The dark side of PayPal
For many, especially those involved in international business transactions through platforms such as eBay, paying via PayPal for items won at auction is a common and almost unavoidable practice. With more than two hundred million customers, PayPal is the world’s largest Internet-based bank-to-bank financial system. Founded in 1998 and based in Yan Jose, California, PayPal has grown since its purchase by eBay in 2002 to become one of the largest and most widely used financial payment services offered with customers in one hundred and ninety nations.
PayPal’s European division is registered in Luxembourg and was granted its patent as a bank by the Luxembourg authorities in 2007, which led to the automatic transfer of all European accounts from their respective domestic companies under the PayPal name from London-registered PayPal (Europe) Limited to PayPal (Europe) S.à.rl & Cie, SCA Regulated by the Commission for the Supervision of the Financial Sector (CSSF).
Unlike other accepted and long-established banks, PayPal offers none of the securities normally associated with a bank branch and few of the services. Overdrafts, loans and insurance are not included, nor is there a personal customer relations department or a facility to consult a member of the bank personally on financial matters. The service is exclusively limited to transferring payment from one PayPal account to another and all customers must have their own bank account and registered email address. Among the services offered to European customers is the automatic debit of a checking or checking account to settle bills collected through various actions. For this service, PayPal receives payment from the paying customer, depending on the country in which one or the other of the accounts is registered.
It is this automatic debiting of an account since its inception that has caused a number of problems and has shown the darker side of a company that on the one hand claims to be a bank, and when the situation is difficult for them, to be just a financial transfer agent.
With an established bank, a direct debit from a personal account can be withdrawn within sixty days of its action, giving all customers a certain level of security against fraudulent claims and accounts. The person or company issuing the invoice must then stake their claim by contacting the debtor directly and, if necessary, going through the due process of law to obtain final payment. With PayPal, this basic level of security is not present. Once PayPal debits a checking or checking account with the invoice amount presented to them, the transaction is marked as closed. Whether the debited amount remains in the recipient’s PayPal account or is quickly transferred to another account, the paying customer cannot get the funds back. Here, PayPal insists that the customer, if there is a basis for a complaint, contact the supplier directly.
The only exception to this non-bank practice is eBay. Here, eBay, as the parent company, assures all customers using PayPal services that their money is safe and, in the event of a claim, can be returned to their account immediately, allowing the normal process of law to proceed thereafter by the company is trying to earn funds. eBay is the only company excluded from PayPal’s no-refund policy, everyone else gets paid with the added security of knowing that few, if any, of their customers or the people being defrauded can afford the process of a claim through the courts – after the initial contact and request for a refund has been refused – or are willing to take on the complexity of pursuing a claim in a foreign jurisdiction.
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