Do You Hear What I Hear? Yes, It’s Paypal Stealing Money From Kids

It’s the holiday season, when a webmaster’s mind turns to thoughts of love and charity. Take Regretsy, for example. The site collected a bit of money and began buying and sending gifts to the kids in the Regretsy community whose parents were having financial problems. In this economy, that could be just about anybody and, the Internet being the Internet, there was an outpouring of affection and donations. It warms, as they say, the cockles of the heart.

Unfortunately, Regretsy used Paypal.

As of yesterday, Paypal shut down the account and put a hold on Regretsy founder April Winchell’s account. They also forced her to refund the money she collected, less the fees Paypal took out – twice.

I’ll let you read the post yourself. It’s a gem of horrible customer support. But this part is classic:

PAYPAL: Only a nonprofit can use the Donate button.
ME: That’s false. It says right in the PDF of instructions for the Donate button that it can be used for “worthy causes.”
PAYPAL: I haven’t seen that PDF. And what you’re doing is not a worthy cause, it’s charity.
ME: What’s the difference?
PAYPAL: You can use the donate button to raise money for a sick cat, but not poor people.

A sick cat, eh?

Now April is a repeat offender. She’s raised money for needy people before and I suspect she’ll do it again. Clearly this sort of largesse is far too suspect to be ignored, especially in the cesspool of iniquity and scam-artists that is the dark binary star of Ebay and Paypal.

What’s Paypal’s problem? April used the “Donate” button instead of the “Buy Now” button on Paypal, a mistake that many make when, you know, soliciting donations. Donations, it seems, require pages of documentation citing non-profit status, something not mentioned directly on Paypal’s website. Instead, anyone can make a donate button – heck, I just did it – and then suffer the consequences when the Paypal militia figures it out. Why not lock the “Donate” button down and make the homeless shelter hire a lawyer in order to file for the ability to accept donations? That seems like it would be effective, non?

Paypal is historically histrionic when it comes to fraud. Either you’re getting screwed on a massive scale or your entire account is shut down on spurious charges. I understand that Paypal has to face scammers and fraudsters every day, but seriously? You hear more about folks like Merlin Mann and now Regretsy getting dinged than the scammers who tried to rent us a place in the Catskills that didn’t belong to them last winter. We trusted them, after all, because they took Paypal.

Paypal no longer seems like the service of choice for things like this and I’d recommend companies start looking into alternate ways to collect money including Amazon (Kickstarter uses this quite effectively) and Google Check-Out or, barring that, hosting their own merchant accounts. An envelope full of money passed by hand through a throng of drunken revelers seems like it would get to its intended recipient faster and more effectively than Paypal.


UPDATE – A Paypal spokesperson wrote:

PayPal Statement:

We can’t comment specifically on the account due to our privacy policy. However, we can confirm that the funds have been released and we are working directly with the account holder on this matter. We are also making a donation to Regretsy to help families in need this holiday season. We’re very sorry this occurred.

For reference, we have clear guidelines for any business who uses PayPal to accept donations. For example, we require certain documentation to prevent misuse of the donated funds and, if the recipient claims charitable status, to determine whether they are properly registered. As a regulated payment service, we’re also required by law to follow these guidelines.

We appreciate that this can be an inconvenience, but we have a responsibility to all our customers – both donors and recipients; or buyers and sellers. In this instance, we recognized our error and moved as swiftly as possible to fix it.