Rolling Reserves

[JFitzDela]

Greetings, PayPal community.  I regret that my first contribution to this community is in so negative a light.

I have long been a PayPal user, then a Website Payments Standard developer, then a WP Pro developer.  I implemented WPP for the billion dollar corporation I work for, then for a long-time client and friend in the legal education business.

In both cases, customer service was excellent, technical support was top notch, never had a complaint.  Then my client and I noticed that a 30% "rolling reserve" was placed on every transaction to cross his account.

Now, I know PayPal -- or at least most of its employees -- understands this policy to be horrifically detrimental to it's sellers.  I also understand the reasoning behind placing a reserve on account -- to protect the many millions of customers who trust PayPal and it's sellers to provide quality, honest service.

The problem, here, is that the sins of a few are punishing the many, and not even in any universal or logical manner.

Take, for instance, the billion dollar company I work for: we process $100,000 to $200,000 in sales of technology goods -- the highest risk for fraud of any market, to my knowledge -- every single month, and we're only going up.  This account, however, does not have a rolling reserve attached to it.  This is in spite of numerous refunds, complaints, chargebacks, etc. -- with such a high risk of fraud, these issues are inevitable (or so it seems, anyway, but I digress).

My client does $200,000+ a year in credit card sales, has never had a single complaint filed, never a chargeback, and very few refunds (these only in cases of a customer being unable to attend a seminar he or she purchased).  My client has also been a PayPal Standard customer for many years.  And yet HE is the one to suffer, based on the "high level of risk" PayPal believes to be associated with his account (See section 14 of the PayPal Website Payments Pro and Virtual Terminal Agreement for the relative description of reserves and other protective measures).

Why the different treatment?  Could it be, perhaps, that PayPal knows there to be a flaw in the logic of assigning reserves?  Surely they don't want a billion dollar company coming after them because they decided to hold $30,000 to $60,000 every month for 90 days.  That would be terrible!

So instead, it seems, they pick on the small guys.  The ones who truly can't afford to deal with these reserves.

My final point is this: PayPal is very quickly losing my confidence -- and that of many others -- as a viable business solution.  I just attended the Innovation X developer's conference and left invigorated, ready to go "all in" with PayPal as it proceeds to innovate the payment solutions industry.  Unless this problem is resolved, however, I simply cannot afford to, and I will do my best to make sure that any new company considering PayPal as a solution understands the risks in selecting it.

In addition, my client is preparing a complaint with the Better Business Bureau and others.  He has to, or he'll go bankrupt, unable to provide the services that are his whole business because he can't rent the conference rooms in which to hold them.

I sincerely hope PayPal re-evaluates this decision, as I truly love working with PayPal, and I hope to continue to in the future.

Sincerely,

John DeLancey

[willgb54]

Wow. Makes me regret not just biting the bullet and getting a merchants account. I hope to see a response to your post from PayPal.

[surfergirl13]

From a "little guy" this one takes the cake.  

I have been subjected to a 25% rolling reserve on my account for the last six months.  Payments received each month never exceed $2000 in my account.  I have ZERO chargebacks against my account and have a great seller rating on Ebay.   I understand why the rolling reserve is necessary, although I have to argue that 90 days is excessive.   On November 17th I was in the process of working out a deal with a client.  I sent the client an invoice and never heard back from him.   For some reason I got an odd feeling dealing with this person and decided to cancel the invoice prior to payment being made.  I cancelled the invoice in Paypal on November 18th and sent the user an email explaining why.    Four days later I receive a payment from an email address that is completely different than the client's email adddress.  Other than putting a note on the payment indicating what it was for, there was no other information it was related to the negotiated sale with said client.  Within 10 MINUTES I sent a total refund to party B and explained that I had cancelled the invoice 4 days prior with party A.  Now here is the kicker:

PAYAL applied the 25% reserve to the payment received even though it was immediately refunded.  After seeing this I contacted customer service immediately to ask how can you apply a reserve to a payment that was immediately refunded?  I spent an hour bouncing between customer reps. and specialists and getting the canned responses of  "it is what it is."  

