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The Almighty Buck

Paypal Reverses Payments Made To Indians 509

Posted by kdawson
from the money-available-but-not-to-you dept.
bhagwad writes "Beginning January 28, Paypal has been reversing the payments made to any Indian provider of services. In addition, Indian users have been unable to withdraw their money to their bank accounts. As a result, a large number of Indian Paypal accounts have negative balances running into the thousands of dollars. The worst part is that users weren't informed beforehand — the funds were just whisked away. Indian providers have gone ballistic, with over 2,000 posts on a thread on the reversal of payments and over 700 posts on this thread about the delay in transfers. Paypal hasn't given any explanation to this behavior other than they're looking into it. Although Paypal claims in the above blog post that payments made for 'Services' are not being reversed, this is not true. All payments not made for 'Goods' with a shipping address have been reversed — in fact, the Paypal e-mail tells the Indian sellers to encourage their clients to lie and claim that they're paying for goods with a shipping address instead."
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Paypal Reverses Payments Made To Indians

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  • Makes me wonder... (Score:5, Insightful)

    by lag10 (667114) on Sunday February 07, 2010 @03:21PM (#31053956) Homepage

    Why anyone trusts PayPal with their money.

    • by Anonymous Coward on Sunday February 07, 2010 @03:24PM (#31053984)

      Nobody trusts Paypal, but there is no viable alternative. Not yet, anyway, but that can't take long in light of these shenenigans.

      • by davester666 (731373) on Sunday February 07, 2010 @03:42PM (#31054132) Journal

        New meaning to the racist term "indian giver"...

      • by bvankuik (203077) <.slashdot_bvankuik. .at. .vankuik.nl.> on Sunday February 07, 2010 @03:53PM (#31054206)

        No viable alternative? What about a normal bank transfer? I used to pay an Indian guy via Paypal but their charges are pretty steep. So I informed with my local European bank for the costs and it turns out this is much cheaper. Problem fixed.

        • by bhtooefr (649901)

          Not practical if the payment's coming from the US - my bank charges $40 for an international wire transfer, and that's not out of the ordinary.

          Also, wire transfers are usually regarded as very insecure here, because when someone thinks "wire transfer," they think "Western Union."

          • Re: (Score:3, Informative)

            by 1s44c (552956)

            Not practical if the payment's coming from the US - my bank charges $40 for an international wire transfer, and that's not out of the ordinary.

            You could always use something like xetrade.com and bypass your banks excessive charge.

        • by AK Marc (707885) on Sunday February 07, 2010 @06:25PM (#31055526)
          No viable alternative? What about a normal bank transfer?

          The US does not allow for that. The banks don't link into other banking systems seamlessly. They treat the account number as a password (despite it being on the face of every check). The US just doesn't do it. Most of the other countries on the planet have banks that let you transfer money to other banks in that country with a phone call, over the web, in a branch, or maybe even other ways without any problems at all. A large portion of money moves directly between banks electronically (rather than checks, as used in the US).

          Hell, I have a fellow customer at the same branch of a US bank that wanted to send me money. It's impossible, according to Wells Fargo, to transfer more than $1000 from one account holder to another. The person may have been misinformed, but the person trying to get me money tried more than once with different people and couldn't do it. The only option is to not transfer it within the bank (meaning, withdrawal the money completely, the deposit it again, which can be done at the same time at the teller, but can't be done by phone, fax, ATM, online, or such, when such options are available outside the US almost everywhere).

          With that system, I declare that to be "no viable alternative."
        • by Teun (17872) on Sunday February 07, 2010 @06:52PM (#31055744) Homepage
          Meanwhile a large swath of the world gets on:

          http://en.wikipedia.org/wiki/International_Bank_Account_Number [wikipedia.org]

      • by terraformer (617565) <tpb@pervici.com> on Sunday February 07, 2010 @04:11PM (#31054334) Journal

        http://www.gunpal.net/ [gunpal.net]
        It's an alternative.

        • Re: (Score:3, Informative)

          Looks like it's US-only. There are any number of US-only "PayPal alternatives", but in the grand scheme of things, if you're US-only, you're not a PayPal alternative.
      • by rolfwind (528248) on Sunday February 07, 2010 @06:04PM (#31055334)

        Nobody trusts Paypal, but there is no viable alternative. Not yet, anyway, but that can't take long in light of these shenenigans.

        They've been saying that about the shenanigans since the beginning of the 2000s.

        The fact is that Paypal acts like a bank but without any of the regulations. A bank can't freeze your assets and the like just because they don't like you or what you do -- only the government can do that. Something's got to give here: the last crisis showed banks can't regulate themselves on a trustworthy level.

        There are alternatives: google checkout and a myriad of others. Since ebay doesn't allow competition to their paypal - it makes it harder though...

