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Is PayPal Losing It?
Complete Computer Services, Inc. ^
| December 2001
| Y. Goodman
Posted on 12/17/2001 8:27:13 AM PST by struwwelpeter
First I was a Paypal cheerleader. Personally, I never had a problem with their service. But others, and even people I knew personally, did. As the complaints mounted and the stories became more egregious, I started seeing the other side. After all, basing my opinion on only my personal experience wouldn't be accurate. I never had a problem with Billpoint, Paydirect, Exchangepath and even the infamous Paymentalt. I know people who smoke and don't have lung cancer (yet). Does that mean I should recommend smoking?
So I set up my payment service ratings to present a more balance picture of what a payment service user can expect. I frequented the bulletin boards where people reported their experiences. I chimed in where I could, at times blaming Paypal and at times blaming the poster for contributing to his own problem. I discovered that posting on the boards was a waste of time. The Paypal bashers blamed everything on Paypal and anyone who suggested PP wasn't at fault was branded a cheerleader. The cheerleaders blamed everything on the poster and anyone who suggested that PP's own policies were at fault was a basher. I tried to stay "middle of the road," judging each case on its own merits. When Paypal has numerous customer service issues, I recommended against using them. When it appeared that they were working to resolve these issues, I changed the rating to "recommended with caution." At this point I can only conclude: "recommended for sellers with personal accounts where credit cards will not be used. recommended for buyers only if a credit card is used."
The problem is the Paypal's "protection plan," though probably set up with the best of intentions, has the exact opposite result than what was intended. It protects the guilty and harms the innocent. Because Paypal is run by a bunch of young and arrogant managers, they refuse to admit that there is a problem. So the fraud continues and the number of scammed buyers and sellers continues to mount. Many have found that there are ways to leave Paypal stuck with the bill. So Paypal now has millions in losses to recover. Could this be the reason for the new trend that I am seeing?
I used to get one or two complaint letters a day. In the past week, I am getting a dozen a day. The letters used to be "run-of-the-mill." Someone paid a seller and got cheated. Someone sold an item and the buyer charged it back for no good reason. They were issues between buyer and seller with Paypal bearing only tangential responsibility. But these current problems are far more serious and has Paypal taking an active hand in creating the problem. There has been an increase in accounts restricted by Paypal due to the possibility of fraud. This would be fine if there was a mechanism by which the account holder could contact Paypal and have the matter quickly resolved. But it appears that once Paypal has decided to restrict an account, it takes nothing short of an act of Congress to get them to change their mind. But even as the account stays restricted, Paypal continues to accept money into it. In my eyes this is theft. If the money does not belong to the seller, then it belongs to the buyer. We know for a FACT it does NOT belong to Paypal. There have been a few complaints of possible hacked accounts or credit cards where the writer says he contacted Paypal numerous times about transactions on his account that he did not make and they have refused to do anything about it. We saw a post on Auctionwatch where a buyer says three transactions of over $6,000 each were made from his account in under one minute, hitting his credit card and two bank accounts and we saw Paypal's rep answer that somehow the buyer must have done this accidentally. I defy any of the cheerleaders to enter three transactions into Paypal, have them funded from three different sources and complete the entry in under a minute. You can't do this deliberately but we are supposed to believe that someone did this accidentally?
There have been complaints about Paypal retrieving money from a seller's account that was paid from existing paypal funds because the payer received a fraudulent payment from another party. What kind of nonsense is this? Someone receiving a credit card payment will be careful to validate the source of the payment, but how vigilant can you be when receiving the equivalent of cash? Paypal won't even reveal a scammer's name and address to another party. How can the seller know where the buyer got his money? Can you imagine depositing a money order into your bank account and having your bank confiscate it, telling you "the guy who gave you that money order got cheated by someone else so we're taking it from you"?
What's amazing is that when a buyer gets scammed and files a complaint, Paypal's usual response is, "Yes, you were cheated but the seller emptied his Paypal account so there is nothing we can do." Yet when it is Paypal who gets scammed, they manage to track that money across several accounts and find a way to recover, even if it is from an innocent third party.
There are many policies at Paypal that I believe will not stand up to legal scrutiny. There are currently lawsuits in process which will test these policies. Until the courts speak, the only guarantee with Paypal is that there is a good protection plan in place to protect Paypal and no one else.
The definition of a Paypal cheerleader is someone who hasn't been scammed yet.
