Thursday, January 20, 2011

PayPal are crooks

I've heard PayPal horror stories. Now I have one of my own.

Briefly: I have two bank accounts. I have one with a local banking institution that I'm pretty jaded with. The other is with INGDirect.com. I'm not thrilled with them either, frankly, but for the most part they do a better job than the local banking institution. The one thing they don't do is take deposits. I have to make the deposits through my local institution and then make an ACH transfer. My paycheck direct deposits to ING Direct. It's my main financial account. I receive utility and other random payments to the local banking account, and this usually ends up being just enough to write my tithing check.

So in short, the local bank account is usually running more or less on empty.

I plan to open an account with BankSimple as soon as they'll allow me.

Last week I got an email from PayPal that I had send a large quantity of money to some website I'd never heard of. I figured it was a fraudulent email designed to steal my password. Just the same, I went ahead and visited PayPal.com (NOT through the email) and sure enough...after forcing me to change my password and enter new security  $### had been withdrawn from my account. Even though the transaction had happened less than 5 minutes prior (I keep a close watch on my email), PayPal had already flagged the transaction as fraud. I went through some steps with them to verify my account ownership and figured the issue would resolve itself. I wasn't too worried about it, frankly. The only thing I was worried about was my password. Like an idiot I was using the same password on some other websites, so I promptly went to all of them and generated secure random passwords for those sites. Fortunately I've been using 1Password from Agile for over a year, so creating and storing new passwords wasn't too difficult...just time consuming.

I was hoping that because PayPal caught the transaction so quickly it would never hit my bank account, but I knew the combined amount of the fraudulent transaction and my tithing check would exceed even my overdraft amount on my checking account. Just to be safe I held off on paying my tithing.

Ok. Fast forward to tonight. I login to my banking account and notice that...sure enough...I'm in overdraft. I check PayPal. The fraudulent transaction resolved in my favor, no surprises there...but where's the $###? It's not in my PayPal account and it's not in my bank account. PayPal lists it on temporary hold. I *THINK* that it's on it's way back to my bank account...but I'm not sure.

So even though PayPal suspected within seconds that the transaction was fraud, they went ahead and pulled $### from my bank account!!!


People fault credit cards a lot (and certainly credit cards are not without their fault); but credit cards tend to offer a lot more consumer protection. If this were a credit card transaction, I could immediately have the transaction reversed. The charge would be suspended from my account and I wouldn't be expected to pay interest on it until the issue was resolved. If the charge turned out to be fraud I wouldn't have to pay interest on it at all. Most all credit cards have a $0 liability, meaning that if your credit card gets stolen...as long as you take appropriate actions you are liable for $0 of the fraud. But since it's a bank account I'm screwed. The money is just stuck in limbo for days while PayPal and my bank make money on my money while pretending that it takes 3-5 business days to transfer money digitally.

(Most bank accounts, by the way, have only the minimum federal fraud protection. That means that if your account info gets stolen YOU may be liable for the first $50 worth of the fraud -- and if they somehow get your ATM PIN and take your money out that way, you won't get ANY of it back).

But the plot gets even better.

Since PayPal knew the charge was fraud...the crooks never got the money either. The only people who got my money were PayPal. I have no clue what the numbers are on fraudulent transactions are, but PayPal has hundreds of millions of users and I would venture to guess that at any given time they are sitting on hundreds of thousands, if not millions of dollars worth of stolen money.

I want my money back.

PayPal are crooks.

3 comments:

orangemily said...

That's ridiculous!
I need to get more secure passwords.

Ty said...

Yeah, I've had paypal do things like that and other times I've had paypal try to refund money that wasn't really mine. I would call back until someone with a brain picks up on the other end. As for banks if you're looking for one online, and money back for EVERYTHING you via pin-less debit transactions and without having a lousy CREDIT CARD you should definitely check out www.perkstreet.com

Sam said...

I can't understand why people still use PayPal. They're crooks. Period. I stopped using eBay on account of this as well. Why? Because anyone who does business with a crook is NO BETTER than the crook. People, listen already! STOP USING PAYPAL! I want to see these crooks go out of business, preferably in my lifetime.