      • I use a separate account at ING Direct. They let you set up as many bank accounts as you want under one umbrella, so you can just use a special account for PayPal with minimum funds in it. I call this my "sandbox" after the idea of sandboxing software in a chroot jail etc. to mitigate its damage potential. No matter what PayPal does, they cannot take more funds than you have in that account, as that is the authorized account. The only thing left they might do I suppose is thrash your credit. I'm not a
    • by MikeFM (12491) on Sunday February 07, 2010 @03:51PM (#31054194) Homepage Journal
      I don't. They arbitrarily started reversing all my payments after I'd shipped product and provided tracking numbers proving delivery. Cost me thousands of dollars and put me out of business. Now they want me to pay them $800 because they not only cleaned out my account but I guess gave away even more. And you pretty much have no recourse but to keep feeling out online forms asking what the frick is going on. Been using Google Checkout and Amazon Payments and they seem viable alternatives. I don't leave money sitting in accounts attached to order processing though because who knows what they'll do to you. Credit card / order protection is a scam. The venders get ripped for no reason. I think unless fraud can be proven there should be no refund and then it should become a legal matter. The credit companies charge fees but they don't cover any of the costs. It all comes from venders.
      • Re: (Score:3, Interesting)

        by shadowofwind (1209890)

        As I have posted elsewhere, my wife and I sued Paypal unsuccessfully over something very similar. But the Ohio attorney general got our problem fixed, and the Washington state attorney general contacted us to follow up later, not because we asked them to or lived in Washington, but just because they ran across our case when generally investigating Paypal. So you might try that if you haven't already. I was impressed by the attorneys general, surprised to see the system working the way it is supposed to.

        Y

    • by zuperduperman (1206922) on Sunday February 07, 2010 @06:30PM (#31055570)

      The beauty is that you don't really have to trust PayPal. I usually transfer money out of my PayPal account within minutes of it arriving there, and I have made sure never to authorize PayPal to withdraw from any bank account I have.

      Just make sure you have a backup plan so that if / when PayPal suspends your account for some stupid reason you have somewhere else for customers to go.

  • Banking Reform (Score:5, Insightful)

    by PingXao (153057) on Sunday February 07, 2010 @03:25PM (#31053998)

    Banking reform in the US should include subjecting PayPal to all the rules and regulations that apply to banks. I find it strange how they've managed to avoid being classed as a bank all these years in the first place. Current regulations leave a lot to be desired, but making PayPal adhere to them would be a good first step.

    • by khallow (566160)

      Banking reform in the US should include subjecting PayPal to all the rules and regulations that apply to banks. I find it strange how they've managed to avoid being classed as a bank all these years in the first place. Current regulations leave a lot to be desired, but making PayPal adhere to them would be a good first step.

      Why should they be a bank? Their primary purpose is enabling transactions not the usual roles of banks. And to be honest, I see no point to treating banks like they are treated in the US. While such regulation delays the mean time between failure for banks, it does so by increasing the size of failures when they occur.

      • Re:Banking Reform (Score:5, Informative)

        by BondGamer (724662) on Sunday February 07, 2010 @04:09PM (#31054320) Journal

        Why should they be a bank? Their primary purpose is enabling transactions not the usual roles of banks.

        Yeah, they only hold, transfer, convert, store, send, give cashback bonuses, interest, etc. They are nothing like a bank at all.

        • Yeah, they only hold, transfer, convert, store, send, give cashback bonuses, interest, etc. They are nothing like a bank at all.

          This is not what makes a bank a bank.

          What makes a bank a bank and the reason they are more tightly regulated (though that's laughable) is that banks create and destroy money. Banks are a form of privatised money creation.

          Paypal on the other hand simply move money from one person to another. They neither create nor destroy money. I would argue that no matter how bad their customer service, their costs or the problems they cause individuals, the paypal organisation is economically far more benign than your lo

          • by AK Marc (707885) on Sunday February 07, 2010 @05:47PM (#31055182)
            You don't understand how the regulation was sold. The regulation was needed because banks lend (you call it creating and destroying money, others call it lending). This allows a bank to fail. Paypal *can't* fail from that. They hold money, but don't lend or borrow against it. So I understand your point. But, from how the regulation was sold to the people, you are 100% wrong. It was never sold as "banks create and destroy money, so they need regulation." It was sold as "banks have your money, and to make sure that they give you your money when you ask for it, they need to be regulated." From the manner in which banking regulation is sold to the America public, Paypal is a bank and should be regulated like one.

            I understand that your argument is that the sale of that regulation was a lie, and the banking industry isn't about holding money (but borrowing and lending against it), but I think you are wrong.