TOPICS: Crime/Corruption; Miscellaneous
I've fallen for PayPal myself. Someone gave me the private phone number for a PayPal VP, but this was "disconnected or no longer in service." Right now I'm working with the DOJ's Internet Fraud Center, as well as the CA & MN state attorney general offices.
If you are a PayPal customer, check out:
I purchased something and used paypal. The seller misrepresented the item and wanted to charge me a 15% restocking fee. I complained to paypal and got nowhere. Luckily, I had used a credit card and was able to get the transaction cancelled. Now I am making the seller send me a prepaid shipping label to get his merchandise back.
posted on 12/17/2001 8:36:11 AM PST
To: Hillary's lovely legs
Through some detective work, and google, I've found some emails:
The lady responsible for fighting fraud at PayPal (Grrr...) is Sarah B. Imbach, email: email@example.com
An executive VP who is friends with PJ Comics (perhaps dropping his name will help?) is Jack R. Selby: firstname.lastname@example.org
Also check out DOJ's Internet Fraud Center and fill out a complaint.
Of course, I've been at it for over a month, with no results. I read on a PayPal bashing site that many, many accounts are being restricted as PayPal begins to file for Chapter 11, but this is probably just a rumor.
We've used paypal for about a year now and we haven't had a single problem. I did finally notice the fees charge the other day (my wife usually takes cae of the billing stuff) and I was thinking about dropping them from our pmt. options, however a lot of people we deal with use paypal.
How much quality time do 2 grand buy in Khokhlyandia?
Let's see, a bottle of premium gorilka is 10 griven, $2513 X 5.25 griven/$ divide by 10... or were you thinking of something a little less prilichno?
I wouldn't sign on because Paypal wanted my credit card # and checking account #. Fuhgeddaboudit.
posted on 12/17/2001 9:05:16 AM PST
I have used PayPal many times for Ebay purchases and had absolutely no problem. I have not used it as a seller, only as a purchaser. There are no fees for purchasers, only for sellers. And I believe that if you use bank accounts only (not credit cards) for transactions, there are no fees period.
Works for me. It's a great concept. If PayPal screws it up, others better at executing the concept will take over.
posted on 12/17/2001 9:11:31 AM PST
I got ripped off for $400
To: randita, freedom4ever
Since you haven't been ripped off yet
, I'll put you down as PayPal cheerleaders. If you are ever unlucky enough to have a problem there is absolutely no way to get through to them to rectify it. They don't respond to emails, there are no numbers on the site, and their fax is disconnected.
PayPal Contact Info:
Toll Free Phone: (888) 221-1161 PayPal P.O. Box 45950 Omaha, NE 68145
I got a PayPal ATM card and gat cash as soon as it hits my account. If they go belly up, they won't get much from me.
To: opinionator, Hillary's Lovely Legs
If you'd like to try to contact someone, I've finally managed to find the numbers which they leave out from their site ("keepin' the squeaky wheels quiet"). After some exhaustive research on google, I managed to find a website listing PayPal's IPO - with the the address and telephone number of their corporate office. Calling CEO Peter Thiel's secretary got me the customer service numbers, as well as some fax numbers that work.
1840 Embarcadero Rd
Palo Alto, CA 94303
650-251-1100 (fax) 650-251-1101
877-9725 (toll free)
normal fax (always busy):402-935-2045
special fax (worked once):402-537-5731
Never give up!
Good idea. Thanks for the info!
bump to mark.
To: diefree, Hillary's lovely legs
Oops, mistake on the toll-free customer service number:
877-672-9725. Find something to read and get comfortable before calling. It hangs up after 15 minutes, but just keep re-dialing and you might get lucky.
How any business can stay afloat abusing it's customers like this is beyond me. I've received better service from the IRS.
I called. I called several times. The recording said that they were busy and hung up on me. The money I am trying to collect gets returned tomorrow. I will never see my money.
To: Hillary's Lovely Legs, CommiesOut
is a wild thread at Auction Watch:
|posted on December 19, 2000 04:41:16 PM new
This happened yesterday, when many sellers who use paypal had their accounts restricted for no reason whatsoever. I have sent them a letter, to appeals@paypal, and will now open my email to responses from AW customers. I will not idly sit by and wait for their phone to answer. Below is the email I sent them.
This is totally outrageous. You give nothing but a form email with no explanation at all. You are now holding up Christmas shipments to many of my customers who trust you with their money much the same as I trust you with mine.
Enough small talk. I have heard far too many complaints from other users to tolerate this for any length of time.
