PayPal: Freezing Peoples’ Accounts to Make Money

“PayPal will pool your funds together with funds from other Users, and will place those funds in accounts at one or more FDIC-insured banks (“Pooled Accounts”). You agree that any earnings on the Pooled Accounts will be the property of PayPal, and you will not receive interest or other earnings on the funds that PayPal handles as your agent.” (Terms of Use, downloaded December 14, 2001)

In effect, PayPal was benefiting from the freezing (permanent or otherwise) of user accounts, because they could (like a bank) use this money to make money (for themselves). However, a settlement for a class action lawsuit (approved on Nov. 2nd, 2004) brought against them specified that they had to change their business practices, so their Terms of Use has since been modified:

“…PayPal will pool your funds together with funds from other Users, and will place those funds in accounts at one or more non-interest bearing FDIC-insured banks (“Pooled Accounts”). Those funds may be eligible for FDIC pass-through insurance. Balances held in currencies other than U.S. Dollars will not be eligible for FDIC insurance.You agree that you will not receive interest or other earnings on the funds that PayPal handles as your agent. PayPal will also not receive interest on those funds, but may receive a reduction in fees or expenses charged for banking services by the banks that hold your funds.” (Terms of Use, viewed on January 9th, 2006)

PayPal: Unethical Practices

They let money into their system without restriction, yet to take that same money back out, they require driver’s licenses, utility bills, and other documents which must be faxed to them…