How Did YOU Lose Your PayPal Account?

14 replies
There is alot of good information out about the do's and dont's of protecting your PayPal account. At first I thought it was all just a bunch of hype, but there are some pretty big names being affected.

If anyone has lost their PayPal account and would care to share the circumstances surrounding the ban, that would benefit Warriors sitewide.

Not to say there is an EXACT reason, but there have to be some very close commonalities.

If I had to guess, I would say it would be withdrawing money too fast. I don't have personal data to back this up, just my opinion.

Anyone who has been affected care to chime in?

-Shawn
#account #lose #paypal
  • Profile picture of the author marrob008
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    • Profile picture of the author Sam England
      Oh ****...this conversation will go on FOREVER...

      I think you just opened a big can of worms my friend...

      I personally have never had any problems with paypal...and I have been using them for years now...of course I run a legit business and don't do anything that will jeopardize my account...
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      • Profile picture of the author Shawn Anderson
        Originally Posted by marrob008 View Post

        I did not lose my Paypal. In fact, I am very much satisfied with their service.
        I haven't either, and I love them too.... for now

        Originally Posted by Sam England View Post

        Oh ****...this conversation will go on FOREVER...

        I think you just opened a big can of worms my friend...

        I personally have never had any problems with paypal...and I have been using them for years now...of course I run a legit business and don't do anything that will jeopardize my account...
        I just know some fellow Warriors are getting shut down for even legitimate dealings. Alot of it revolves around payments from WSO's. I personally think that withdrawing money too fast is the big problem. I have no personal data to back that up though...
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        • Profile picture of the author CDarklock
          Originally Posted by myshovel View Post

          I just know some fellow Warriors are getting shut down for even legitimate dealings.
          There is a level at which PayPal expects you to manage your funds like a "serious" business, and if you don't, they start to get concerned.

          Basically, a given percentage of your sales are expected to result in returns. That portion of your balance, on an enterprise level, does not belong to you and should not be transferred or moved.

          The normal assumption is 30% in the absence of better data.

          So when you make $80,000 in sales in a given week, PayPal expects that you are going to reserve some portion of that - somewhere at or around $24,000 - for refunds. That portion of the funds is considered "reserved" for some period of time, usually 180 days (sound familiar?) because that's how long after the transaction banks can issue a chargeback or reversal.


          If you don't, PayPal reads this as an intention not to honour them.

          Which means everyone who bought your product using a bank-issued instrument (as opposed to PayPal balance) represents a risk of chargeback or reversal, and those can cost PayPal up to $30 a pop. The fees on that are nasty, nasty, nasty... and PayPal is forbidden to pass them on to you.

          They have to pay those themselves, as a punitive measure for letting crappy merchants use their service.

          So when you make 500 sales and yank out all the money, PayPal doesn't just see you exposing them to a liability of roughly 30% of that money... they also see you exposing them to a possible $30 fee per transaction when you don't honour refund requests and the buyer can't be arsed to file a dispute.

          So if that product was $10, as far as their risk department is concerned, you just turned your account into a $6,000 liability (more than the $5,000 you collected in the first place) - which it will remain for six months.

          And the job of the risk department is to reduce and remove liability.

          Now, pretend you keep right on doing this for three months and then step up your game to a $200 product that makes just as many sales. Look what happens to the liability your account represents: $6k... $12k... $18k... $52.5k...

          Whoa there, bucko. Account frozen. We'll be holding onto this $100k you just collected for the next six months, because we're not liking this pattern.

          And the vendor goes "Why, you *******s! I've made you THOUSANDS OF DOLLARS these past four months!" - $4,510 to be exact. Which is, you know, less than ten percent of the liability PayPal is facing down.

          If you carried a balance, and used it to buy through PayPal, they would have other fees to look forward to. They would earn interest on that balance. They would have some assurance that you were going to honour refund requests. It would reduce their risk significantly.

