Warn HN: When PayPal doesn't know the meaning of "Donation"...
I've had my PayPal account since 2002, and have been using it to send and receive thousands of dollars since then. Last month, PayPal froze my account. I try to keep it as close to empty as possible, but since they purposely make it hard to get money out (i.e. you can't schedule withdrawls) there were some 2500 USD in donations when they froze it.
I write free software. My free software has a "donate" link that goes to the PayPal donation page. The idiots at PayPal froze my account since I couldn't prove 501(c) exemption (which I don't have - and more to the point, never claimed to!) and insist that it's "illegal" to receive donations unless you're a registered non-profit with 501(c) IRS clearance. All this happened when I changed the name of the account from my name to the name of my website (because I didn't want my name on the payment page), bringing to their attention my site and PayPal account.
I tried to reason with them (showed the definition of "donation") and explained that I'm just getting paid at the whim of the user for services rendered, and that it isn't a "non-profit donation" in the IRS sense. No luck there. I asked to go back "to the way things were" - back to a normal premier account in my own name, and not in the name of the non-501(c) organization that I run the site under, but they (of course) wouldn't listen.
In the end, they stopped responding to my emails and told me to get the papers I need to be able to pull the money out. I cannot transfer the money I have to my bank account. I cannot close my account, withdraw any money, use my PayPal debit card or anything other than (you guessed it) put more money into the PayPal balance. The money frozen is enough to hurt, but not enough to make it worth it for me to get a lawyer or waste too much time on it.
So just a word of warning to the wise: don't use PayPal. You'll thank yourself forever.
(I ended up switching to Amazon Simple Pay, which is _incredible_ except no phone support and customer service response times for _merchant accounts_ is 3 days+. Then I tried my hand at Google checkout, except my conversions went down, waaay down; and have come to the conclusion that it's stupid to accept money through any of these 3rd party services. Time to check out real payment processing providers like BrainTree & co.)
39 comments
[ 3.3 ms ] story [ 83.1 ms ] threadIf they get even a whiff of fraud or a scam then they're sure as hell going to investigate, because if it goes wrong and it is fraud who has to pick up the bill? Paypal.
(What is a "fake" charity, anyway? I've worked with some charitable companies that were outright scams, but due to clever phrasing, continue to do business.)
I expect that when such organizations are uncovered, paypal gets a flood of credit card chargebacks (but can't recover the money from the "charity" because by that point the scammers have drained the accounts and moved on).
What is a "fake" charity, anyway?
The canonical example is "disaster relief" organizations which pop up after each major earthquake but just pocket the cash rather than assisting disaster victims.
https://www.paypal.com/us/cgi-bin/?&cmd=_donate-intro-ou...
"To accept donations, put a Donate button on your website. Creating the button is easy. We provide the HTML code, which you simply copy and paste to your site. Donors can then click the button to make donations. See button features you can customize."
How could you use the Donate button? "Let’s say that you are an animal rescue organization needing to raise funds to provide care for animals. You can easily add a donate button to your website and make it safe and convenient for supporters to give to your cause"
There are other similar and/or related scams involving "charities" (both legitimate and fake) but I feel this is the wrong place to discuss them.
The trouble the OP has with "donations" to an open source project tend to be very common with paypal and they often result in a false-positive in the paypal "fraud detection" (risk management) analysis. I know of one example where a prominent OpenBSD developer needed some fast hardware. He does full builds of the entire "ports" tree (i.e. all software ported to OpenBSD), so buying powerful (read: expenseive) hardware was really needed. One person stepped up with a donation/gift of the needed funds, and sent the payment through paypal...
The first thing that happened is the donor got a call from paypal because the donation triggered a false-positive in their "fraud detection" analysis. It might seem like an annoyance, but this is actually a good thing.
The next thing that happened is, the donor got a call from the credit card department of his bank, mainly because he used only a credit card with paypal. Yep, there was another false-positive alert on the fraud detection system of his bank.
During these two false-positives, the paypaly account of the open source developer receiving the funds was locked. In this case, the mistaken lock was resolved very quickly due to the two separate phone calls, but it was still a pain in the ass.
There is hope. The way to get around the paypal "requirement" of an open source project needing to be a vetted and registered 501(3)(c) organization in the US (or equivalent in other countries) is to have the payments classified as a "gift" rather than a "donation" in paypal parlance.
I have used Paypal successfully for fourish years now. Not to ignore your experience, but if I listened to my buddies on the day after they were dumped I'd swear off speaking to young ladies, too.
BrainTree is not viable at your scale.
To better fit your metaphor, I'd say it's like having all your guy friends warn you that they each had a relationship with Jenny and she cheated on every single one of them, and you shrug your shoulders and say, "Well, she hasn't cheated on me yet, and besides, I think that was totally understandable behavior."
To be crass for a moment: If he's only bothered if Jenny puts out that night and not about a long term relationship, knowing that there are other girls he can sleep around with, then he wouldn't be bothered.
Tunnelling through the metaphor: If using auto-sweep he's only risking, it seems, one or two days of payments. When/If he gets cut off by PayPal then he can jump ship.
More directly, Braintree will cost you a minimum of about $130 per month (with their vault service). Until you're doing a couple thousand in revenue per month, there are cheaper alternatives.
But you get something for that money - a great API.
PayPal is the new mafia.
If you choose to do business with them, you're choosing to take on a great amount of personal and business risk. Maybe that'll work out for you, maybe it won't. That's gambling.
Can we stop the PayPal complaint train now?
If you have a viable alternative to suggest, then yes, it would be reasonable to tell people to stop whining. Given that PayPal is the only game in town, and that there is no obvious competitor for use by individuals and small companies, the complaints need to be shouted from rooftops.
Ask HN: what about WePay, is that a real competitor?
That's the last I'll say about this topic, because it's a waste of time.
Did anyone try small claims courts for it? From reading internet seems small claims courts have small fixed fee and if defendad (PayPal) will not appear, they automatically loose.
Probably, it's possible alternative to spending days on phone/email with PayPal, or paying lawyer tons of money?
Where does PayPal state that you must have 501(c)(3) status to accept donations? (I'm concerned because I do something similar to CompuerGuru--accept donations for free software via PayPal and have done so for years).
(I'm not a lawyer, this isn't legal advice.)
Supporting documentation: https://merchant.paypal.com/cgi-bin/marketingweb?cmd=_render... Click on the pricing tab, then open up the "Standard Rates" section at the bottom. The relevant quote on this page about the donate button is this: "If you are not a 501(c)(3), you can still accept donations with our standard pricing."
A few months ago, I helped my son to set up a non-profit organization and a website to collect online donations (http://sujal.org), mostly from family and friends. I chose the non-profit option for the business type when the PayPal account was created, since the organization was registered as non-profit in my state and also because we intended to file for exempt status with the IRS (until we found that it costs $400 to do that, which is a story for another time.)
A few weeks later, PayPal suspended the account. I contacted PayPal and after a few days going back-and-forth, I was told to change the business type to something that is not non-profit, and also to add a disclaimer along with the donate button to convey that the donations are not tax-deductible (see the above link for exact text of the disclaimer if interested). After doing this, the account was restored.
Always consider any balance hosted at Paypal "in danger" and at risk of loss. Sweep into your account.
You don't need a lawyer to take this to your local small claims since its under a typical award.
On a more general note, it boggles the mind why anything like 501(c) would even exist in the first place. Sounds like unnecessary, out-of-control beauraucracy.