Referring to it as “aggressive changes”, Paypal has committed to changing its policies on how it goes about handling suspected fraud after the consumer says it’s not fraudulent.

For years, PayPal’s fraud filters have infuriated its customers. The company’s policies have resulted in some consumers unable to get access to their money for months. Now, though, it’s announced it will undergo big changes so that its policies aren’t so intrusive to the daily lives of its consumers.

Detailed and Frustrating

Its policies are indeed some of the most detailed in the financial industry, unfortunately, though, it’s caused legitimate business transactions to hang in tandem and untouchable while it goes about very intricate investigations to ensure laws aren’t being broken. As a result, charities, businesses and individuals have found themselves being forced to provide tons of paperwork – and often, that paperwork doesn’t even exist, or at least, not to the degree that can be provided to the company’s satisfaction.

Now, though, it says it’s ready to rethink its policies and has ensured its consumers that it will be rolling out new policies – and soon. It’s not committed to a timeframe nor has it revealed any of the options it’s considering, but Anuj Nayar, the senior director of communications for PayPal promises:

These are not minor – these are aggressive changes.

He agreed that these changes are going to be “fundamental” in the way it conducts business and that transparency is a priority.

He said PayPal will be clear about how its customers can avoid getting stuck in the frozen funds scenario and that it’s retraining employees to be of better service to frustrated consumers. He goes on to say that customer service reps will either get “better about helping people” or will “explain why actions are being taken”.

Questions and More Questions

If you’re a PayPal customer and have found yourself being questioned about your funds, you know well that the company routinely freezes funds for 21 days if it believes something’s not right with a transaction – or a series of transactions. But – it can also freeze those funds for months if it chooses to. This can be catastrophic for companies and individuals. They’re often subjected to a series of demands for various documentation and if you don’t have it, then it only raises the level of suspicion, even when there are legitimate reasons for an absence of paperwork they think you should have.

Twitter to the Rescue

You may recall the writer, Jay Lake, who is struggling with cancer and who had an opportunity to take part in an experimental genome sequencing process. Because it’s experimental, his insurance company refused to pay. He set out to tweet his predicament to his many followers and within hours, he’d raised $20,000.

Unfortunately, Paypal saw that as suspicious and began demanding receipts, paperwork for business and shipping records. Of course, none of that existed. This entire campaign was just hours old and the only receipts provided to the donors would be those that PayPal acknowledged. No shipping documents because nothing was being shipped and no business records because there was no business at all.

Lake became frustrated and used his role as a well respected writer to voice his complaints via Twitter. Another few hours pass and his funds are freed up, along with a donation from PayPal for his experimental treatment costs. Not everyone has that kind of influence, though. Lake’s story is rare. Lake said:

If it weren’t for my small bit of fame, if I were the guy down the street, this could have taken months.

Backing Down

That’s not the first time the financial company has had to eat crow. In late 2011, the company began an online spat with Regretsy, a humor blog that was attempting to buy gifts for needy children. Paypal shut the account down because it said a for profit company was running the donations. After a massive movement to get it to reverse its decision, Paypal backed down and even donated to Regretsy’s Secret Santa fund. In an emailed statement then by a PayPal representative, it said,

We can confirm that the funds have been released and we are working directly with the account holder on this matter.

Nayar, the PayPal rep, said the company policy prevented him from commenting any specific issues. He did say, however, that Paypal has made a commitment to be clear with its consumers on how they can get themselves out of these situations. Some say that’s a problem – the consumers shouldn’t be forced to get themselves out of anything and that the burden of proof should be placed on the company. He did say,

We’re fixing a lot of that and that at a minimum, the fact that someone needs to mail in something to an online payments company is a problem. 2013 is going to be the year that we fix a lot of those pain points.


Don’t expect this to be a fast two step of a solution, though. In fact, it’s better to think of it as a slow waltz – and one the consumer won’t be leading. Nayar reminds consumers of the “complex security systems” that are in place and work in tandem with others. They all will require upgrades or changes on some level. It will take time, he cautioned. PayPal has multiple, complex security systems in place, and all of them need a fresh look.

Lake, meanwhile, agrees that PayPal has plenty of room for improvement. He said,

There’s a guilty until proven innocent bias to it, and that needs to change,

Now’s the time, too, for Paypal. It’s never faced the degree of competition that it faces now. No longer is it Paypal’s monopoly; in fact, there are several that are climbing fast, including Google Wallet, WePay, Square and a host of smartphone apps designed to help consumers move money around. The company appears to know this. Nayar said,

We are committed to getting back to being the center of our customers’ financial lives. Big changes are coming.