I’ll have to confess to a certain amount of hypocrisy. I have developed a deep dislike of Paypal, especially after reading the horror stories behind Paypalsucks.org, yet I still have a paypal account of my own. (Unfortunately, for many online services it is the only form of payment accepted. Rather than do without, I’ve buckled and kept the account as a last resort.) Paypal has a nasty reputation for freezing accounts then stalling to release the funds within a reasonable amount of time. I have second hand knowledge of this happening to a fellow publisher in the RPG industry. He had to scramble to come up with money to pay people out of his pocket when he had a stack of money frozen in his paypal account.
Consequently, when Paypal announced that they’d be holding money up to 21 days for some types of transactions, I can’t say I’m terribly surprised. Neither is CNNMoney. Here’s the money-quote:
Barr of the FDIC notes that PayPal does not ultimately fall under the jurisdiction of the FDIC, which regulates banks and banking institutions. Regulation of deposit brokers or money-transfer operations falls to individual states, he said.
Paypal is not a bank. They are not beholden to the same rules as banks. They are a deposit broker. Sometimes they are a necessary evil, but I’d advise thinking long and hard before you use them the next time.
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