            Not to mention, you are begging the question. You assume that they don't lend against the money they hold. Even if I agreed with your logic (and I don't) you have assumed a premise that has never been addressed. When you prove Paypal doesn't lend money (and I consider buying stock or bonds to be lending money, for this exercise, as one could default on that debt and have the same result), then we can address the logic I don't agree with.
      • Re:Banking Reform (Score:5, Interesting)

        by Tacvek (948259) on Sunday February 07, 2010 @04:15PM (#31054374) Journal

        What Paypal does is actually very similar to what many banks do at least from the user's perspective. Both hold money in accounts, and provide ways to transfer money. Banks provide checks and debit cards for this purpose.

        I will admit that Paypal does not offer loans, nor does it over things like savings accounts, but from a user experience they are very similar to a bank where they have only a checking account.

        If Paypal does not bother to invest the money sitting dormant in accounts, then many regulations would have only minimal impact on them, since they would be keeping full reserves rather than fractional reserves. The regulations we really want are those that prevent banks from freezing accounts for no valid reason, and from interfering with valid transactions. The procedures already in place for banks on both of these points would really help protect users.

        I will admit though that overall Paypal's primary purpose is more like that of American Express than a bank, but the way they do it is debit based rather than credit based, meaning a whole bunch of regulations that would not apply to AmEx could be applicable.

      • Re:Banking Reform (Score:5, Interesting)

        by YrWrstNtmr (564987) on Sunday February 07, 2010 @04:22PM (#31054420)
        Why should they be a bank? Their primary purpose is enabling transactions not the usual roles of banks.

        They hold user accounts - you can keep money there.
        PayPal credit [paypal.com]
        PayPal Money Market funds. [paypal.com]

        Sure smells like a bank to me.
        • Re: (Score:3, Insightful)

          People may *use* PayPal like a bank but if they do they are misusing it.

          PayPal is not your bank. PayPal is the cash till in your register. No business owner leaves cash accumulating in their register day after day. They count it and clear it out at the end of each day and bank it because the register is a fundamentally insecure and unreliable place. If people treated PayPal more like that there would be less issues (not saying PayPal doesn't have problems - just that people's tendency to accumulate la

      • by nospam007 (722110) *

        "Why should they be a bank?"

        They have been a bank for years based here in Luxembourg, because here the VAT is the lowest.

    • Banks create money.
      Paypal moves money.
       

      • by larkost (79011)

        How do you figure this? In the US the only entitiy that "creates" money is the US Govenment (through the US Mint). Banks are only in the business of moving money between people (and businesses) in the form of loans and deposits. They then "make" their money by taking a percentage off the flow of money, which is simply them diverting money from the stream (moving, not creating).

        All this is a simplification of course. But if you take all of the complex things that banks do (like investments or morgages) and s

        • Re: (Score:2, Informative)

          by bill_mcgonigle (4333) *

          How do you figure this? In the US the only entitiy that "creates" money is the US Govenment (through the US Mint).

          It's called Fractional-reserve lending [wikipedia.org]. You deposit $100 into your bank and they led out $900.

          If they're paying you 2% interest and charging 4.5% interest in their loans, their profit is (roughly) 4.5% * 9 - 2%. So, they're making 38% or so on your deposit.

          This is why banking is so profitable despite the seemingly low rates. It's also what creates the problems of 'runs on banks', but with the

          • Re: (Score:3, Informative)

            by nedlohs (1335013)

            Your profit calculation is just plain ridiculous.

            The only way they loan out $900 is if you are counting all the iterations: ie. $100 gets deposited, so they loan out $90, that $90 ends up back in the bank as a deposit at some point, so they loan another $81 out, and so on and so on.

            But you ignored that they have to pay out that deposit interest on all those deposit iterations not just the initial $100.

            And you also can't count it as profit against that $100 deposited, since $1000 ends up being deposited. It

          • Re: (Score:3, Informative)

            by ArsenneLupin (766289)

            It's called Fractional-reserve lending

            No, it's called Fractional reserve banking. You even got it right in your link, but strangely not in the text.

            You deposit $100 into your bank and they led out $900.

            That's not how it works. The "fractional reserve" applies to the deposit, not the loan. You deposit $100, they keey $10, and lend out $90. When banks "make" money, they do not actually "print" money, so they're pretty much stuck with lending out less than what they take as deposits.

            The way that banks "make" money is by enabling people to still use their deposits for payments. Those $100 that you de

        • by smallfries (601545) on Sunday February 07, 2010 @04:32PM (#31054478) Homepage

          No you are completely and utterly wrong. There is a very authoritative document from the Fed that explains how banks expand the money supply, but a simple starting point for you would be the wiki page on Fractional Reserve Banking [wikipedia.org].

      • by Snover (469130)

        Banks, in the US at least, haven’t created money since 1935. That job goes to the Federal Reserve. If you’re referring to creating money through investments, well, PayPal has a money market too.

        • by Colin Smith (2679)

          Nope. You are wrong. Banks create money every day. That's what makes a bank a bank, and different from all other financial organisations, like say paypal.
           