You will answer this email within 24 hours with a detailed explanation of why this has happened or:
I will proceed with legal action that may or may not include the following:
File a formal complaint with the IRS, and the FBI.
File charges of misappropriation of funds
File charges of false advertising
Contact the appropriate authorities regarding FTC guidlines for proper banking practices
I will be contacting and filing a lawsuit against Travellers Insurance
I will be filing a lawsuit on behalf of myself and ALL my paypal customers against you for any violations my lawyer may deem are applicable regarding punitive and and other damages resulting from this restriction.
Lastly, I will be writing letters to all major periodicals, newspapers, television, media, and all of your sponsors, explaining the situation, and gathering OTHER CLIENTS who have been hurt by your "inexplicable efforts" to restrict other accounts. This, of course, would result in a CLASS ACTION SUIT not only for the funds themselves, but related damages as well.
You now have a choice. You either lift this restriction IMMEDIATELY or I will pursue this furthur with all means at my disposal. This is not a free service any more. I now PAY for this. Big mistake, because now you are a BUSINESS, and are subject to legal proceedings AS a business
I sincerely hope that this has been a misunderstanding on your part and a mistake. I have used paypal reliably for quite some time with no problems. The problem here is the notice that is given with this restriction. THERE IS NO NOTICE. I hope you find the time to answer this, due to the holidays, you will make some very unhappy people and you will find yourself on the end of my litigation; not to mention ANOTHER lost client.
Thank you for your time
OK AW USERS
This is the ground floor to add your name to a list of plaintiffs that will be filed. My email account created for this sole purpose for anonymity is:
What are the two numbers that are floating around for Paypal CSR? I will need these. One is a toll-free, the other is a long distance call. Please post below.
Once these numbers are posted, I encourage every one to ram their phones, what this means is that you will completely tie up their lines. 500 incomings at once will cripple all but the biggest companies. If you have a computer that is online but not used, do an infinite redial on their number, with no hangup until a recorded message occurs.
This is the first and LAST time they will be doing this charade.
damon@paypal IF YOU ARE LURKING HERE I SUGGEST THAT YOU FORWARD THIS TO LEGAL AT ONCE.
AW members who are lawyers? Forward tips and help to
WE WILL SETTLE THIS ONCE AND FOR ALL
||posted on December 19, 2000 04:59:10 PM new
Wow, I agree with you that the form letter was pathetic, and I too was angry, however the restriction was lifted within hours if not less and it was due to an error. I even received an email stating such with an apology no less. I'll wait till there is something more substantial to sue about. Thanks anyway.
||posted on December 20, 2000 06:00:21 PM new
Pnth, I agree with your assesment of the situation and concur that legal action should be taken.
I myself was never burnt by PrayPal due to the warnings my fellow AW posters gave me. I closed my account.
However, you may want to reexamine posting specific actions that may place you under some potential legal liabilities yourself.
I am not a lawyer, but it does seem that I recall similiar instances where people were held liable for actions intended to disrupt a business.
Maybe you have already considered this, just thought I'd toss that out there.
Hope you can get SOME action out of them.
[ edited by Powerhouse on Dec 20, 2000 06:04 PM ]
||posted on January 1, 2001 06:10:05 PM new
For the record, the moment you mention in a letter to a corporation the words "Law", "Legal" or "Lawsuit" you have guaranteed that you will receive no more contact from that agency, company or corporation. Most, not just a few, but far closer to most than to many legal departments of corporations follow company policy that once the words listed above are communicated either by voice or electronic means, all communication must stop and the account and all correspondence is then turned over to the legal department. Likely forgotten unless your threats are backed up with a "Letter of Intent" drafted by a licensed attorney. So those who threaten to sue a company have all but shot themselves in the foot regarding any expedient resolve through email and phone calls except in the most exceptional and unusual cases.
But... good luck!
||posted on January 7, 2001 12:55:40 PM new
I just tried to email you at the above address as you posted. But it came back undeliverable. What gives?
Aynway, you asked for phone numbers. I found two numbers in various complaint postings, perhaps they are the ones you need.
800-836-1859 and 877-672-9725
||posted on January 9, 2001 08:57:10 AM new
Here' the phone # I got...
Dear PayPal User,
You can contact me at 1-402-935-2258 to discuss this issue. Basically,
your account has been restricted due to a large number of buyer protection
and fraud claims. If you call, be prepared to answer how you intend to
resolved each and every claim that is outstanding in your account. The
first step will be to issue refunds to every customer that has not received
the items that you sold and promised. A quick count indicated at least 15
claims that will need to be resolved before we can move forward. I will be
in the office the rest of the week from 6am PST until 4pm PST.
