PayPal’s incompetent compliance arsehattery

You really have to wonder about PayPal. Every day they seamlessly process a squillion pissy little transactions from countless innumerate trailer-trash. Nice work. Then they ruin their reputation with Kafkaesque requests and oddly incompetent “service”. Like now.

“We need your help resolving an issue with your PayPal account,” they emailed me on 9 May. “We need a little more information regarding your organisation, since your PayPal account is registered as a charity or non-profit.” Huh?

As Gary Stark tweeted just now, “You, a non-profit? While that might not be your intention, it’s probably just about right.” That’s true enough. But I’m certainly not a charity or non-profit, I’m certainly not tax-exempt, and I’ve never claimed to be. I’m not even an “organisation”. And have never claimed to be.

By “a little more information” PayPal means photo ID, another document showing my address, a bank statement linking me to my bank account, confirmation that I’m not not a “politically exposed person”, and “organisation and payment information”, whatever that might be. But I’ve been travelling for the last fortnight and I’m not carrying all this stuff.

They’re also asking for one item I’m going to have trouble with. Proof of my tax-exempt status. For no such thing exists. As Leslie Nassar tweeted, “If you can’t prove you’re not who you’re not saying you aren’t, then no Internet Money for you.”

Back on 10 May I emailed service@paypal.com.au to ask why all this was happening. I told them that I’m an individual doing business as a sole trader, and have never claimed to be anything different. I received no response. Typical. My PayPal account is now “limited”. Which means frozen.

This morning I’ve contacted PayPal’s compliance team by both email and fax.

You are asking me to prove my tax-exempt charitable or non-profit status. Why? I am not tax-exempt, non-profit or charitable, and have never claimed to be. Never. An email to service@paypal.com.au on this matter dated 10 May went unanswered. Why? Your demand for proof of tax-exempt status does not include the option “But I am not!” Why? I do expect written answers to these “Why?” questions.

I’ll let you know what happens next. Meanwhile, do feel free to vent your own frustration at PayPal in the comments. I daresay I’m not alone here.

21 Replies to “PayPal’s incompetent compliance arsehattery”

  1. Had to go through the same process myself, twice. I responded the first time with what documentation I could and the restriction was lifted, then they slapped it back on a few weeks later and I had to go through the contact process again. They are a pain to deal with, limited means of communication and it all at your own expense. Especially galling as you have to respond to some classification imposed on your account that was never requested. Far as I can tell, after being through the process, there has not been any change to my account with regard to charges etc. All rather pointless. I can only conclude they are using it as a means to be able to identify the account holders.

  2. Stil,

    I would assume that PayPal don’t take kindly to the fact that you have a ‘make a donation’ button on this site.

    I think I have found one company that is trying to be more of a PITA then PayPal to prove ‘who’ you are, and that is Apple. Signing up for Apple’s developer programs can literally take weeks if you don’t have / can’t find the required details.

    Good luck dealing with the bureaucracy, though I suspect that if you get out of this they’ll harass you at some point in future — it’s just the way PayPal are.

  3. I used to have a donation request on pages at the RatbagsDotCom site until PayPal decided that I had to prove that I was a registered non-profit organisation. As they had frozen my PayPal account and I wanted to get at the money in it, I decided to remove the donation request buttons until I could find another way to ask for money. By the way, PayPal didn’t notify me of the problem — I found out when I tried to pay for something I had bought on eBay and the only acceptable payment method was PayPal. By the time my account was released I had passed the time for payment and acquired a “bad payer” first strike at eBay.

    I removed the buttons and told them I had done so, but they replied that I was still asking for donations. The problem was the first article at http://www.ratbags.com/rsoles/history/2010/08august.htm in which I discussed an organisation that had attracted the ire of the NSW Office of Liquor, Gaming and Racing by continuing to claim charity status after their registration had lapsed. Apparently having the word “donation” on my site meant that I was still violating some PayPal rule.

    I eventually managed to convince them that I really wasn’t soliciting donations through PayPal any more and was able to spend my money, but it made me think carefully about having anything to do with PayPal in the future.

    I realise that they were probably doing something to stop themselves from being accused of facilitating money laundering or GST dodging, but I suspect that the few hundred dollars a year I was getting would have hardly been detectable in the billions of dollars they move around every year.

  4. Well quite frankly, Gentlemen, if the word “donation” is what PayPal is objecting to, they should’ve fucking well just said so in their initial email. I’d happily re-word it to “gift” or something.

    However it does strike me as odd to assume that donations only happen in the context of registered tax-exempt charities. Again, simply explaining what the specific problem is and/or linking to the relevant part of their terms and conditions would’ve meant this could all have been sorted on day one.

    @Peter Tonoli: For some reason WordPress ate your link to PayPal Sucks, so there it is.