    • Re: (Score:3, Interesting)

      Wal-mart would fight this type of regulation to the death as they want all the profitability of offering banking services without all of the regulation and they have the deep pockets to prevent the type of regulation that both Paypal and Wal-mart ought to fall under.
  • by Anonymous Coward on Sunday February 07, 2010 @03:27PM (#31054008)
    Who will be manning the call centers to handle the complaints?
    • Re: (Score:2, Interesting)

      by mysidia (191772)

      Hehehe....

      Nice.

      However, PayPal doesn't have any call centers.

      They're paypal. The only way you can contact them is by e-mail (which they ignore), or through forms on their site (which you might get a response to in 3-6 months, if you are lucky) -- as for getting your hard-earned money back from your account they randomly chose to freeze, expect it to take 12 - 18 months, again if you are lucky.

      If you are unlucky, 36 to 48 months, or (possibly) never. Your luck depends little more than who

  • by kai_hiwatari (1642285) on Sunday February 07, 2010 @03:29PM (#31054020) Homepage Journal
    This is due to some change in the regulations by the Reserve Bank of India (RBI) regarding offshore money transfers. I read somewhere that RBI is demanding some documents form PayPal to make them eligible to transfer money to and from Indian Banks. Apparently PayPal hasn't been able to furnish those documents.
    • by iammani (1392285) on Sunday February 07, 2010 @03:42PM (#31054130)
      Of course. Paypal has to be registered with the RBI to make forex (foreign exchange) transfers. Every time someone converts rupees in dollars or vice-versa, the source and destination of transfer and reason have to made available to the RBI.

      Apart from these, Paypal would also be subjected to regulations governing these transactions.

      The problem is Paypal doesnt want to be regulated as bank but wants to be able to perform what banks do. And this does not go well with the RBI.
  • My theory (Score:5, Funny)

    by wealthychef (584778) on Sunday February 07, 2010 @03:36PM (#31054080)
    I think PayPal is run by cowboys.
    • This is the post I was looking for, LOL

      Indians never win against the cowboys - this is old news. Now, someone comes along and tells us how ignorant we are for mistaking Indians for Native Americans. *shrugs*

  • Dear PayPal (Score:5, Funny)

    by codepunk (167897) on Sunday February 07, 2010 @03:37PM (#31054088)

    Please do the needful!

  • Yet another reason (Score:4, Insightful)

    by Dracos (107777) on Sunday February 07, 2010 @03:49PM (#31054182)

    Why PayPal needs to be regulated as a bank, and why I refuse to use it.

  • by 140Mandak262Jamuna (970587) on Sunday February 07, 2010 @03:56PM (#31054228) Journal
    Where would you hide a tree? In a forest of course. Every time there is a new technology is found, the terrorists and criminals use it first and the law enforcement is way behind and always plays catch up. The Mumbai attackers were using prepaid satellite phones and VOIP routed through New Jersy to get constant feed back while they were on their rampage inside the Taj hotel. Wait for a day or two, and you will see that angle will be mentioned. Whether sincerely or as a diversionary tactic by Paypal or by RBI I don't know. But it is a well known fact the terrorists use havala trading systems very effectively and Paypal would not be a big step for them.
  • Paypal Sucks (Score:3, Informative)

    by Anonymous Coward on Sunday February 07, 2010 @03:58PM (#31054238)

    http://www.paypalsucks.com/

    I got burned by these bozos once. Make sure you read the terms and conditions carefully. They refund only under very tight circumstances. If there was an alternative, i'd use them instead.
    I had no problems on about 50 transactions ... I got bitten for several hundred dollars once...

    Seriously, PayPal sucks...

  • by 1s44c (552956) on Sunday February 07, 2010 @06:49PM (#31055728)

    Paypal have been dodgy for years now, but if they have to go on a robbing spree I guess Indians are as good a target as anyone else.

    Anyone that doesn't know about paypal's sleazy practices should treat this as a wake up call, close their account, and cancel any credit cards paypal know about.

  • by pla (258480) on Sunday February 07, 2010 @07:10PM (#31055904) Journal
    As a result, a large number of Indian Paypal accounts have a negative balances running into the thousands of dollars.

    Does anyone else see that as a good opportunity to cease their relationship with PayPay (for those stupid enough to have kept using them anytime in the past, oh, decade)?

    Remember - Not a bank, by their own maneuverings. You can't actually owe PayPal money, because they don't sell anything or provide any (direct for-cost) services. Sure, you can owe their other customers money, but PayPal itself?

    Negative balance? Yeah, time to close that account. Thanks, PayPal, but you can keep "my" negative money. Funny thing, about forced arbitration clauses - You can stack the system as much in your favor as you want, but to get government sponsored armed thugs to go shake down your clients, you need to step in to a real court of law and risk setting some seriously unfavorable precedents.

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