          But yanking your money out as quickly as you can doesn't just increase their risk, it also alters their perception of your business model. A legitimate, reputable businessman who makes six figures a month understands risk management and assessment. If he didn't, he couldn't have gotten to that level... well, not without cheating, anyway.

          It's not about whether you did anything wrong. It's about whether you look like you're doing things right. People tend to distribute the gray area between the two on the "PayPal likey" side when it really belongs in the "PayPal not risk it" side.
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          "The Golden Town is the Golden Town no longer. They have sold their pillars for brass and their temples for money, they have made coins out of their golden doors. It is become a dark town full of trouble, there is no ease in its streets, beauty has left it and the old songs are gone." - Lord Dunsany, The Messengers
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          • Profile picture of the author LB
            Originally Posted by CDarklock View Post

            Basically, a given percentage of your sales are expected to result in returns. That portion of your balance, on an enterprise level, does not belong to you and should not be transferred or moved.

            The normal assumption is 30% in the absence of better data.

            So when you make $80,000 in sales in a given week, PayPal expects that you are going to reserve some portion of that - somewhere at or around $24,000 - for refunds. That portion of the funds is considered "reserved" for some period of time, usually 180 days (sound familiar?) because that's how long after the transaction banks can issue a chargeback or reversal.


            If you don't, PayPal reads this as an intention not to honour them.

            Which means everyone who bought your product using a bank-issued instrument (as opposed to PayPal balance) represents a risk of chargeback or reversal, and those can cost PayPal up to $30 a pop. The fees on that are nasty, nasty, nasty... and PayPal is forbidden to pass them on to you.

            They have to pay those themselves, as a punitive measure for letting crappy merchants use their service.

            So when you make 500 sales and yank out all the money, PayPal doesn't just see you exposing them to a liability of roughly 30% of that money... they also see you exposing them to a possible $30 fee per transaction when you don't honour refund requests and the buyer can't be arsed to file a dispute.

            So if that product was $10, as far as their risk department is concerned, you just turned your account into a $6,000 liability (more than the $5,000 you collected in the first place) - which it will remain for six months.

            And the job of the risk department is to reduce and remove liability.

            Now, pretend you keep right on doing this for three months and then step up your game to a $200 product that makes just as many sales. Look what happens to the liability your account represents: $6k... $12k... $18k... $52.5k...

            Whoa there, bucko. Account frozen. We'll be holding onto this $100k you just collected for the next six months, because we're not liking this pattern.

            And the vendor goes "Why, you *******s! I've made you THOUSANDS OF DOLLARS these past four months!" - $4,510 to be exact. Which is, you know, less than ten percent of the liability PayPal is facing down.

            If you carried a balance, and used it to buy through PayPal, they would have other fees to look forward to. They would earn interest on that balance. They would have some assurance that you were going to honour refund requests. It would reduce their risk significantly.

            But yanking your money out as quickly as you can doesn't just increase their risk, it also alters their perception of your business model. A legitimate, reputable businessman who makes six figures a month understands risk management and assessment. If he didn't, he couldn't have gotten to that level... well, not without cheating, anyway.

            It's not about whether you did anything wrong. It's about whether you look like you're doing things right. People tend to distribute the gray area between the two on the "PayPal likey" side when it really belongs in the "PayPal not risk it" side.
            Please share some data for this stuff you are claiming.

            Merchant account standards are 10% in reserve, usually anywhere from 1-6 months. Not 30%.

            Additionally, Paypal offers "auto-sweep" which empties all funds into a bank account each day.

            If Paypal wanted 30% in reserve they would just take it...which they do. (plenty of people have rolling reserves)

            Except...that's illegal. Paypal is not a merchant bank, but a "money transmitter". They have 10 days to move the funds. That's all.

            It seems strange to me that people will argue using Paypal's TOS as evidence but completely overlook state law...
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            • Profile picture of the author CDarklock
              Originally Posted by LB View Post

              Please share some data for this stuff you are claiming.
              Um, basic business finance?