  5. This can be an arse when travelling, but here’s a novel idea — call them!

    I’ve had a problem or three with this seething heckhole of a company in the past, and I make a point of picking up the phone and calling them (1800 073 263, 06:00 to 22:00 Monday through Saturday AEST/AEDT).

    Emailing them doesn’t work, because they’ve made a business out of ignoring email support requests.

    I won’t get off the phone until I either receive an answer which is helpful, or they put me through to a supervisor with a clue who can actually fix the situation.

    And if they don’t fix the situation to your reasonable situation and continue to hold your funds without justification — then make a complaint to APRA (http://www.apra.gov.au/Feedback-about-institutions.cfm). In order for them to operate in Australia — being a non-bank deposit-taking institution, they have to be authorised by APRA (http://www.apra.gov.au/ADI/upload/PayPal-auth-and-conditions-2006.pdf).

    The more people who report their dissatisfaction to APRA, the more chance you’ll have of getting the problem solved, and their embarrassing customer service put under the spotlight of the industry regulator that will hopefully force them to improve and get rid of their ridiculous and anti-customer practices.

    After all — what’s the worst that could happen? PayPal loses their license to trade and do business in Australia entirely, something which I think they’d work tooth and nail to stop happening if the thumbscrews were applied by APRA.

  6. @Michael H: Oh thank you for the phone number! I’ve been dealing with this by email and then fax because they’re the communications methods listed in the material they gave me. I couldn’t see a phone number anywhere, although I’ll admit I didn’t look that hard.

    When dealing with bureaucracies, my first efforts will always be to use the communications channels they recommend. If, as you say, PayPal tends to ignore emails then it does strike me as arsehattery for them to indicate that as their preferred channel.

    I shall phone them on Monday, unless there’s progress beforehand.

  7. I haven’t been hit with the charitable status proof BS, but due to previous fuckwittedness on their part, my paypal password is something not too distantly related to gofeckyoursellfpaypal.

    It does nothing to improve their stupidity, but it makes me feel better every time I have to use it 🙂

  8. I got hit with a similar thing recently, except that it was/is on my personal account. (I do not accept payments through this account in any form; basically it’s there to buy stuff on eBay.)

    They wanted several pieces of identifying documentation; they claim only to require one for each but then state that you must provide ‘each of the following’, including a passport — I have not traveled overseas since 1993, so my most recent is rather out of date.

    And the link for ‘Learn why your account access is limited’ is beyond useless:

    Your account access has been limited for the following reason(s):

    (Your case ID for this reason is PP-xxx-xxx-xxx-xxx.)

    25 Feb 2011: We need a little more information from you to help confirm your identity.

    (Your case ID for this reason is PP-yyy-yyy-yyy-yyy.)

    So there’s no information about why I need to confirm my identity. If PayPal at least gave me a reason why I am required to do this, I might be more accepting of the idea.

    What’s most annoying is that under the ‘What can’t I do while my account is limited?’, is ‘close your account’.

    It’s effectively put me off using PayPal for anything. The only thing I wanted to use it for recently was the Humble Indie Bundle, and they offered Google Checkout as an alternative, so I went with that instead. And I’ve stopped buying anything on eBay.

  9. I think it has to do with the rate they charge you. If you want to get paypal at a non-profit rate you need to submit paperwork proving non–profit status. However, I am surprised they froze (limited) your account so readlily—that’s a bit unprofessional considering the circumstances. It’s very peculiar though, because I’ve used a donate button in the past and they never asked me for anything; maybe I slipped under their radar. Anyway, good luck with your situation.

  10. I have this same problem. Using the phone number given above, I rang paypal just now and was told to simply write a note explaining that I wasn’t a charity, etc, and upload that as a document, then hope for the best.

  11. ps – I asked the dude whether he thought it had something to do with the fact I had a donate button on my site, and he didn’t think so, but then went on about Australia and its anti terrorism laws and I kind of tuned out at that point.

  12. It does indeed seem that PayPal has decided that the word “donation” may only be used in the specific context of a registered charity. Everyone else must apparently use a different word to mean “money someone give you with no expectation of return”.

    It is likely that your account was limited automatically for having received one or more donation payments on the URL http://stilgherrian.com/

    Please bear in mind that the donation buttons are reserved for the use of non-profit organisations and charities only.

    As I said previously, if the word “donation” is what PayPal is objecting to, they should’ve fucking well just said so in their initial email. Idiots.

    I’ll have more to say about this arsehattery in due course.

  13. OH dear, fraudpal. We had our own experiences with these muppets last year. Keeping our money for some months because we had to prove who we were.

    Even though we already had.

    I believe they exist outside of normal financial requirements in Australia, and can’t understand why.

    For this and other reasons, I’ve chosen to avoid them, especially when it is most “convenient” for me.

  14. @Gavin: Your belief is wrong about PayPal’s legal status. It is a deposit-accepting financial institution, and PayPal Australia Pty Ltd has to comply with Australian Prudential Regulatory Authority (APRA) rules.

