Don’t get mad, get under PayPal’s skin and make a difference by contacting the Financial Ombudsman.

Update: 02 Feb 2011

Consider signing this online petition.

Recent commenter Mark reports a great result from contacting the Financial Ombudsman:

“It only took one telephone call from the Financial Ombudsman for paypal to release the funds that had been frozen. Its the 4th time ive used The Financial Ombudsman but the 1st time with paypal and every time the Financial Ombudsman has given me an excellent service.

The Financial Ombudsman now has a section just to deal with all the paypal complaints. How many paypal complaints must they be getting?”

Mark

Definitely worth a try!

PayPal’s unhappy customers

More and more people are arriving at this site, furious with PayPal for freezing their accounts, holding their money, banning them permanently for no good reason (ruining many a decent online business) and apparently caring nothing about (and some would argue even permitting) frauds perpetrated by buyers and sellers.

Wikipedia touches on this (but makes no mention of the scale of this problem):

As of December 2011, PayPal is embroiled in a controversy over their policy of holding 30% of vendor transactions for 90 days, which PayPal argues is intended to make funds available to customers in the event that a transaction is found to be fraudulent; to provide PayPal the funds to refund the seller. But PayPal has refused to provide information regarding the reasons particular sellers have been identified to have funds reserved.

There is also criticism about the perceived arbitrariness of the 90-day waiting period, when customers have only 45 days to file a claim against a seller, and complaints about the fact that PayPal has not paid interest on the funds held back. Many sellers have surmised that the policy is due to a desire on the part of PayPal to use their funds for investing. There is a class action suit pending regarding the practice.

Many have given up trying to access their money. Some have persevered and got their accounts unfrozen. Others have ended up seriously out of pocket with their businesses in tatters. None have successfully or satisfactorily been able to hold PayPal accountable for its actions.

When I first wrote about this, it seemed that PayPal was regulated by the FSA and under the jurisdiction of the Financial Ombudsman Service. However, according to Wikipedia, this has now changed:

In Europe, PayPal is registered as a bank in Luxembourg under the legal name PayPal (Europe) Sàrl et Cie SCA, a company regulated centrally by the Luxembourg bank authority, the Commission de Surveillance du Secteur Financier (CSSF) (note that all of the company’s European accounts were transferred to PayPal’s bank in Luxembourg on July 2, 2007.) Prior to this move, PayPal had been registered in the UK as PayPal (Europe) Ltd, an entity which was licensed as an Electronic Money Issuer with the UK’s Financial Services Authority (FSA) from 2004. This ceased in 2007, when the company moved to Luxembourg. It is therefore not possible for UK customers to obtain legal redress from the company in the English, Scottish, or Northern Irish Courts.

Step 1, then, should still be to approach the Financial Ombudsman in the UK.

Step 2 is to contact the CSSF – even if you’re resident in the UK.

This might be difficult, given that the CSSF website is in French. But I recommend you persist. One of our commenters (Ann – see comments below dated Jan 23rd 2012) has at least got through to the CSSF and has been advised to complain directly to the Director PayPal and give him 1 month to reply. What her options after that point will be we hope to find out soon and be in a position to tell you.

Below is some of the information from my original post. Much of this may now be irrelevant so please take that into consideration when reading it. The most useful information will be found in the comments submitted by other unhappy PayPal customers.

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Looking for a way to get your money back? You might find the ideas in this step-by-step guide submitted by an former solicitor interesting.

**Update Nov 13th 2011**

Has PayPal suspended your account and demanded proof of identity that appears to be almost impossible to supply? The good news is that you’re not alone.  Please scroll down to read recent comments from other people in this situation, and consider these numbers (thank you to a comment by Duncan):

PAYPAL UK AND EBAY UK GEOGRAPHICAL AND FREE PHONE NUMBERS:
PayPal UK Customer Service: 0208 605 3000
eBay UK Customer Service: FREEPHONE 0800 358 6551

The bad news is that PayPal appears to have become less, rather than more, contactable since I first posted about it a couple of years ago.

The good news is that this post is now on P1 of Google for the keyword “paypal”.  Take some time and read the 190+ comments after this post to see how other people are dealing with their PayPal problems. 

OTHER IMPORTANT INFORMATION regarding regulation:

PayPal’s bank permit in Europe

In 2007 PayPal received from the Commission de Surveillance de Sectuer Finacier (CSSF), based in Luxembourg, a bank permit for the European Union. PayPal Europe S. r.l & Cie S.C.A. is a company based in Luxembourg which falls under the supervision of the Luxembourg Commission de Surveillance de Secteur Financier (CSSF). PayPal Inc. is the mother company of PayPal Europe S. r.l. & Cie S.C.A, and 100% property of eBay Inc.

If you’re a LinkedIn member, you might light to take a look at David Clarke’s profile - VP and CFO at PayPal Europe. While he may not accept your connection requests, he certainly WILL see every connection request you make – and that little box gives you about 300 characters to put in there to catch his attention. Just select ‘Friend’ and drop him an invitation to connect.

*** Original post ****

In the interests of positive dispute resolution, a stress-free world and a better service and experience for all (including PayPal) here is our step-by-step guide to complaining about PayPal.

Important notes:

a) Despite being registered as a bank in Luxembourg, PayPal IS regulated by the Financial Services Authority because it falls within certain categories of activity in the UK.

b) FSA have power to regulate PayPal but NOT to deal with individual complaints. The areas of ‘regulatable’ activity are listed here. While it is outside of the FSA’s jurisdiction to talk to you about individual complaints, the FSA are happy to hear from you if PayPal does not perform to the FSA guidelines.

For example: FSA expects PayPal to adhere to its guidelines on dispute resolution – one of which is that PayPal are obliged to ‘make it easy’ for you to contact them throughout the process. If you feel that PayPal are in contravention of that guideline, please bring this to the FSA’s attention. (Please be clear about the distinction between complaining about breach of FSA guidelines and complaining about your issue.)

c) The Financial Ombudsman Service is the place to complain about your individual issue with PayPal if it has not been resolved within the 8 week period. You can download the complaint form here. If the FOS feels there are sufficient grounds and the issue is within their jurisdiction, they may take up the issue with PayPal, keeping you informed of what they are / aren’t doing along the way. If they think you have a case, their goal will be to restore you to the situation you were in before the problem arose.

So, here’s what you do:

1. Raise your complaint with PayPal in writing (email or hardcopy)

2. Give PayPal 8 weeks to respond / resolve the dispute with you

3. If after 8 weeks, you’re not satisfied, then do the following:

(i) Download a complaint form from FOS and send it to them with all accompanying documentation

(ii) Check this list of areas of business activity (more detail available from the FSA handbooks section) that are regulated by FSA. If you feel that PayPal have acted outside of the guidelines that the FSA impose on these areas of activity, then bring that to the attention of the FSA in writing.

If you follow the 3 steps above (all of them!) you will achieve the following:

1) You will bring to the Financial Ombudsman’s attention just how many unhappy PayPal customers there are out there.

2) You may achieve satisfactory resolution of your issue with the support of the Financial Ombudsman service.

3) You will go a long way to calling PayPal to account with the Financial Services Authority if and where it needs calling to account.

It’s revealing that the Financial Ombudsman Service person I spoke to this morning had never heard of ‘PayPal Buyer Dispute’.  If those of you who’ve fallen victim to this scam follow the above 3 steps you can bet he soon will.

Thank you to the FSA and the FOS for their time and information this morning.