PayPal: Institutional Scamming?

What are these PayPal jokers all about? Last year (2007) with much fanfare they started operations in India. The Indian government allowed them to introduce in the country their money-transfer services. With this, Indians can now open an account with PayPal through its website and recieve funds directly into their Indian bank account from anywhere abroad.

All very well, till you get a taste of PayPal’s habit of coolly depriving you of your money and showing you the middle finger. Truly shocking! These thugs should be in jail. How did the Indian government allow these irresponsible crooks to operate in the country and inflict themselves on the Indian citizens? Did it not do any research beforehand?

I can tell you my first-hand experience of last week with PayPal. I know someone in the UK who sent me about one thousand pounds through PayPal. He emailed me to inform me about the transfer. I promptly logged on to my PayPal account and clicked to withdraw the funds to my bank account here in India. Instantly, an error message flashed: “Your account has been limited. Pls contact customer service.” Their site does not give their address or phone number. (Or if it lists them, they are impossible to find. Here is my challenge to you: go through their website to see if you can find their address or phone number listed anywhere.)

The only way you as a PayPal account holder can get in touch with the company is through email. PayPal asks for a time of a minimum of two days to respond to your email. And the emails that you finally recieve in response carry not the name of some real customer-service executive, but canned first-names such as Jill, Christopher and Judy. The emails begin with “Hi! I am Judy.” The next one will be “Hi! I am Christopher.” The third one will be: “Hi! I am Laura.”

And all emails that you get carry a message: “Do not reply to this email as this inbox is not checked and you will not get a response.” You are supposed to send a fresh email by logging to your PayPal account each time and use the form there. Excellent customer service, eh? Customer treated like royalty!! And what happens if they cancel your account on their own? How will the customer get in touch with them then?

After sending three or four emails, I finally got a response. They asked me to fax to PayPal’s US fax number (!) a copy of my passport and a copy of my bank statement. I was perplexed. What in the hell is this? Why should I send these personal documents (which can easily be misused by anyone) to US at a great expense to unknown people? All I want is to withdraw the money that has been sent to me through PayPal, that is all.

I emailed PayPal asking the company to either allow me to withdraw the money, or refund the entire amount back to the sender. PayPal thereafter abruptly stopped responding to my emails and I have not heard from it since the last five days now despite sending about a dozen frantic emails.

After doing a lot of research on the Internet, I understood what the scam is and how the PayPal thugs operate. Apparently, the company is hit hard by scammers of all types who use stolen credit card numbers. These people, being professionals, are rarely if ever caught. So PayPal has hit upon an easy solution: screw honest customers by locking their accounts on the pretext of some “suspicious or fraudulent activity” and prevent them from withdrawing their money. Once PayPal freezes an account, it remains locked for a minimum period of six months (often more) with the customer’s money still inside it. PayPal will neither allow the customers to withdraw their money, nor will it refund it to the sender!

Your money — whatever the amount is — remains in the custody of PayPal and it quitely keeps earning interest on it. After six months, it will either defreeze your account or close it down permanently. In the former case, the desperate customers try to withdraw their money as quickly as they can to their bank accounts. In the latter case, they have to kiss all their money goodbye. As simple as that, no questions asked!

And if you enquire from PayPal about why your account was abruptly frozen, the company argues that its rules and regulations (which you agreed to during sign-up) prevent it from disclosing this information to the customer! How sweet!! Many people tried to sue PayPal in the US for this tactic of freezing customer accounts without any rhyme or reason, but PayPal escaped by citing the fact that it is not a bank and thus not governed by rules applicable to banks and financial institutions.

PayPal is essentially a privately run, unregulated non-banking company which accepts your money but writes its own laws (one of which states that PayPal cannot be sued by you and it can close your account without giving any reason and prevent you from withdrawing your money for as long as it wants).

How has this pathetic excuse of a company been allowed entry into India? Imagine Indians working abroad and sending their hard-earned money back to their families in India getting scammed by this company by locking their accounts without assigning any reason.

There is some kind of racial profiling going on too and money-transfers to Asia or Africa from Western countries are especially at the risk of getting their accounts locked. The customer has absolutely no recourse except sending the company emails (which it stops responding to after some time).

When you open an account with PayPal, you sign (click on “I accept”) a very long document that contains reams of rules and regulations and terms of service through which you allow PayPal to:

Hold your money with no explanation 
Freeze your account without assigning any reason and prevent you from withdrawing your money
Authorize PayPal to take money out of your account without your permission or knowledge

You also forfeit your right to take legal action against the company or appeal against its decision. This is really terrible. I have read about well-established businesses of people collapsing overnight because PayPal locked their accounts one fine morning and prevented them from withdrawing any money for months at a stretch.

In my case, I have no idea if I or the person who sent me the money will get the thousand pounds back or will we have to wait for six months to access it or will we ever get to see the money again. Shall I send PayPal a court notice for misappropriating my money? Which is the address in India where I should send the notice to? I have no idea what to do.

See below a couple of websites run by people who were scammed by PayPal this way. I wish I had seen them earlier.

This is what the second site says on its home page:

Your Paypal account can be frozen at any time, without advance notice, leaving you without your money for months (if not forever), and there isn’t much you can do about it.

With personal experience, I have found this to be disgustingly true. The trick PayPal plays is that it keeps these shocking terms and conditions buried in fine print, when they should be clearly intimitated to its customers who are signing up. PayPal clients find what they have walked into the hard way when they are locked out of the entire money that is lying in their PayPal account.

