Sending Money via PayPal No Longer Free.

[Eurastus]

I apologize for the length of the post, but there is no shorter way to do this.  And if you don't hear it here, you're certainly going to know about it very, very soon.

Over the past 10-days I have bought five small items off eBay, and used PayPal to pay the seller.  I'd have to add them up, but the purchases went something like $4.55, $17,01, etc. and that includes shipping if it wasn't free.  And, these five transactions have cost me $60.00 in fees ---- the fees are more than the auction amount totals. Each transaction cost me a $15 fee; the $4.55 item carried a 300% fee for paying through PayPal.

The fees are called "ITA fees" for "International transaction assessment" - meaning simply that you just sent money out of the U.S. It's a long story, but in 2009 Federal regulations required that all electronic transfers of money arriving or exiting the U.S. be screened against a government blocked list.  It didn't affect eBay buyers/PayPal customers, but I'm sure that PayPal took a hit because of the large amount of international transfers it engages in.

The screening of each transaction has to be done just once for each international transaction by the U.S. financial institution which electronically sends or receives the money.  They are the "entry point" or "exit point" and called "control operators" each time they process an international money transfer.  I don't know how PayPal has been handling ITA requirements since 2009, but I know how they are handling it now.

You've seen this transaction code many times on your credit card or bank statement, "EFT-PAYPAL/INST XFER/J."  That's the code when your bank does an electronic funds transfer (EFT) to PayPal.  Once your PayPal account was funded, PayPal then would do as it did with the money; a second transaction. So, you could buy and pay for penny Chinese or Canadian auctions all day and it was PayPal's worry.  Now, it's your worry.

PayPal has just started using a new code, "EFT-770510487C/IAT PAYPAL" which they send to your bank requesting money to fund your PayPal account.  PayPal still uses "old" code for domestic transactions only;  the new code is only when PayPal plans to send your money to a foreign destination.  It doesn't matter whether both the seller and the merchandise are in the U.S. ---- the sole consideration which invokes the screening requirement is whether money is sent to or received from a non-U.S. party.  It doesn't matter what currency the transfer is in, or if the buyer even knew where the seller banked.  You can buy a TV from your neighbor, pay for it with PayPal, walk across the street to pick the TV up, and if your neighbor happens to have a foreign account registered with PayPal you have just conducted a "international transaction" and liable for a fee if (when) your bank imposes one.

The bank sees this new code, and uses it as an opportunity to gouge whatever fee they want to set.  Mine is $15 per "foreign" transaction, other banks charge 2% or 3%;  Most don't charge anything.... yet, because this new revenue mine has just been discovered.  And, the practice is spreading like wildfire.

"So what?" you may be thinking, You don't buy internationally anyway.  Better think again, because I've just tried avoiding international buying.  After the first three fees, I made sure there was nothing foreign about the auctions I bid on, and got hit promptly for two more "foreign" transactions; $30.00.  There is nothing in an eBay auction or in the PayPal transaction to identify sellers who registered an international bank account with PayPal.  I haven't tried it, but I doubt either eBay or PayPal will give you the name of a prospective seller's bank you haven't even bought from.  Further, there is nothing about these ITA fees anywhere on eBay's or PayPal FAQs or discussion boards --- the practice is that new.  Google gave me a non-PayPal related post where a buyer used a credit card to buy something in Massachusetts. The seller was in Mass too, but he banked in Canada --- the credit card customer got waxed with a big fee.  When you get jacked with a big ITA fee you can call eBay who will tell you it's a PayPal problem.  Call PayPal and they tell you it's a matter between you and the bank. 

I talked to the highest level person I could get on the phone at PayPal who assured me that PayPal does NOT identify the seller financial institution when it requests an EFT from your bank.  I have since learned that it does... whatever the reasoning behind the new transaction code, it's obvious effect is to tip off your bank that PayPal intends to send the money internationally.  PayPal knows it, the seller knows it, your bank knows it, but you don't.  Having no idea of where the seller banks, no way to find out, and having never even authorized a foreign transaction is no excuse for fee liability.    

My solution is obvious --- no more eBay'ing and PayPal'ing until something changes.  There's just no safe way to bid now; I've done tried and got whacked.  And once all the banks catch on and add "ITA Fee" to is fee schedules there's going to be a lot of other customers following suit.  When that happens we'll see eBay and PayPal heavily involved.  I can't predict their reaction, but doubt that the standard response of "... between you and the bank" will be used once the quarterly charts show a dive.  

My bank has been very evasive about providing me with information about these fees which I of course appealed to no avail.  I receive get general words about "policy" and "strict regulations" but no specifics.  I've demanded to know where they sent my money; if I'm being charged for a international transaction, then somebody better show me where they sent that money.  The bank refuses to acknowledge that I even asked.  I shouldn't have to ask.  What's the first thing you hear from a service provider who has charged you for a service you claim you never received?  You know the answer; proof that the service was provided (I've only dealt with one other institution which responded to a customer question about why they owe money with the reply of "because we say you do" --- that other one was the IRS). 

Then it occurred to me --- the bank doesn't know where the money went!!  I says it "screened and reported.... on paperwork" the transactions, but regardless it has no idea where PayPal sent the money.  It received a tip off from PayPal about what PP was going to do with the money and nothing else.  Incidentally, PayPal never even paid one of the sellers, telling me that it was unauthorized transaction, but the bank never refunded the fee, because it didn't know that either.

That set me to thinking....................

