Consumer Alert: PayPal's Problems
Customer service woes continue to plague popular payment service.
Tom Mainelli
Thursday, May 30, 2002 02:00 PM PDT
If you're among the roughly 16 million people signed up to use PayPal, you know how handy the online payment service can be, and chances are, you've never had a problem.
That said, customer service has long been a trouble spot for the company, as we reported last October in
Consumer Watch. And although PayPal says it has improved its service, two law firms have launched class-action suits against the company because of customer service problems.
Sheila Stawicki of Woodville, Alabama, knows those problems firsthand. She used PayPal without a hitch for two years. But in January someone fraudulently accessed her PayPal account and liberated $3000 from her bank account. She recovered half the money through her bank, but needed PayPal's help with the rest. After calling and e-mailing PayPal repeatedly for 45 days, Stawicki says she'd received only disconnects and canned replies. She got a refund after
PC World contacted PayPal.
PayPal says Stawicki's case was an anomaly, caused partly by a now-complete move from paper to electronic affidavits. PayPal also added customer service staff: 280 agents are now available daily, says Vincent Sollitto, vice president of corporate communications. Most complaints are resolved within 24 hours, he says.
Lawsuits Pending
The two possible class-action lawsuits paint a less-rosy customer service picture.
One suit, handled by Girard Gibbs & De Bartolomeo of San Francisco, alleges PayPal places barriers between itself and users, hindering those who experience problems. The suit also contends PayPal goes overboard in its fraud prevention, sometimes erroneously freezing or closing accounts.
The other suit, filed by national firm Jacoby and Meyers, makes similar claims. Even without advertising the suit (it's unlikely to get class-action status for a few months), the firm already has nearly a thousand complaints about PayPal, says Gail Koff, a founding member of the practice.
PayPal's Sollitto says neither lawsuit has merit and they will be contested "vigorously."
PayPal has made a business decision to save money by offering sometimes inadequate support to users who aren't business-class, paying customers, says Avivah Litan, vice president and research director at Gartner Research.
Sellers pay per transaction, but buyers get to use PayPal's service for free. PayPal isn't concerned about losing some nonpaying users, Litan says.
Sollitto vehemently denies that PayPal offers poor service to any of its customers.
Not A Bank
Paypal's customer service troubles highlight the fact that while PayPal looks like a bank, it has carefully avoided becoming one, says Steve Schutze, the American Banking Association's e-strategies director. Banks must abide by regulatory and internal audits, and by other rules, he says. But "there is no regulation that says they [PayPal] must work with you to resolve the problem."
PayPal's chief competitor, EBay Payments (formerly BillPoint), follows banking regulations because it outsources all payment banking functions to Wells Fargo, a national bank which once owned 35 percent of BillPoint. Citibank offers C2It, another rival, so it too falls under banking rules.
All in all, negative press over the pending suits and poor customer service don't seem to be diminishing users' appetite for PayPal. Gartner analysts project that the company, which debuted in 2000 with about 10,000 users, will reach 25 million users by 2003.
http://www.pcworld.com/article/id,101525-page,1/article.html
http://www.paypalwarning.com/
http://en.wikipedia.org/wiki/PayPal
...of particular interest to the seller, is this information:
PayPal's Seller Protection policies do not cover intangible goods or goods that are "not as described". Many scammers have used this lack of policy to their advantage. They will buy a product and pay for it via PayPal. When the product is received, they will dispute the charge as "not as described." This freezes the seller's account until the dispute is finalized. After the freeze, PayPal is unlikely to gain back the funds, thus leaving a negative balance to the seller.
PayPal is a member of the
Better Business Bureau of Silicon Valley, although it has a significant number of
unresolved complaints
PayPal protects sellers in a limited fashion via the Seller Protection Policy
[14]. In general the Seller Protection Policy is intended to protect the seller from chargebacks or complaints but it is subject to various terms. PayPal states the Seller Protection Policy is "designed to protect sellers against claims by buyers of unauthorised payments and against claims of non-receipt of any merchandise". Note that this contrasts with the consumer protection they claim to offer. This policy should be read carefully before assuming protection. In particular the Seller Protection Policy includes a list of "Exclusions" which itself includes "Intangible goods", "Claims for receipt of goods 'not as described'" and "Total reversals over the annual limit". There are also other restrictions in terms of the sale itself, the payment method and the destination country the item is shipped to (simply having a tracking mechanism is not sufficient to guarantee the Seller Protection Policy is in effect).
and on and on and on blah blah blah
______________________________________________________
It's a risk, but then, so is playing with a big snake.
