giving cause for freezing/closing the account.
If it's (1), the employee in question should be terminated and OpenCamp's account restored. If it's (2), Paypal should be on the wrong end of a lawsuit.
Everybody has caught on to paypals so called "fraud protection", which often involved going to ridiculously elaborate steps to prove fraud.
For a pair of pants I bought, I had to actually go to a retailer and get them to write a letter with their letter head, proving that they were a cheap copy. There is absolutely no reason a retailer would waste time doing this, why would they. They have a business to run, and are not doing a charity.
So now most savvy people purchase on paypal with their credit card, and when paypal pulls something like this, they just do a chargeback or threaten to do a chargeback.
Paypal are incredibly inflexible at times, their site is horrible, but they still have some advantages.
> Open question to HN: how could PayPal do a better job of handling the situation?
Be open and honest in their position on (non-established?) conferences. I think it's likely that the author is spot-on about PayPal's motivations, and that they're doing everything they can within their TOS to get the client to terminate the agreement. So here they are with their pants around their ankles and their only recourse is to de-pant their client. Sounds like bad faith to me, but just try proving it in court.
If I book a place at a conference I don't understand why it's any of PayPal's problem if the organiser runs off with my money and the conference is cancelled? What's the legal backing there? Is this some quirk of US American law?
If I pay by credit card then I can recoup the money from them - but they're supposed to insure themselves to mitigate the effects of the risk going bad, again what's that to do with PayPal?
It sounds like PayPal are being screwed by credit card companies and not by event organisers.
You book a place at a conference using PayPal. PayPal transfers money to the organizer. The organizer withdraws it, buys a lot of beer, never organizes the conference.
You used your credit card to pay for the ticket, so you call your credit card company and request a chargeback. The credit card company takes the money back from Paypal IMMEDIATELY (this is standard in all merchant agreements), pending an investigation. Ultimately, PayPal gets left holding the bag.
Sure, credit card companies count on losses for fraud, but in most cases, they get their pound of flesh. In this case, it's PayPal's flesh.
From reading many of these stories, it's clear that PayPal wants to cap their risk. For a brick-and-mortar business, their risk is the difference between sales that have been billed and product that has been received by the customer. That might account for a week or two worth of sales volume on a rolling basis, so a business doing $100k a year of PayPal transactions will typically only have $3k-$4k at risk, which is on par with what PayPal will earn by serving such an account over 18-24 months.
For a conference, however, there might be six months of revenue for pre-registration before the actual event takes place. If the event planner then absconds with the money, PayPal could be on the hook for the entire amount, which has long-since been withdrawn and spent. Take that same hypothetical $100k business for a conference, now all $100k of it is at risk, and PayPal only stands to make $2,500 or so off of that.
It's pretty clear that the credit card companies have PayPal by the short-and-curlies, in the sense that PayPal themselves will be on the hook for any chargebacks.
I call this the "wash my Ferrari" problem. If you do a good job, you make $10. If you scratch the paint, you're out $10,000. Not a good risk.
Open question to HN: how could PayPal do a better job of handling the situation?