PayPal Account Review Department
||posted on January 9, 2001 11:08:37 AM new
That ph# doesn't look right. Paypal is in Palo Alto, the 650 area code. I'm not sure of your situation, but if they ask for a password from you don't give it.
||posted on May 3, 2001 08:16:39 AM new
I have another phone number, apparently a switchboard. It is 402-935-7733. I've been told (but haven't tried it) that extension 4053 will get you to a real live person that handles problem accounts.
I would like to know the corporate address of PayPal and the registered agent name and address(in Oregon)that can beused to file suit against.
I would also join any class action suit. My account is not in its 40th day of a fraudulent chargeback and I have not had a reply to my e-mails or phone calls. Not one.
Contact me at email@example.com
||posted on May 16, 2001 10:15:15 AM new
Just from the few quick messages I have read I am on the lower end of those involved with this, but I would like to add my name to a class action suit against Paypal. I have been arguing with Paypal for over 3 months now about $225 dispute (small compared to many here, but I am a student, so it is a ton of money to me). Paypal concluded that the seller was at fault, but will do nothing to refund my money. I have filed with the BBB and received a reply via snail mail from Chad E., resolutions manager.
His email is firstname.lastname@example.org. The number they gave me in the letter is 402-935-7733. I am assuming this is a general number that is of no use.
Feel free to contact me with any more information at email@example.com. I have also recently purchased ihatepaypal.net and intend to get a message board up there (call is therapy).
||posted on May 21, 2001 05:31:52 PM new
Just like to say that I came home from vacation today and paypal has reversed 3 more accounts dating Dec. and Jan. and they said they had reviewed all my transactions
WHEN WILL THEY TELL THE TRUTH.I stopped dealing with them in Feburary. Maybe by next Feb. they will have reversed all of them and all of my customers will have their money back. THANKS PAYPAL.
BY THE WAY IF YOU WANT TO REACH PAYPAL'S MAIN OFFICE BE AWARE THE PHONE # IS (650) 251-1100 ASK FOR Mr. Sandeep Lal his ext. is 1106 tell him Stoney said to call him.
||posted on December 13, 2001 08:20:29 PM new
I would like to know if anyone may be aware of a class action law suit aimed at the incredible behavior of this obviously flawed financial institution. I have a similar story to the ones I see here and at auction suits all over the net of their extremely high handed ways. In my case I made the mistake of simply stating that I was working in malaysia (Though I am an American citizen and resident). The wrote back the following:
Thank you for contacting PayPal.
We currently do not provide service to Malaysia. Following an
investigation, this account has been permanently locked due to violations
PayPal Account Review</B>
Paypal must come under some of the same restrictions as a registered bank. In any case, I am certain that the California Attorney general's Office will take an interest in their high handed ways and their incredibly obtuse approach to things. Not in the above letter they use the familiar saluation "Dear Gary" and then refuse to sign a name to the letter. Frankly this is the most incredible case of consumer abuse I have encountered in my 55 years. Though the amount of money they have frozen, in my case, is quite small, Paypal has given me a reason to feel anger and revulsion not unlike what I felt on 9-11. Paypal, here I come.
With regards to fellow victims,
Gary N. Davis
||posted on December 13, 2001 09:10:13 PM new
Can you please forward your account email address to me? I would like to have this reviewed by account management. My email is firstname.lastname@example.org.
Malaysia, in addition to being a country we do not support, has a high fraud rate.We ask for documentation to protect the user, the user base, and the company from potentially riskly items. These restrictions can be removed (generally) if the user:
a) supplies the requested documentation (to make sure the correct party is utilizing the account)
b) there isn't a history of problems on the account (scam reports,chargebacks)
I certainly apologize that this happened but I would like to have this looked at.
||posted on December 13, 2001 10:34:31 PM new
Well at least Damon is going to do something about it. Darn because your living in a foreign country YOUR a fraud. Does that mean all Arabs living in this country are bad? Maybe next it will be the city you live in. Or you rent and don't own.