Truly unbelievable.  I now have money taken from my account that is my personal money and not from proceeds of a sale. 

[sensei57]

Yea this "Rolling Reserve" is stupid. I'm one of the "little guys," just trying to build my business and I've been with Paypal for a long time. I recently signed up for a Virtual Terminal Account and now I have a 25% Rolling Reserve for no reason. What's worse is that I have no desire to use Paypals Virtual Terminal after reading all the horror stories of money being held for 90 days.  Just like you, money was removed from my Personal account because of this stupid reserve thing.

[troyboy1]

I feel the same.  I am an online merchant and a web developer.  I can see why PayPal would place a reserve, but not 30% and not for 90 days.  I was with another merchant, and was enticed by PayPal to upgrade to a Pro account.  I did and and started noticing the reserve.  I called, thinking maybe there was an error.  They were very matter of fact (and rude) that I agreed to it in their terms and conditions.  Lesson learned: Always read the fine print.  PayPal has a lot of it!  Now I have a rolling reserve that is 1/3 larger than my bank account.  I have never had a chargeback.  It seems like for the guys that have proven after a couple years of good history, they would relax the reserve.

[Response911gear]

I can not believe this, With todays economy and everyone just trying to servive Paypal does this to the small guys. I sell Police, Fire and EMS equipment and appearal to all major departments. Now what am I supposed to tell these guys. Pay pal is keeping 30 percent of my orders and the problem with that is I dont even have a 30 perecent mark up un my products. A chief just called me today and needs 3 new helmets for his guys that were damaged in a fire, total comes to $1,000 dollars, my cost is $800. there holding 300 of that so now I have to take 100 dollars of my money to cover the cost and wait 90 days to get paid. This will put me out of bussiness as I dont have enought in my bank acount to cover all the department orders over the next 90 days as my mark up is userly 10% to 15% on the products. Nice way for pay pal to treat us in this economy, guess its time to close the doors and go on unemployeement befor I lose my house due to this... Thanks alot pay pal... I think its time we all post this on our facebooks as it travels like wild fire on facebook and get everyone to cancel there accounts with pay pal, Inform the nation, Inform the world as to the way they treat people and the people trying to build a better life for them selves and loved ones. Please post these stores on facebook and spread the world. Start cancelling your pay pal accounts and togeather we can put them out of bussiness just like they are putting me out of bussiness and many others that I know.....

[tabooisland]

Just wanted to share my recent experience in case it may help someone else.  I applied for the Virtual Terminal service over a year ago.  My application was conditionally approved with the 30% for 90 days rolling reserve.  When I saw that, I stopped there and did not agree to those terms.  Since then, my application has been waiting for my approval, which I never gave.

All of a suden, last week, the rolling reserve showed up on my account, and Paypal was holding the 30% on even my regular Paypal payments from eBay.  Turns out that I never approved the Virtual Terminal, but Paypal activated it anyway.

I called and they couldn't tell me why this had happened, but luckily agreed to cancel it and release all of my money.

[troyboy1]

Be glad you got out early.  I am sitting here with a "Rolling Reserve" at PayPal that is about 20 times (literally) my bank account and they eek it out to me $20-50 at a time.  I can't pay a bill with that.  I HATE PAYPAL!

[mbgilleran]

i dont hate pay pal i mean i love the whole idea of virtual money and not having it in hand. but i dont like the idea of not being able to have virtual money in my virtual hand- any ways after reading comments maybe ill put pressure on them and see if they allow what is mine ealier than some time in the future. or maybe they will read this comment and put more pressure on me to just give them my money and say like the last few cents on a gift card(o forget about it)- na never that --its 2011 and IM dead broke with a 4 year degree in in worthlessness now trying to make a dollar off something a 7 year old with no schooling at alll can do. Soi feel little better knowing its my stupidity and not everyones. good day