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Text Box: WARNING:

Your PayPal account can be frozen at any time, without advance notice, leaving you without your money for weeks (if not forever!), and there isn't much you can do about it. PayPal has been investigated by regulatory agencies in at least three states!
I have not checked out this source to see if they have some sort of gripe against PayPal but this website ( does at least cause me some concern. I am not trying to single out PayPal. Some people have told me that they are very happy with this service. It just seems whenever I start shopping one of these Third Party Services the other foot drops sooner or later. I just received an offering from StormPay which was "ready to take the internet by storm". Digging down in the site I found that customers must open an account and pay a 10% discount fee for deposits from their credit cards!

Anyway, here's a text of the page that was sent to me.

This page is intended to provide advance warning to users of the transaction processing system. It also provides information on resolving your PayPal issue and an alternative for anyone who may be considering a PayPal account. is in no way affiliated with PayPal, Inc.

PayPal, Inc.
1840 Embarcadero Rd
Palo Alto CA 94303

PayPal, Inc.
11128 John Galt Blvd
Omaha, NE 68137

Known phone numbers:

(402) 935-2000 / (402) 935-2001 / (402) 935-2062 / (402) 935-2258 [this is Craig, complaints resolution manager] / (402) 935-7733 / (402) 537-5740 (fax) / (650) 251-1100 / (888) 221-1161 / (800) 836-1859 / (877) 672-9725 / (866) 272-9725 / (402) 935-2338 [Carrie, PayPal Security]

Last updated: November 4, 2002

eBay tries to bully our domain from us!


Judge says PayPal's arbitration rules unfair Company attempts to isolate itself from challenges, he rules

Be warned that PayPal is not a bank and is not FDIC insured. PayPal provides for a new concept - pass-through FDIC insurance coverage. They do this by pooling funds into checking accounts at about four different banks. This is great in case any of those banks go out of business (highly doubtful), but we are not yet sure of the coverage offered in case of another PayPal "dot com" failure.

Many PayPal accounts are frozen for almost anything and without warning until the owner faxes in lengthy and intrusive private information several times over. Even then, the account may not be released. The account can usually receive money while it is frozen, but it certainly cannot withdrawal money.

Merchants finding themselves on the wrong end of a frozen PayPal account will still have to find some way to pay their obligations and fill orders for the weeks and months while the account is restricted. A domino effect occurs when a merchant's account is frozen, leaving them with no means to fill orders. Those orders are then disputed by customers, creating more chargebacks and the illusion of fraudulent activity on the part of the merchant.

While anyone paying into the PayPal system with a credit card does still have the protection of their own bank by disputing the transaction to create a "chargeback", PayPal will eventually insist that a customer begins depositing money through their checking account. This will eventually prove to be a mistake as all chargeback protection through a credit card is then lost, leaving the customer at the mercy of PayPal.

Anyone experiencing these PayPal nightmares could always threaten to sue them, but that may be difficult at best. A thorough reading of the PayPal terms of service will reveal that you cannot even sue them should you have a legitimate claim. Their terms of service make it very hard to sue them! There have been several class-action lawsuits filed against PayPal.

Fraud seems to run rampant on the PayPal system. Merchants doing business through PayPal are simply not given any of the same tools to identify fraudulent transactions that real credit card merchants enjoy, yet they seem to take even more risk. PayPal is quick to chargeback transactions months after the fact, for seemingly any reason.

Any PayPal customer with a problem typically has an impossible time calling and talking to a real live person and personal attention to electronic mail is virtually non-existent. According to Vince Sollitto (PayPal spokesman), PayPal intentionally makes the phone number very difficult to find in order to save costs. This is fine, except their Email "customer service" also leaves a lot to be desired. Many times you will get a canned response that doesn't address your initial Email message, if you get a reply at all. It doesn't do any good to complain anyway. When asked about customer complaints, Sollitto said the company reads them, but takes them with a grain of salt... (source MSNBC article, above).

None of this is very surprising when you consider that PayPal, Inc. publicly admits "we have limited experience in managing and accounting accurately for large amounts of customer funds." Their EMail "customer service" is also outsourced to a company in New Delhi, India. Additionally, regulatory authorities in three states (California, Idaho and Louisiana) are investigating whether PayPal, Inc. is engaged in a banking business because of their customers' ability to retain a balance for future transfers. Because PayPal is not licensed as a bank, they are not permitted to engage in a banking business! (Source, IPO Prospectus) Louisiana has already ordered PayPal to stop doing business in the state. This could spell REAL trouble for anyone with funds "deposited" in! PayPal also recently shelled out $200,000 to the NY Attorney General and has agreed to stop service to NY gamblers.

This website is a collection of horror stories, news reports and other information addressing problems with PayPal, Inc. While we do not have the resources to verify each and every complaint we receive, we do believe that all reports posted here are true based on our own experience with PayPal and the growing number of corroborating horror stories we receive every day.

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