By the way the co-founder of the company is an Russian immigrant.
||posted on December 14, 2001 06:47:37 AM new
amzn one click does not do business with malaysia either.i sell books on amzn and received an email from a malaysian buyer asking if i would sell him a book.
i told him what the actual shipping would be and i have not heard from him(i have a merchant account which will process malaysian charges).
a year ago,i received an order on amzn from a customer with an email addr coming from russia,his credit card charge never go thru ,message from amzn is ship at your own risk.
i never ship the book.
||posted on December 15, 2001 04:38:12 AM new
It is tru that PayPal seems to develop an "arrogant" attitude towards customers. First my account was restricted because all my family members (5) opened accounts with the same phone number. (Family - same house - same phone number - get the point?) It took an unbelievable 2 weeks!!!! until I had acces to my funds. I have faxed all requested documentation 7!!! times. 6 times they claimed they haven't received it. (Whatever) Everytime I faxed I called, everytime I was told it takes 5 business days. And nowhere else ever have I had a customer rep hang up on me. (Too bad I didn't write down his name) Wow, what a response time considered the fact that you have MY money.
Now three and a half weeks later I loose my PayPal debit card, follow their instructions, report it lost, request a replacement, result:
Account restricted - debit card request denied! (????????)
PayPal comes with a lot of amenities and convenience, but hold times on the phone of 1 hour and 45 minutes (!!!!!) to get the appeals department. No thanks I think after my current auctions close it's going to be Citibank's C2It from now on.
And on and on and on...
My wife has $130 in a PayPal account that PayPal will not release to her. PayPal restricted her account cause she used the same credit card to set up an account for her son.
She attempted to satisfy PayPals requests for proof of identity, bug finally gave up. She faxed copies of her drivers license, but they claim they can't read it. She scanned it, blew it up and faxed it, they didn't like that either.
PayPal needs to be taken down, they are operating without any rules, other than their own.
posted on 12/17/2001 2:08:29 PM PST
Hm... speechwriter for William Bennett.
Title: Co-founder, CEO
Launched: October 1999
Revenue: $1 million a week and growing
Distinctions: National master in the U.S. Chess Federation, speechwriter for Secretary of Education William Bennett
Author, The Diversity Myth
This is what I got. This is a bunch of garbage. I lose the money tomorrow
Thank you for contacting PayPal.
I sincerely apologize for the inconvenience caused. The PayPal system is so designed that it does not allow you to claim a payment that is sent to a misspelled or incorrect email address. Your ISP server may allow you to receive the notification but the funds will not settle in your PayPal Account. Please contact the sender and ask them to cancel the unclaimed transaction in their account and resend it to you, using the correctly spelled email address.
Please note that an email address that ends in a period, such as "email@example.com." has an extra period at the end of it, and will cause the funds to remain unclaimed. There should not be a period at the end of the email address.
We cannot change our security policy to allow the payments to be claimed at a wrong email address. We hope you understand our concern about the security measure.
If you have any further questions, please feel free to contact us again.
Sincerely, Susan PayPal Customer Service
=========================================== We at PayPal would like to know how well this response accommodated your request. Click on the appropriate link to send your feedback. We welcome your comments.
If this email exceeded your expectations: mailto:firstname.lastname@example.org
If this email met your expectations: mailto:email@example.com
If this email did not meet your expectations: mailto:firstname.lastname@example.org
Thank you for your feedback. ===========================================
To: Hillary's Lovely Legs, tje, CommiesOut
Aw the heck with it, let's all get drunk and play ping-pong!
To: struwwelpeter,madrussian, malarski, dennisw,Askel5, GROUCHOTWO, Zviadist,kristinn, Free the USA,
thanks for putting me on your ping list a mixed blessing for sure.
posted on 12/17/2001 4:12:17 PM PST
PayPal? Frankly I think a little 'insider trading' pays off best, like dealing in the pre-911 puts and shorts. And if you know the right people the SEC will not bother you.
To: GROUCHOTWO; CommiesOut
This was "the story" which I felt had the most potential, post 9/11 for identifying those silent partners of the terrorists. Yet there is vitually nothing being reported or even investigated by the any of the media, big or small. Or have I missed it?
posted on 12/17/2001 4:45:52 PM PST
Three alternatives to PayPal:
1. Money order
2. Money order
3. Money order
posted on 12/17/2001 4:53:24 PM PST
This sounds like a great way for PayPal to increase its bottom line. Restrict a lot of accounts and keep the interest on the float.
It is down the memory hole!
So who can divert such a big story?
Are the US citizens are considered so simple minded that the boom-boom distraction of 'breaking news' will be enough to bury this?
It sounds to me like they learned their custom service policies from E-Bay. E-Bay doesn't even have a customer service e-mail address. They rely on a chat board and e-bay customers to help their customers resolve problems. I've never seen or heard of any business this lame before.
