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PayPal Freezes Mailpile Campaign Funds

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Re: PayPal Freezes Mailpile Campaign Funds

#231

Post by Xylakant »

mseebach wrote: post #227
Xylakant wrote: post #198

Earlier quoted context omitted.

So why do they actually do business with IndieGoGo? I would expect the vast majority of IGG campaigns not to be able to deliver within 20 business days. Since the users of IGG obviously intend to use the money to fund a lengthy process of building a product that sort of invalidates the use-case.

Presumably they've done the kind of review of IndieGoGo's business that they stated they'd like to do of Mailpile and found that IndieGoGo has their risk spread broadly enough (and has a cash buffer large enough) to underwrite the risk of a particular project going down.

As far as I understood the paypal payments came in as part of the IGG campaign, not separate from it. So the Ubuntu Phone campaing would face the same problem. As would face any other IGG campaign. I seriously don't understand the rationale behind that:

a) either Paypal/IGG can afford the risk

or

b) issues like this will crop up again and again and again, leaving frustrated businesses and a bad impression behind, regardless of who's technically to blame.

or c) I'm missing some point here.

The other thing I'm desperately trying to understand is why PayPal claims that the refund risk is high. Almost all benefits given by the IGG campaign are intangible or of neglectable value compared to the funding you give. The first tangible item starts at the 67USD tier (a postcard from iceland [!]). Later items include a T-Shirt for 256 USD and some overpriced USB-sticks. If someone at PP actually read through the descriptions, it would be pretty obvious that any backer was aware of what he's doing.

Re: PayPal Freezes Mailpile Campaign Funds

#232

Post by patio11 »

mistercow wrote: post #215
patio11 wrote: post #118

Indulge me in a flight of fancy in which we pretend, for the sake of argument, that a) Paypal is run not by Snidely Whiplash clones but b) by smart geeks working with thin margins in a highly regulated industry where c) customers are at risk essentially never, d) merchants eat 100% of the risk if they stay in business, and e) Paypal eats 100% of the risk if the merchant doesn't. Why is Paypal very skeptical of pre-sa…

What credit card company allows a chargeback after more than 180 days? The only one I can find that does that in any circumstance is Master Card, and they only do that for "interruption of service" on prorated services.

Amex for one starts the 180 day countdown at the day of delivery or expected delivery, so you can get them to reverse a transaction literally years after the fact if necessary -- pre-ordering Duke Nukem Forever in 2005 would still be chargebackable into 2013. They're also well-known for bending over backward for cardholders, particularly very valuable cardholders. (They require merchants to retain all records for 24 months. You can probably get them to reverse transactions after that, too, though it's an open question whether they'd eat it or have the merchant eat it at that point. For high-value customers they can be quite accommodating indeed.)

There are also fun edge cases with foreign banks, corporate/government cards, etc etc. Paypal says they (very rarely) get chargebacks 540 days out.

Re: PayPal Freezes Mailpile Campaign Funds

#233

Post by ubernostrum »

patio11 wrote: post #118

Indulge me in a flight of fancy in which we pretend, for the sake of argument, that a) Paypal is run not by Snidely Whiplash clones but b) by smart geeks working with thin margins in a highly regulated industry where c) customers are at risk essentially never, d) merchants eat 100% of the risk if they stay in business, and e) Paypal eats 100% of the risk if the merchant doesn't. Why is Paypal very skeptical of pre-sa…

The issue with PayPal is not that they take steps to insulate themselves from fraud and chargebacks.

The issue is that their process for doing so is unilateral and -- as is well-documented -- offers essentially no options for resolution unless you are lucky enough to be able to bring significant media pressure to bear on them.

That is a problem. Unfortunately, I think the only solution is to encourage people to basically sue PayPal at the drop of a hat. PayPal has the most abysmal processes in the world because those processes are cheap; if those processes become expensive (because people run to a courtroom every time PayPal freezes so much as ten cents), then and only then will PayPal change the processes.

