PayPal promises changes to temporary hold policy

We told you back in September about how some PayPal users had been denied access to their funds up to 21 days. That's four times longer than most banks. Since then, serious negotiations over those hold times have been launched.

"So what I would like to see is some movement on the part of PayPal," Assemblymember Tom Ammiano said. "I'll be sitting by my phone waiting for them to call." That was Ammiano's reaction after 7 On Your Side brought the issue to his attention.

A recent 7 On Your Side investigation found PayPal has been denying account holders access to their own money for as long as 21 days if they suspect unusual activity on their account.

Days after our report, the phone call from PayPal came and a meeting was held between PayPal, Assemblymember Tom Ammiano's office, and Consumers Union.

"Our primary concern is that we want to make sure that consumer's money is not being held for unreasonably long periods of time," said Norma Garcia, Senior Attorney at the West Coast Regional Office of Consumers Union.

The meeting took place as anger over the policy was bubbling up both on the blogosphere and in the courts.

PayPal agreed to consider making changes.

The same month our story aired, PayPal customer Elliott Jay Stocks wrote a scathing blog about this issue titled 'Good Riddance, PayPal.'

PayPal's new president David Marcus posted his response a few days later, writing, "There's a massive culture change happening at PayPal right now. If we suck at something, we now face it, and we do something about it."

The company also immediately offered to reinstate Stocks' PayPal account.

"The new president of PayPal has been on record as stating that they've gotten the message from our lawsuit and from consumer complaints," said Jeff Leon with Complex Litigation Group.

Leon has filed a class action suit on behalf of PayPal users who say their accounts have been frozen even longer than 21 days. He says the accounts of thousands of PayPal customers have been frozen six months.

That's something PayPal denied in September to 7 On Your Side, but now admits happens on rare occasions when it is in the process of closing someone's account.

"Thousands upon thousands of instances where sellers had been flagged by PayPal as somehow being associated with fraud, had many thousands of dollars in their PayPal account frozen for six months, and weren't told why," Leon said.

A settlement was agreed to by both sides and awaiting approval by a judge, which would provide greater disclosures about PayPal policies. Much of those policies are currently buried in PayPal's user's agreement.

ABC7 legal analyst Dean Johnson says it's a good settlement, "It's a good settlement in the sense that it's better than no settlement. That's what class actions do."

But both Ammiano and Consumers Union say they won't be satisfied until those long hold times are shortened, "So it is something that we want PayPal to look at carefully," Garcia said.

Paypal says it currently reviewing the issue of hold times. The company declined to comment on camera, but sent us this emailed statement, "As we continue with our efforts to improve our products and services, I expect additional changes; we have nothing further to announce about this right now."

Consumers Union says it's had two meetings with PayPal since our story first aired and says the changes should not be taking this long to implement. No new meetings are scheduled at this time.

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