What has happened is that the customary double financial transactions associated with PayPal purchases have been fused into a single electronic funds transfer (EFT).  The old transaction model of (1) your bank funds your PayPal account and (2) PayPal pays who you tell it to pay. Now, the process is a single transaction where PayPal is paying a foreign seller and using a third party to fund the transaction.  If so, that would be in the rules, right?  I checked, and it sure was, right down to the term I had in my mind; "third party."  Could the third party also assume the responsibility for screening/reporting ITA transfers?  Yep, that too in Regulation E.  So, even though PayPal is the exit/entry point for ITA's, the required screening is now being done by the third party who only providing funds for the transfer if everything can be considered a single transaction.  It's all legal.    

I don't like jumping to conclusions, and I'm not accusing anyone of anything.  But I can still think, and can't see things working out the way it did without some kind of agreement between PayPal and the banks.  Corporations do nothing without the intent to enhance profit --- I get and appreciate that being a businessman myself. But why did PayPal suddenly change the transaction code when requesting your bank to fund your PayPal account when the only apparent code the change does is tip off your bank about what PayPal intends to do with the money?  The new code even carries the "ITA" abbreviation.  There are no rules requiring PayPal to tell your bank what you intend to do with the funds in your PayPal account --- that's why it never did, until now.  And, why didn't the code change for domestic transactions; the ones that are a normal process of business that carry no fee potential?  (personally, I wouldn't want PayPal telling my bank anything about what I did with my money even if there was no fee involved). The better question may be why would PayPal suddenly begin telling your bank where it intended to send your money, but only in funding requests which carry a fee potential?  

And, how was the bank able to process the very first new transaction code like a pro unless it knew it was coming? It did all the screeing/reporting/paperwork (and fee collection) with the same speed and ease it handles any transaction.  I can't see a clerk waiting for the supervisor to return from lunch and explain "what to do with this one." The bank had the process and procedures in place and ready to rock, and that requires pre-planning.  And, especially how would the bank know that it was now its duty as third party in the new single transaction scheme to screen and report the transaction when it had never done so in the past and that the "control operator" bearing primary responsibility for compliance (PayPal) was no longer going to be doing it, unless there was a pre-existing agreement with PayPal?  Or, is it more reasonable to think that the bank just did it on its own initiative without knowing or caring that PayPal was duplicating something which regulations only required be done once?   

And, there's more, but this is long enough.  Just questions.  It could all be coincidence rather than hands being shook earlier to close a deal where PayPal gave up the ITA compliance burden in exchange for tipping off the banks on international funds requests who get to gouge the "sender"  I just know that I wasn't gouged..... I was gored.  My wallet is $60 lighter for transactions I never authorized, and in two of those transactions didn't even suspect that PayPal --- or rather my bank under the new method --- was going to send money internationally.

Watch you bank for the required "disclosure" of the new fee.  Mine wasn't even on the statement as required by law, but on the bank's newsletter.  I found it on the last page in a rectangular box about 1"x3" saying simply that "Effective such-and-such date, there will be a fee for international transactions" which went over everyone's head (especially mine) since we never transact money internationally.  Do we?  (The notice and the effective date also timed beautifully with PayPal's new transaction code --- I need to quit thinking so much)

[MaryFixx]

My sister introduced me to bidding on the EBay website.  I purchased twenty items, the most expensive one being around $10 and all of the others were under $3. I love costume jewelry and particularly liked bidding on them.  The total price for all items purchased wasn't more than $50 bucks.  What a deal huh? I found a great new hobby; I was elated when I found out how to bid.  Out of the twenty purchases two of them included shipping charges.  The amounts were clear and I was okay with it.  However, one of the first things my sister showed me was how to have EBay specifically display only items that had "free shipping."  I know how impulsive I am and made sure to stick to her advice.

Each day I was receiving my little trinkets in the mail. I had just deposited a check into my bank account and wanted to see if it had cleared so I could go back on and buy some more!  Looking at the statement online I saw I had a charge for $255.00. I don't remember what the description for that amount was but was certain I didn't purchase anything for that particular amount.  I called the bank.  I was told it was being looked into and someone would call me back.  About a half of an hour later the bank called to inform me that these were charges for international shipping that had taken place.  She named several of the sellers with the amounts of fifty nine cents and ninety nine cents, which incurred a $15 international charge each.  Which means that fifty nine cent ring cost me $15.59! I explained to the person what exactly I had done and that each item I bought I made sure that it stated "free shipping."  She said the seller is not charging you for shipping but PayPal and the bank are charging a fee for each item that was purchased internationally!  I told her that I never heard of anything like this. Unfortunately I have always trusted dealing with EBay, PayPal and my Bank.  In anger I goggled this subject  to see if I was being ignorant and found this wonderful post of which I am replying to.  I want to thank the writer of this post for the time it must have taken you to do the research you did; but most importantly thank you for posting it.  I hope this becomes a well known fact to everyone very soon!

My bank was kind enough to refund half of the $255 because I was told that they valued my business. It's disgraceful that ALL banks will be charging their customers, and I'm sure many will go unnoticed. Who is it that is getting this money and how can they justify the reason for having the banks add this "small print" new implementation?

Going forward, I will not purchase anything else online until I know all the facts.  Perhaps if another form of payment was used for purchases this charge could be avoided or wouldn't be incurred at all...........  MaryFixx

[kathy78653]

Wow what a report Eurastus, thank goodness for individuals like you!  

I read it ALL am wondering how we are going to protect ourselves and our finances with all of the "money hungry" financial institutions grabbing everything they can from the poor consumer. Just gets my hackles up! 

I have been buying items on line since 1986 and have had very good experiences, just 1 or 2 hiccups.  But reading more and more posts such as yours makes me leery.

Based on your report (thank you) I will not be dealing with PayPal on ANY international purchases or sales.

Thanks Again

Kathy