Re: PayPal Freezes Mailpile Campaign Funds

#234

Post by mseebach »

HerraBRE wrote: post #220
patio11 wrote: post #203

Earlier quoted context omitted.

I totally understand that this inconveniences you a lot. Be that as it may, your conspiracy theory has no basis in fact whatsoever . Paypal will, in fact, not make large amounts of money on transaction float -- they're already probably losing money on your account by talking to you too darn much. Interest rates are presently something like 15 basis points ($150 per year on $100k). Even if we count their underwriter a…

Oh, I am sure PayPal are doing what they believe to be in their best interests. However, I think you overestimate their competence. The people we spoke with on the phone didn't even know what Open Source software is, let alone have an understanding of the risks involved. They were just following procedure.

What does the license of the software have to do with the risks involved? What is the special case that they didn't understand that makes your project a smaller risk? What are the exact mechanisms in place that will prevent the project from failing miserably in any of the myriad ways software projects routinely fail after most of the money is spend and trigger a non-trivial number of chargebacks?

Re: PayPal Freezes Mailpile Campaign Funds

#235

Post by jtbigwoo »

jusben1369 wrote: post #117

What strikes me as really disappointing here is that the person has no idea why PayPal has frozen their account. It's surprising to me that they don't understand the inherent risks to PayPal from a kickstarter program (how dare they ask me for my business plan?!). In this post at least it seems like they just think PayPal doesn't like them and wants to hold their money for a long time. I guess they should have done m…

>> How hard is it for them to say "In the past, we have seen crowd funding sites/services that never delivered anything. That resulted in a lot of unhappy end users going to their credit card companies and initiating a chargeback which we're on the hook to pay. As you can see, if you took the money from your account and disappeared we'd be on the hook for that entire $X. That's why it's important we understand more about what you're up to"

The reason they don't is probably experience. If you're delivering bad news, don't mess around and don't over-explain. Every extra sentence in your communication is just a potential complication. Tell the target the problem simply, including details that directly relate to their conduct, and tell them how to fix it to your satisfaction. Don't tell them the history of this type of problem.

You do this because the target is going to be upset about it and they're going to want to argue. The more you communicate, the more points they have to argue. In your description, I see at least four more points to argue ("we're not like those guys that didn't deliver...our users are different...we're trustworthy people...you're only a percentage of our total funding so your risk really isn't that great..."). None of those points matter and none of them are going to change anything.

Paypal has told them what's wrong and given them concrete steps to fix it. Anything more is just going to drag out the resolution of the problem from Paypal's perspective.

Re: PayPal Freezes Mailpile Campaign Funds

#236

Post by mseebach »

Xylakant wrote: post #231
mseebach wrote: post #227

Earlier quoted context omitted.

Presumably they've done the kind of review of IndieGoGo's business that they stated they'd like to do of Mailpile and found that IndieGoGo has their risk spread broadly enough (and has a cash buffer large enough) to underwrite the risk of a particular project going down.

As far as I understood the paypal payments came in as part of the IGG campaign, not separate from it. So the Ubuntu Phone campaing would face the same problem. As would face any other IGG campaign. I seriously don't understand the rationale behind that: a) either Paypal/IGG can afford the risk or b) issues like this will crop up again and again and again, leaving frustrated businesses and a bad impression behind, reg…

From the article:

"PayPal's position particularly ridiculous when contrasted with IndieGoGo's policy of transferring all funds to successful campaigns within 15 days of their conclusion. If IndieGoGo can do it, so can PayPal."

This seems to me to imply that the PayPal fundraising was done in parallel to IndieGoGo.

Re: PayPal Freezes Mailpile Campaign Funds

#237

Post by zach »

HerraBRE wrote: post #220
patio11 wrote: post #203

Earlier quoted context omitted.

