PayPal's temporary hold policy frustrates consumers

This is very similar to what many bank customers have experienced. It's typical for banks to place, for instance, a five day check holds on deposits. There's one major difference, however. The holds placed by PayPal can be four times longer, sometimes as much as 21 days

"It says available balance in U.S. dollars, zero," Sam Gold said. The Pittsburg resident says he couldn't believe his PayPal account had a zero balance. He'd just sold a stereo amplifier on eBay and the money was deposited into his PayPal account.

But PayPal put a 21 day hold on his fund. While the company says it's to protect its customers, Gold disagrees, "What they're doing is wrong. They have an obligation as a money transmitter to transmit money."

PayPal declined an on camera interview. But in an email told 7 On Your Side, "Some eBay sellers and some PayPal small merchants are subject to holds due to their limited transaction history or have a higher than average risk. The great majority of eBay sellers are not subject to any hold." eBay and PayPal are both owned by eBay Inc.

Consumer advocates say the policy is a bit extreme, "Customers should be able to obtain their funds or access to their funds in a timely matter," said Michelle Jun, senior attorney with Consumers Union.

California's financial code says companies such as PayPal "have 10 days to forward all money received for transmission," unless otherwise agreed to by the customer. And PayPal says its customers agreed to longer hold times when they signed the company's 46 page user's agreement. PayPal says it's working hard to improve.

The issue has caught the attention of San Francisco assembly member Tom Ammiano, "It's a little draconian. It's a little black & white. And they can do it because they're PayPal."

Jun notes that consumers aren't the only ones who've complained, saying, "Apparently there have been reports from small businesses and charities that are struggling with trying to have a positive cash flow because of these hold times."

Jun says more investigating needs to be done into this matter. Ammiano agreed that something needs to be done, "So what I would like to see is some movement on the part of Paypal. I'll be sitting by my phone waiting for them to call."

Ammiano says if that doesn't happen, a legislative hearing, even legislative action, is possible. The hold on Gold's money was finally released just under three weeks after he submitted proof his buyer had received the merchandise.

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