

How to Get PayPal To Freeze Your Account in Four Easy Steps - jamievayable

As first-time entrpreneurs, we have of course hit many bumps and snags along our path to launch.  But none have been more painful, irrational or bloody our perpetually-losing battle with PayPal.  I have written the following to help other startup founders using PayPal fail faster.<p>How to get PayPal to Freeze your account in four easy steps.<p>1.  Be a bootstrapping startup.  
With no funding, transactions or big names behind us, we set up our PayPal merchant account like any innocent first-time founders would: by following procedure.  We provided our Employer Identification Number, a summary of our business, a summary of how we would be using PayPal for our transactions, and all the other good details you’d a payment service to require.  All good?  It seemed so, but then we got greedy.  We wanted to use PayPal Pro to streamline our transactions.<p>2. Apply for Payments Pro.  
We first get a phone call from a representative at PayPal informing us that Vayable is conducting illegal activity by running a business without a Travel Seller’s license from the State of California.  Without this license number, they tell us, we cannot use PayPal’s service.  This is the first we’ve heard of needing to acquire a Travel Seller’s license, as we’re not actually selling travel, but I go ahead and look into it.  Turns out, the State will not issue us a Travel Seller’s license even if we wanted one: they’re reserved for sellers of transportation, like airlines and bus companies.  We do not do this.  We are a community marketplace for individuals to buy and sell unique experiences from one another.  Think Etsy or Airbnb for EventBrite for unique travel experiences-- Or whatever marketplace startup du jour you want to throw before “unique experiences.” (Note: Etsy, Airbnb  and Eventbrite all use PayPal).<p>I call PayPal back and tell them that we in no way fall under the state’s definition of a Seller of Travel and therefore not only don’t need the license, but wouldn’t qualify for it.  “Then we’re going to have to decline your application for Payments Pro” I am told by three different representatives. (I’m always a believer in calling back to talk to someone else if the first person doesn’t give you the answer you want).  In this case, no one was giving us the answer we wanted.  Time to pivot.<p>3.  Comply with PayPal’s requests.  
After failing to qualify to use Payments Pro, we decide to go with another one of their merchant products:  Express Checkout, a free and streamlined merchant service PayPal released last fall that does not require a lengthy application process.   While building it into our site,  we receive a notification from PayPal that our merchant account is going under review (note: we have yet to test a single transaction yet).  They are concerned that we are are not a real business, they say, and ask us to submit our Articles of Incorporation as well as our EIN number (which I had already submitted several times) in the enrollment process) as well as a statement of how we intend to use PayPal for our transactions.  Of course, we comply. Within an hour of receiving the email from them, I have uploaded these documents to the Resolution Center, as requested, and wait.  And wait. And wait.  After several days of hearing nothing back, I call PayPal.  I talk to a guy in their customer support department who informs me that the account is fine, but they just need to verify that the business name is actually Vayable.  This sounds odd to me.  So again, I provide them with the material and am assured by customer support that the account will be restored to good standing as soon as they look over the paperwork I’ve provided.  Ten days later, our account status has not changed and I still cannot get any more information from PayPal customer support.<p>4. Stay Loyal.
With no new information, we decide to charge ahead and implement PayPal into the site. After all, we need transaction on the site and PayPal is the most widely recommended and seemingly accommodating platform.  After a painful implementation process (which involved the server-side technical problems from PayPal throughout, making it nearly impossible to test and use the sandbox), we finally got our Express Checkout up and running.  Seamless and perfect? Far from it.  Functional and secure?  Yes.  Less than 12 hours after getting the service us and running, I receive the following email from PayPal:<p>Dear Jamie Wong,<p>Thank you for your response.<p>Per our Acceptable Use Policy, under credit card association rules, PayPal
cannot permit the use of the PayPal service as a funding method for payment
processors to collect payments on behalf of merchants.   Upon review of
your account, it appears that you are offering an aggregation service that
allows multiple merchants to process transactions that are against various
Acceptable Use rules.  The service you provide allows said merchants to
circumvent our policies.<p>While we wish you the best of success in your future business endeavors, we
respectfully ask that you seek another method of payment for your online
business.<p>Your PayPal Account has been limited and there will be no appeals to the
decision.  Any remaining funds in your account balance will be held for 180
days from the date of the limitation.  Once 180 days has passed, the funds
will be available for withdrawal.<p>If you have any further questions, please feel free to contact us again.<p>Sincerely,
Julie
PayPal Compliance Department
PayPal, an eBay Company<p>Responses to this email address are not monitored.  Please send any
additional questions that you may have to compliance@paypal.com.<p>Translation: Your account has been frozen and there’s nothing you can do about it.  
Upon referring to PayPal’s Acceptable Use Policy, as they suggest, I find nothing to suggest we are not in compliance.   In fact, we seem to be the exact kind of merchant PayPal would want using its services.  We are bringing them new users by requiring our customers to pay with PayPal, we are building a global marketplace that is ideal case study for PayPal’s robust risk management and fraud management and we’re a budding new startup that enables a brand new community of merchants and transactions, off of which PayPal will be able to profit.<p>We’re still unclear why PayPal froze our account, but we’ve got a pretty good idea of how it happened, which really started with following procedure, followed by compliance, followed by loyalty to their service.<p>PayPal doesn’t want their cut of tens of millions of dollars of revenue we project in the next two years.   Any idea of who does?<p>-Jamie Wong 
Co-Founder, Vayable.com
http://blog.vayable.com
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ig1
I can't say I really blame them, you're in a high-risk business which tends to
have lots of credit card chargebacks and you can't guarantee delivery of
service. If you went the merchant bank/credit card processor route you'd
probably have to put down a substantial deposit.

If you're operating a high-risk business you can't really expect PayPal or a
merchant bank to absorb that risk on your behalf unless you're willing to pay
for it.

PayPal's policies do forbid the kind of marketplace aggregation you're doing
(Unless you're using their Adaptive Payment split payment mechanism which is
designed for this sort of situation; but from your description I assume you're
not)

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LiveTheDream
> tens of millions of dollars of revenue we project

Paypal's revenues are well over $3 billion/year and growing. They are also
known around these parts as a fraud detection company with a payment
processing component. Respectfully, I would first suggest you be happy that
those millions are still just projected and not sitting in limbo in a frozen
PayPal account.

Next, check out some other payment processing options. Here is a great place
to start:
[http://www.gabrielweinberg.com/startupswiki/Ask_YC_Archive#t...](http://www.gabrielweinberg.com/startupswiki/Ask_YC_Archive#toc85)

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daimyoyo
Your solution here is obvious. Several times per week it seems there's a
thread here lamenting paypals policy's. My advice to you would be to start a
competitor to paypal. (yes they're owned by eBay, but remember that there's
potential antitrust issues if they harass you too much or refuse to allow you
to integrate your payments widget into the listings.) You certainly aren't
alone in your struggle, and were I in your position, that's what I'd do. Just
my $0.02.

~~~
wladimir
Aren't there already many competitors to Paypal? They're not as well-known,
but I don't think starting another web payment service is a very good business
plan. For example, I know Netteller has been struggling pretty much.

I agree that Paypal needs a bigger competitor though. They're really making a
mess of it.

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JigSaw81
Your site looks pretty sketchy. Try to make it look more trustworthy, then re-
apply for Payments Pro in 2-3 months. They might reconsider.

