PayPal Freezes Mailpile Campaign Funds • Hacker News Board

Re: PayPal Freezes Mailpile Campaign Funds

#31

Post by kalleboo » Thu, Sep 05, 2013, 10:45 AM UTC

webjames wrote: post #12

andyhmltn wrote: post #2

Why do people still use PayPal? Their service is just absolutely insane.

My sentiments exactly, if this were the first instance of this i would forgive them however it is not; I fail to see why paypal is used given it recent history. Ref: GlassUp Campaign - Indiegogo Diaspora's Funding Account Skullgirls DLC by developer Lab Zero - Indiegogo Paypal even froze a $35k donation for cancer treatment and in another case forced Regretsy to refund all their donations.

PayPal terms of service strictly requires any kind of charity donation campaign to be approved by them in advance. Anyone who has their unapproved donation drive frozen by PayPal kind of deserve what they get.

Re: PayPal Freezes Mailpile Campaign Funds

#32

Post by Kiro » Thu, Sep 05, 2013, 10:46 AM UTC

ycombinatorcom wrote: post #24

Mailpile is about encrypted email that NSA may not be able to access. Mailpile also referred to Edward Snowden in their indiegogo campaign. Mailpile also accepts bitcoin payments. Do you need anymore reasons to why this happened ???

Get real.

Re: PayPal Freezes Mailpile Campaign Funds

#33

Post by paul_f » Thu, Sep 05, 2013, 10:46 AM UTC

GeorgeOrr wrote: post #11

Paypal doesn't understand that it isn't their money. Every contributor to Mailpile has just had their funds stolen by what was supposed to be a middleman.

Actually it is their money. Paypal is taking all of the risk in the transaction. If Mailpile fails to deliver, Paypal is on the hook. I see no problem with what they did, maybe this should have been communicated better.

Re: PayPal Freezes Mailpile Campaign Funds

#34

Post by mootothemax » Thu, Sep 05, 2013, 10:48 AM UTC

They just don't want to, and we cannot help but wonder why.

The risk of complaints, refunds, and chargebacks for non-delivery would be my guess.

"Please provide an itemized budget and your development goal dates for your project"

This puts us in an incredibly uncomfortable position...

...of having a roadmap for your product's development. It's really not unreasonable, and if you don't have even a vague idea right now, that's a big warning sign.

... we do not feel that it's remotely in their jurisdiction to ask for a detailed budget of our business

Which is unfortunate, as PayPal's business boils down to risk management, and they're asking you to reduce their risk.

Re: PayPal Freezes Mailpile Campaign Funds

#35

Post by ollysb » Thu, Sep 05, 2013, 10:48 AM UTC

The problem here is that crowd-funding is a risky business and as things stand paypal has to shoulder that risk. What we need is a type of transaction where the payer/crowdfunder assumes the risk, i.e. chargebacks are not allowed.

Re: PayPal Freezes Mailpile Campaign Funds

#36

Post by derefr » Thu, Sep 05, 2013, 10:49 AM UTC

andyhmltn wrote: post #3

They will only release the funds when version 1.0 ships? Does PayPal not understand that it costs money to create products? That's the entire reasoning behind crowdfunding! 'Well you see this money you said you needed to make version 1.0 of the product? Well you can have it after you've finished'

Paypal understands full-well. They just don't want to be in that business to begin with. Whoever ends up accepting credit and debit cards (in this case Paypal) has to deal with chargebacks on those cards from unsatisfied customers, and crowdfunding is rife with chargebacks from unsatisfied customers. Paypal doesn't want to bear that burden; they never signed up for it.

This whole problem would be mitigated if Paypal set certain limits on accounts by default ($3000 transfer per month, say)--that you'd obviously want to unlimit before running a campaign like this--and then required a phone call with the account owner to discuss the need for the unlimiting. Then they could just tell the crowdfunders "no" up-front.

Re: PayPal Freezes Mailpile Campaign Funds

#37

Post by downandout » Thu, Sep 05, 2013, 10:49 AM UTC

I don't know why, in 2013, people are surprised when they use PayPal and wind up without access to the money for months or years. Paypal apologists will say that this is relatively rare. Even if that is true, since the criteria they use to take these actions are often beyond the control of merchants, using PayPal is an unacceptable risk for any business that doesn't have at least 6 months of working capital.

Always avoid PayPal if you need access to the money. Even if you feel that your business falls squarely within PayPal's AUP, always have a backup implementation with an alternative payment provider coded and ready to go (I recommend using Stripe and skipping PayPal altogether). You don't want to lose new sales on top of the money PayPal decides to hold indefinitely.

Re: PayPal Freezes Mailpile Campaign Funds

#38

Post by bowlofpetunias » Thu, Sep 05, 2013, 10:50 AM UTC

People should start to understand that crowdfunding is not a trivial business from a legal and regulatory perspective.

Yes, PayPal sucks, but you can run into this crap with any bank or payment service provider you don't have clear and direct business dealings with, and who you haven't informed upfront about what you're up to.

Also, it's just plain lazy and irresponsible of IndieGogo to pay out via PayPal, at least not without big fat warning signs. Of all the options available, this is pretty much the worst.

It's very naive to think that you can just accept money in exchange for unverifiable promises and not set off all kinds of alarm bells. Expect frozen assets to start to happen more and more often with crowdfunding, and not just at PayPal.

Re: PayPal Freezes Mailpile Campaign Funds

#39

Post by mootothemax » Thu, Sep 05, 2013, 10:51 AM UTC

[deleted] wrote: post #28

[deleted]

I added a "donate" button to a free to use website I run. After its first use, PayPal proceeded to freeze my account because I "recently declared your organisation to be non-profit or started receiving donations".

I was very unimpressed, mostly because there was absolutely no indication that adding a "donate" button would do this

The first Google result for "paypal donate button" gives this page:

https://www.paypal.com/cgi-bin/webscr?cmd=_donate-intro-outs...

It clearly states: This button is intended for fundraising. If you are not raising money for a cause, please choose another option. Nonprofits must verify their status to withdraw donations they receive

I think it's unfair to blame a company for enforcing policies which they're completely open about, especially when it's a policy you could read after mere seconds of research.

Re: PayPal Freezes Mailpile Campaign Funds

#40

Post by zamalek » Thu, Sep 05, 2013, 10:52 AM UTC

It's not the first time I have heard about them freezing funds - the last time was a few years back. From what I remember they were worried that the customers would ask for their money back if the product wasn't completed (explaining why they want to see a budget). This has nothing to do with fraud. They are allowed to do whatever they want with your money because they are not a bank.

It's completely ridiculous because participants in crowd funding are aware of the risks - they may never see their money's worth (even though that isn't the case here).

Either way, I would raise a massive stink if they don't buckle - I see you have a WIRED article, maybe approach them about writing about this encounter with PayPal. That's some pretty bad publicity right there. You may also be able to demand interest if they do continue to illegally with-hold the funds for that long (again, they are not a bank, but that means that this time they are not protected by those very same laws).