Worse, in quite a few cases, PayPal (conveniently) does not prevent deposits into the account which it has locked. So if you are running a website selling something, your unsuspecting customers will continue to buy from you and keep paying into your PayPal account even as PayPal prevents you from taking out the money. Later, predictably, the customers begin to chase you, asking for goods to be delivered to them or their money refunded, and you are truly in a soup as your buyers threaten to sue you for non-delivery. Truly a hellish senario. Read the horror stories given in the above two websites about how people had to abruptly close down their businesses as PayPal locked their accounts.

I want to warn all Indians who are planning to open an account with PayPal: Don’t do it at any cost. You will be in a load of trouble, especially if you are in India. And if you already have an account with PayPal, get rid of it immediately. This company has arrogated police powers to itself and once it has accepted money on your behalf, it sits in judgement about whether to give it to you or not. If it decides it doesn’t like you, you are screwed and can kiss your money goodbye for at least six months, if not forever.

Read the following link. A former PayPal manager acts as a whistle blower about how this shady company operates and how it can deprive you of your money without warning:

I am faxing a copy of this blog post to the Finance Secretary of Government of India, to inform them about what kind of an unethical and irresponsible company they have allowed to enter into India and put honest Indians at its mercy. We do not want this kind of American crony capitalism in India. The Ministry should immediately carry out an audit of the terms of service that PayPal offers to Indians and whether the citizens of this country should still be allowed to open an account with PayPal and run the risk of being deprived of their hard-earned money without any reason being assigned.

So now the situation in my case is: I and the sender both are asking PayPal to allow me to withdraw my money (about 1,000 GBP) or refund the money back to the sender. There is no way to contact them except email. And they have stopped responding to our emails. Simply great!! Essentially, PayPal has pocketed our money and is refusing to talk to either of us.

This story needs to be publicised so that Indian citizens as well as the Indian govenment become aware of the unethical and imperial policies of PayPal and this company is taken to task. I don’t know about America, but in India they are covered under laws related to “non-banking financial institutions” and this kind of holding on to people’s money at their whim is clearly illegal. Do we need such exalted examples of Western enterprise in India?



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6 responses to “PayPal: Institutional Scamming?

  1. Now this is a revelation and a shocker. I was planning to later include this on our forthcoming site on cinema, but this is seriously of a let-down. I mean what we do when one is stuck, like in your case, and I do agree this needs a better coverage. Because, I mean, it’s just too much that people are being cheated even at this places. I could never imagine this happening with Paypal.

  2. sanjaychoudhry

    It sure is a shocker, considering how well-known PayPal is. But once you have burnt your fingers, then you know it is only a glorified fly-by-night operator that tries to become invisible to customers after accepting their money. After I have sent PayPal so many emails, they have now gone into the mode of “we will screw you real hard for making all this noise.” There is absolute silence on their end and no email of mine gets a response. I have no hope of getting my one thousand pounds back.

    The Indian government should have insisted that PayPal open a proper office in India before it allowed Indian citizens to recieve money through this company and trust it with thier savings. (They currrently only have a software development centre in Chennai.) Any Indian stuck like I am will have no idea what to do in such a situation and whom to approach.

    Imagine a typical middle class family in small towns of India losing money this way. Those poor guys not very smart with computers won’t be able to do a thing at losing a fortune. It may lead to some desparate people committing suicide. Imagine, the son working hard abroad and sending his six-months’ worth savings to his parents in India for his sister’s upcoming marriage, and boom!! the money dissappears into the bowels of PayPal and the only thing the family gets is a message stating: “Your account has been limited for suspcious activity. Pls contact customer support.”

    The Indian government needs to tighten screws on this company, or ban it from India. We don’t need this kind of garbage here.

  3. Deepak

    Disclaimer: I am not associated with paypal, however I have account with paypal since last 4 -5 years and never had any problem. Paypal will only give you troubles if you will not send them required documents.

    Well, I want to make you understand some facts about paypal before you make any biased judgment like the blogger has made in above blog.

    1) Paypal may ask you to submit your documents to ensure your identity and confirm that you are true person. This is common practice among all bankers in India and abroad. Why are you so concerned about sending out required documents to them, when you have nothing to hide?

    Everyday, There are 1000’s of fraud transaction carried forward through paypal accounts and they must take such steps to prevent frauds.

    For example, if you bought something say worth $200 from someone in united states or hell in india and sent them money through paypal using your credit card or funds available in your paypal account and later you found that seller was fraud person but he managed to take out his money from paypal account through bank transfer or something else, now certainly you will ask paypal to refund you money or you can call you card to charge back paypal because they provide protection guarantee against fraud transaction till cretin days. Guarantee has to be maintained on both sides, seller + buyers hence it becomes very important for paypal to verify that you are true person so that they can ovoid scams.

    Now if you are scamers then you definitely have all reasons to hide, (who knows you are using stolen credit card to just open and account) but if you are true person then you should simply send them your documents so that then can verify your account and make it legit for ever. Whats wrong in that?

    2) Some blogger suggested about sucide or something, that is totally bullshit. If someone want to send money to their parents in India he can send it to other means like bank transfer, western union or even check which takes about 30 days to clear but it will get clear easily, why the hell he will use paypal account to send out money. This argument just doesn’t make any sense. Paypal is not mean for parents to only receive money, its basically designed to transfer money from one user to another one for business purpose and act as an payment gateway between buyers and sellers.

  4. Anonymous

    >>Disclaimer: I am not associated with paypal

    Yet he’s here defending Paypal as if he has some stake in the company’s reputation…

  5. vimal

    Pay Pal has also cheated me of my US $100… I want to take them to court for this.. but I dont know how to do this..

    Every time i ask for my money, they say something or the other stupid things 😦

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