In recent months, there have been an increasing number of complaints of PayPal seizing accounts under a variety of rationalizations.
Some of them have been exhaustively detailed, but in general, they fall into one of several classes:
- Donations, which PayPal freezes ostensibly out of concern that it's being collected under false pretenses
- Payments to groups that PayPal says encourage illegal activity, such as to WikiLeaks
- Payments to groups that PayPal says could be considered obscene, such as a site for artistic nude photos
- Others are simply pre-sales
Most of the articles that have been published on PayPal's actions focus on indignation about the fact that funds can be frozen for up to six months, and encouraging people to use services other than PayPal instead.
But beyond the straight ethical questions surrounding the validity of the seizures, there are public policy issues around it as well.
- If PayPal claims it has the right to refuse service to any organization it wishes, how far does this go? What is stopping PayPal from seizing accounts belonging to women, blacks, gays, Muslims, or any other group it deems a threat? To what degree could this be considered a violation of protected classes?
- If PayPal freezes the money for six months, how is this different from stealing? Simply by virtue of giving the money back after six months? Is it okay for me to steal money, as long as I give it back within six months?
- As others such as The Consumerist have pointed out, PayPal is keeping transaction fees -- including a second round of fees if people donate again.
- What about the interest on the money? Six months' worth of interest on $50,000 adds up.
- Is PayPal using the money while it's frozen for six months? Does it pay taxes on the money?
It will be interesting to see where this goes.