  15. Update:
    It has everything to do with the donate button – straight from the horse’s mouth. However the letter has nearly worked – now I just have to show them my passport and D/L and it should be over. I’ve taken the donate button off my site in the mean time and won’t be putting it back.

  16. PayPal, Google, Schmoogle, whatever, …

    The fact is, PayPal (or any other payments processing middleman that does not have a formal partnership with all the participating retail banks as do Visa/Mastercard) cannot “professionally” manage the financial risk involved in their business as they can never know the entities at either end of each transaction as well as those individuals’ bankers can; and because PreyPal simply rides on the back of the retail banks’ existing payments processing system, as literally a very large credit card merchant in the case of card transactions, they do not provide, nor are they prepared to invest in sufficient human resources to provide, effective transaction mediation, as the banks indeed do provide for Visa/Mastercard.

    If you are an eBay merchant then you have to be prepared to accept all the “unprofessional” treatment that comes with being also required to be a PreyPal merchant and to offer the clunky PreyPal to buyers. Why any off-eBay merchant would choose to offer PayPal I cannot imagine: desperation, or simple naivety, I suppose.

    All anyone needs to know about the clunky PayPal:
    http://forums.auctionbytes.com/vbulletin/showthread.php?p=165263

    Enron / eBay / PayPal / Donahoe: Dead Men Walking.

  17. Update time: I just called PayPal on 1800 073 263 and, once I’d navigated the IVR, spoke with the quite helpful Kelly. It was reasonably quick for her to identify what remaining documents I needed to provide, and to notice that my current living arrangements — five months in a location for which there’s no documentation — made it difficult for me to provide documents within their standard procedures.

    We discussed what might work, but she didn’t to give me incorrect information. So she has escalated it to the team that handles such things and they’ll email me.

    My observations in all of this are that PayPal has created a very process-oriented system rather than a customer-oriented system, and they’re very bad at writing things in clear, basic English. I can well understand that PayPal users get completely confused, especially since so many of them are not normally businesspeople and used to the jargon. They need to fix that.

    1. Unfortunately, they will never fix that. Both eBay and PayPal are both horribly done systems that only work because they starve all other competition out of it. I’ve had so many bad experiences through eBay and PayPal both that it’s just ridiculous.

      Did you know that on eBay if you want to stop a competitors product from selling you just make a bid on it for 999999? It doesn’t matter that you win, you simply don’t respond to any emails and don’t pay. eBay will force the seller to go through a long process of recovery, and then when it is finally resolved you’ve stopped him/her from selling it for three weeks and you get precisely zero punishment.

      As for PayPal – my personal favourite experience with them is where I was commissioned to do some copy for a client who had been commissioned by a publisher. Publisher paid 5 digits into their PayPal account, and in return they froze his funds on suspicions of money laundering. This wasn’t their normal freeze either, it took nearly 3 weeks of back and forth with them and way more ID than is normally needed to get it unfrozen.

      Guess what happened when he then paid me? Yeah, fun.

      Unfortunately, negative criticism of these practises simply doesn’t faze them. They continue again and again to force competition out of business and make it so it’s nigh on impossible for a medium company to offer a better solution. Oh and the fact that eBay forces people to have PayPal as an option? Isn’t there something in Australian law that prevents precisely that practise from occurring?

      ~End Rant~

  18. bloody unreal!
    Yesterday got that same bloody garbage from paypal.
    Couldnt work out why, but on reading this blog i know now.
    on my website I offer free advice concerning problems associated with vintage tractors.
    its been there a long time.
    It is free… BUT and this is the BUT I put a donation paypal button there for anyone who would like to donate.
    Its been there a long time, but 2 days ago someone donated $5.00
    and this has caused all this fuss.
    So I will remove it and anything about donating, but of course i cannot expect this will solve anything.
    looks like the end of the road to me selling on ebay or using Paypal because the questions they ask are beyond me
    cheers

  19. I have found Paypal’s procedures to be ludicrously unintelligent. I had limitation put on my account for no discernible reason and despite complying with the initial checks they kept asking for more and more documentary evidence of ID and all the time holding a reasonable amount of my money in limbo. I had been using the same credit card to service the account for two years! Yet from what I read they constantly fail to pick up the real fraudsters. I closed the account and will not use Paypal again.

  20. Oh. This PayPal thing. I let it all slide. I have maybe $100 sitting in the account but I haven’t bothered getting the documentation I need.

    @Kije: I couldn’t comment on PayPal’s ability to weed out fraudsters compared with, say, banks or Western Union. But what I can say is that they tend to freeze an account as the standard way of dealing with a weirdness, as opposed to freezing the transaction, and their procedural emails are very badly written. That last point is a problem because they deal with a lot of hobby-businesses, which tend to be run by people unfamiliar with standard business jargon.

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