              Hold back a reserve against future returns to reduce risk. Duh.

              Merchant account standards are 10% in reserve, usually anywhere from 1-6 months. Not 30%.
              Empirically, the 10% standard doesn't seem to work. Plenty of people have complained that they used this metric and still got frozen or limited. That suggests to me that PayPal wants a larger amount; probably somewhere around the 30% they like to slap on businesses as a rolling reserve.

              Additionally, Paypal offers "auto-sweep" which empties all funds into a bank account each day.
              PayPal does not offer autosweep to everyone. You have to ask, and you might not get it.

              If Paypal wanted 30% in reserve they would just take it...which they do. (plenty of people have rolling reserves)
              Ah, so you know about that! And yet, even though PayPal can and does "just take it" from many businesses... you want data to show they'd like other businesses to do the same thing voluntarily?

              Except...that's illegal.
              I am not convinced of that. Money transmitters can hold money longer than ten days if they have reason to believe a crime will be committed... like, say, buggering off with the money and not honouring refunds, chargebacks, or reversals. Just by way of example.
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              "The Golden Town is the Golden Town no longer. They have sold their pillars for brass and their temples for money, they have made coins out of their golden doors. It is become a dark town full of trouble, there is no ease in its streets, beauty has left it and the old songs are gone." - Lord Dunsany, The Messengers
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          • Profile picture of the author gotti3636
            Originally Posted by CDarklock View Post

            There is a level at which PayPal expects you to manage your funds like a "serious" business, and if you don't, they start to get concerned.

            Basically, a given percentage of your sales are expected to result in returns. That portion of your balance, on an enterprise level, does not belong to you and should not be transferred or moved.

            The normal assumption is 30% in the absence of better data.

            So when you make $80,000 in sales in a given week, PayPal expects that you are going to reserve some portion of that - somewhere at or around $24,000 - for refunds. That portion of the funds is considered "reserved" for some period of time, usually 180 days (sound familiar?) because that's how long after the transaction banks can issue a chargeback or reversal.


            If you don't, PayPal reads this as an intention not to honour them.

            Which means everyone who bought your product using a bank-issued instrument (as opposed to PayPal balance) represents a risk of chargeback or reversal, and those can cost PayPal up to $30 a pop. The fees on that are nasty, nasty, nasty... and PayPal is forbidden to pass them on to you.

            They have to pay those themselves, as a punitive measure for letting crappy merchants use their service.

            So when you make 500 sales and yank out all the money, PayPal doesn't just see you exposing them to a liability of roughly 30% of that money... they also see you exposing them to a possible $30 fee per transaction when you don't honour refund requests and the buyer can't be arsed to file a dispute.

            So if that product was $10, as far as their risk department is concerned, you just turned your account into a $6,000 liability (more than the $5,000 you collected in the first place) - which it will remain for six months.

            And the job of the risk department is to reduce and remove liability.

            Now, pretend you keep right on doing this for three months and then step up your game to a $200 product that makes just as many sales. Look what happens to the liability your account represents: $6k... $12k... $18k... $52.5k...

            Whoa there, bucko. Account frozen. We'll be holding onto this $100k you just collected for the next six months, because we're not liking this pattern.

            And the vendor goes "Why, you *******s! I've made you THOUSANDS OF DOLLARS these past four months!" - $4,510 to be exact. Which is, you know, less than ten percent of the liability PayPal is facing down.

            If you carried a balance, and used it to buy through PayPal, they would have other fees to look forward to. They would earn interest on that balance. They would have some assurance that you were going to honour refund requests. It would reduce their risk significantly.

            But yanking your money out as quickly as you can doesn't just increase their risk, it also alters their perception of your business model. A legitimate, reputable businessman who makes six figures a month understands risk management and assessment. If he didn't, he couldn't have gotten to that level... well, not without cheating, anyway.

