They have simply adopted an escrow system without calling it that. The problem is that a formal escrow is a legal agreement and I think they should at least release funds for shipping. That would solve alot of problems. I don't see how this protects the buyer or seller. It protects paypal. If you, as the buyer, send me money and I take it out of an ATM 15 minutes later, and then you file a dispute paypal is going to take the money from my account and my funding source to cover a negative balance. If I send you an item, and the money you send me does not clear your bank account. Paypal will attempt to charge your bank account and then give you a negative balance. They will STILL be left holding the money -- they aren't going to take it back from me. It is their fault they allowed the charge to go through. I don't think people consider how much interest can be earned from these held funds. Not to mention the extra cash they routinely have on hand to reinvest. Banks make money by reinvesting your cash. They should reinvest the money already freely in your account or take up acceptable banking practices and establish a minimum balance. This system is not benefiting anyone but paypal. In the interest of full disclosure, I have been dealing witht this policy for the last few weeks. I've only had one buyer leave feedback that impacted a sale of a pending item (any sale over 30 USD). So, now I am stuck waiting for the item to be delivered, opened, used and THEN three days after delivery is confirmed I have to call paypal to get the funds released. I've had no automatic release after three days. Another method to keep money longer. The problem is that buyers far outnumber sellers. While there can be no eBay without buyers --- these holds don't seem to apply to a majority of sellers, just anyone who would like to join eBay and become competition.
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