I just opened a PayPal account three hours ago. Wish I had waited!
posted on 12/17/2001 5:37:41 PM PST
I made a prediction to myself when this story came out soon after the attack, that it would never see the light of day if found to be politically incorrect with respect to those involved.
posted on 12/17/2001 5:40:09 PM PST
I've never had a problem. But I don't have the legs to be a cheerleader ;-)
Smart move. It has become quite easy to predict what will become 'news' and what will disappear.
The bad thing was how this story was knocked off the radar....the new terror attack by anthrax. The news media prepared us to anticipate it, then to assure hysteria the first round of anthrax was sent to the talking heads. Isn't interesting that the anthrax was home grown?
Since there has been much embarrassing news revealed this week regarding Israel conducting aggressive espionage against the US and JDL terrorism, I fear that if the media spin does not negate these charges we may see another 'terrorism' attack.
No, the stories have been proven false
posted on 12/17/2001 7:15:23 PM PST
To: Hillary's Lovely Legs
I read your link. Where exactly is the proof that the stories are false?
It was sarcasm..:)
posted on 12/18/2001 4:00:14 AM PST
I don't know what to tell you except the concept of PayPal was a silly one to begin with. The "services" offered by PayPal, Yahoo Wallet, etc, etc can mostly be found with your typical credit card.
I've purchased many high-priced items on Ebay. If the seller required PayPal or something similar I would not even consider bidding on it. I'll either use a bank-issued cashier's check or a credit card.
Both have the backing of, no doubt, an entire floor of lawyers who will gladly work with me to get my money back if I'm bulls###ed. :)
posted on 12/18/2001 4:13:51 AM PST
by Mr. Fit
Exactly why we do not use any of these payment methods.
I guess they don't have to follow banking laws?
Need good, safe service? Verizon, dude.More
To: Mr. Fit, Dustbunny, Patriotic American, CommiesOut
PayPal will self-destruct eventually. No business can afford to abuse their customers indefinitely.
Commies: Interesting that one of the co-founders, Levchin, is a Khokhlovskiy emigrant from Kiev. He must have worked for the government there before coming over - his customer relations skills reminds me a lot of a visit to the VVIR (Visa & Registration) over there.
Bump for great justice!
A dab of satire is surely appreciated these days.
MasterCard to stop third-party transactions
By Andrew Backover, USA TODAY
A new rule by MasterCard could crimp online commerce by stopping merchants from accepting credit card payments through third parties, such as the popular PayPal, USA TODAY has learned.
Unless a settlement is reached, on May 1 Internet merchants and other mom-and-pop firms that rely on third-party billing could miss out on sales via the USA's No. 2 online credit card. And MasterCard holders could have a harder time using their cards at many sites that use PayPal and similar services, says Gartner analyst Avivah Litan.
"The promise of the Internet was that anyone could set up shop and get paid," she says. "It's not a level playing field anymore if this rule goes through."
According to MasterCard, its 15,000 members, such as banks and credit unions, won't be able to process credit card transactions using third-party services such as PayPal. They are used most often by small merchants who cannot afford to take MasterCard, other credit cards or checks.
Even if the MasterCard change goes through, consumers would still be able to use the card to buy goods from Web sites that deal directly with MasterCard.
The biggest third-party system is PayPal. It has about 13 million registered users, most of whom are small Web merchants or people who frequent auction sites.
The change would require those merchants to set up deals with banks so they could take MasterCard directly. That's a time-consuming and costly process, especially for small merchants.
The reason for the change, says MasterCard spokesman Alex Lau, is to protect financial institutions and card holders from fraud and identity theft.
Based on the rule's wording, it could affect other third-party services such as Yahoo's PayDirect and eBay Payments, Gartner's Litan says. Yahoo could not be reached. EBay says it does not expect to be affected because its services work through Wells Fargo.
PayPal is working hard to get an exemption, it says. Catering to small Web merchants and individuals, PayPal will sign them up with fewer hassles and lower fees than banks. PayPal uses its agreements with big banks to process credit card payments for these customers. PayPal has been one of the few Internet initial public offerings in recent years. It closed Thursday at $24.46.
PayPal spokesman Vince Sollitto says PayPal is "hopeful and confident" it will come to new terms with MasterCard. Visa says it still accepts PayPal. American Express still accepts PayPal and one other service.
The change is likely aimed at porn and gaming sites that have higher occurrences of credit card fraud and identity theft, Litan says. One in 20 online consumers were victimized by credit card fraud last year, she says.
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