            It's not about whether you did anything wrong. It's about whether you look like you're doing things right. People tend to distribute the gray area between the two on the "PayPal likey" side when it really belongs in the "PayPal not risk it" side.
            I have a friend that works for PayPal and I can confirm that most of what you have said here is pretty much on target. I was told that quickly withdrawing large amounts of money from your account will cause flags to be raised and in some cases will cause your account to be frozen. They also look at consistency in your account. If you are getting $50/day and all of the sudden you have a week where you made $40,000 then you will be drawing unwanted attention to your account.

            On the other hand I was also told that the most of the staff have different ideas regarding when to freeze an account under review so sometimes I guess you just need to get lucky and have the right staff member looking over your account
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  • Profile picture of the author dadamson
    I've actually heard of peoples Paypal accounts shut down because of their customers fruedulant credit cards.

    Apparently if someone uses a stolen credit card on their PayPal account and he buys from you, both the customer and the merchant's accounts can be frozen.

    I have been running a legit business for almost a year now with PayPal and no major problems so far.

    Just a couple of glitches which the PayPal team resolved for me within 24 hours.
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  • Profile picture of the author E. Brian Rose
    How Did YOU Lose Your PayPal Account?
    I sold too much. Of course, I alerted them ahead of time and got their permission, but that didn't seem to matter.

    http://www.warriorforum.com/main-int...st-paypal.html

    I know that there will be naysayers that chime in and say, "You must have done something wrong." They always do and I must admit that I was once one of them.
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    • Profile picture of the author Shawn Anderson
      Originally Posted by E. Brian Rose View Post

      I sold too much. Of course, I alerted them ahead of time and got their permission, but that didn't seem to matter.

      http://www.warriorforum.com/main-int...st-paypal.html

      I know that there will be naysayers that chime in and say, "You must have done something wrong." They always do and I must admit that I was once one of them.
      Damn man. So erring on the side of caution here, should someone have say like friends or familys paypal accounts at the ready? Especially if you are promoting alot of WSO's?

      Thanks for chiming in here Brian,
      Shawn
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      • Profile picture of the author E. Brian Rose
        Originally Posted by myshovel View Post

        Damn man. So erring on the side of caution here, should someone have say like friends or familys paypal accounts at the ready? Especially if you are promoting alot of WSO's?

        Thanks for chiming in here Brian,
        Shawn
        One thing is for certain... you should never have all of your eggs in one basket.
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        • Profile picture of the author ZilvinasJuraska
          Originally Posted by E. Brian Rose View Post

          One thing is for certain... you should never have all of your eggs in one basket.
          I just read your story.. Dam! This made me to think hardly..

          Now there is more than 6 months from that event. Did you received those money back from paypal? And what you are doing different to prevent frozed accounts?
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        • Profile picture of the author dadamson
          Originally Posted by E. Brian Rose View Post

          One thing is for certain... you should never have all of your eggs in one basket.
          I too have read your story! Gotta suck!

          Luckily I have set up different PayPal accounts to prevent this from happening and to put my eggs in different baskets

          It is a shame PayPal is such a dominating Payment method online - if you don't offer it you loose out on so much business!

          Cheers,
          Dave
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  • Profile picture of the author Matt Poc
    Well, it seems to happen when you get many sales very fast.

    You can read some horrible stories:

    derrickvandyke.com/warning-your-paypal-account-is-at-risk.html
    russruffino.com/paypal-limits-my-account-2#comment-404
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  • Profile picture of the author coolidge
    I got a fun story about paypal. I was selling a consulting service to financial firms and when I started getting $4,000 deposits into my paypal account they immediately put my account into quarantine lol! I had to email and fax them endless paperwork. I sent them everything from all the corporation files to my bank statements, driver license copy and all the credit cards I had on file with them. It was the most insane crap ever! It was taking them forever and they always asked for more. My clients were waiting for my service and I couldn't wait anymore so I refunded their payments and told them to bank wire it. Paypal was a real disappointment.
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