I totally understand that this inconveniences you a lot. Be that as it may, your conspiracy theory has no basis in fact whatsoever . Paypal will, in fact, not make large amounts of money on transaction float -- they're already probably losing money on your account by talking to you too darn much. Interest rates are presently something like 15 basis points ($150 per year on $100k). Even if we count their underwriter a…

Oh, I am sure PayPal are doing what they believe to be in their best interests. However, I think you overestimate their competence. The people we spoke with on the phone didn't even know what Open Source software is, let alone have an understanding of the risks involved. They were just following procedure.

I'd say that's because they're the people who talked to you on the phone, and a major part of their job is to be a liason to walk businesses through their rules. You should look at them as someone who can inquire within the organization on your behalf, rather than someone to challenge the competency of.

Such people can be pretty handy. Yes, I know, it's frustrating that they don't understand a lot about your business, but again, their job is communication, so it probably just means they don't have experience with talking to projects like yours. Why not educate them so the next project down the line has an easier time?

Finally, the people who actually set those policies are very likely experienced and I'm going to guess are also pretty competent. If you are reasonable and have a positive attitude with the people you speak with on the phone, you might get to talk directly with such a person. I personally think that would have probably been the easiest way to resolve this matter.

Re: PayPal Freezes Mailpile Campaign Funds

#238

Post by Xylakant »

mseebach wrote: post #236
Xylakant wrote: post #231

Earlier quoted context omitted.

As far as I understood the paypal payments came in as part of the IGG campaign, not separate from it. So the Ubuntu Phone campaing would face the same problem. As would face any other IGG campaign. I seriously don't understand the rationale behind that: a) either Paypal/IGG can afford the risk or b) issues like this will crop up again and again and again, leaving frustrated businesses and a bad impression behind, reg…

From the article: "PayPal's position particularly ridiculous when contrasted with IndieGoGo's policy of transferring all funds to successful campaigns within 15 days of their conclusion. If IndieGoGo can do it, so can PayPal." This seems to me to imply that the PayPal fundraising was done in parallel to IndieGoGo.

From the IGG campaing update:

"The bad news is, PayPal have frozen our PayPal account. This means roughly $45,000 of the $135,000 we have raised so far are in a state of limbo and we don't know when we will get access to the money"

And the campaign is currently at 137.000 USD. IGG offers PayPal as payment method along with CC payment and from what I've gathered those funds are handled via PayPal. AFAIK the funds at kickstarter are split in a similar fashion depending on the payment provider.

Re: PayPal Freezes Mailpile Campaign Funds

#239

Post by DennisP »

sudomal wrote: post #94
Kiro wrote: post #32

Earlier quoted context omitted.

Get real.

It's not without precedent to see payment systems leaned on to disable their clients. This is a shiny new webmail client with a focus on encryption, but these shady groups probably aren't attacking projects this early in their life... probably.

True, and given the amount of economic and legal pressure the government has proven itself willing to apply to preserve its surveillance capabilities, I'm not sure why people think it's out of the question in this case. We haven't seen it yet for early-stage projects, but this one's gotten a fair amount of press and donations.

It may seem more likely that PayPal froze the account due to discomfort with crowdfunding, but the question then is how many other campaigns have they done this with. Since Indiegogo still uses them, it seems the answer must be "not many."

Re: PayPal Freezes Mailpile Campaign Funds

#240

Post by nathanstitt »

patio11 wrote: post #182
derefr wrote: post #174

Earlier quoted context omitted.

I wonder how much of Paypal's margin it would eat to just require a phone call with everyone who signs up for a Business account, asking precisely what kind of business they'll be doing (with the real possibility of denying their request.)

For some of their business products, you do actually have to get pre-approval. For example, I filled out approximately ~10 questions (about a page worth of text, about business model, business history, shipping/refund policies, anticipate monthly revenue, etc) to get Appointment Reminder the payments gateway to charge credit cards offsite. I got asked to call in with some elaboration. It went something like: "So this…

I've done two accounts with Braintree now, and both times have had very similar conversations with people there. They were fairly painless, but they did want all the documentation that you mentioned as well as assurances that we were not pre-selling anything.

Sounds like those are fairly typical unwritten rules for all payment processors. Which makes sense to me.

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