A says that they were told by a PayPal support rep that the company is planning to introduce a new policy of holding a proportion of all sellers’ payments to protect itself against chargebacks:
We received an email out of the blue from Paypal on Saturday to let us know that our account that we have held for six years will now be subject to a rolling reserve of 6%. This means that from now on Paypal will deduct 6% of all of payments and hold them on a rolling 6 month basis to protect itself against chargeback’s. [sic] … According to the person I spoke to at Paypal yesterday this is something that is rolling out to ALL Paypal accounts and that we are ‘lucky’ as some people are being charged up to 20% with 10% being the norm. … When I asked why we had not had any notice and when this was announced I was told by the Paypal agent that this was an ongoing process that started at the beginning of the year and that they had 60 million accounts to go through.
We’ve heard from several sellers that the same has happened to them over the last year or two, and PayPal’s user agreement makes provision for putting holds on a proportion of a seller’s account for a number of different reasons, including a couple of cover-all clauses that mean they can instigate a hold if they feel your business is more risky than they’d like. It’s also normal practice for merchant accounts to hold a reserve.
But PayPal doing this to every seller, regardless of the reality of their account, seems drastic: does the support rep have it right? We asked PayPal UK for a comment; here’s what they said:
It’s certainly not true to say that PayPal is holding 20% reserves on all seller accounts.
We only apply reserves to a small proportion of sellers’ accounts, and typically allow these sellers to withdraw 95% of their account balance. The remaining balance is held for a set period of time, usually 60 to 90 days.
Our aim is to protect consumers and PayPal while enabling a flourishing buyer and seller community. The decision to apply a reserve to an account reflects a host of factors, which may include the level of customer complaints and chargebacks, the financial performance of the seller’s business and the amount of information available about the merchant. We also consider other ways of mitigating the risks involved, such as personal, directors’ or bank guarantees, but again it is rare for PayPal to require these. Decisions are taken case by case.
So it’s not going to happen to everybody – but it could still happen to you, and it’s something that every seller needs to consider, and ensure their business and their family could survive.
If you’ve had PayPal put a hold on your account, let us know what happened in the comments.