I've been seeing some back-and-forth between posters on one of the email lists to which I am subscribed concerning a change in PayPal's acceptable use policy. So I decided to go check it out for myself. I was less than pleased with what I read. Here's the offending section:
You may not use PayPal to sell any firearm manufactured after 1898. Certain related items and high-capacity ammunition magazines are also prohibited, as described in more detail below. In addition, it is the responsibility of users to abide by all applicable laws when dealing with the sale of permitted antique firearms, ammunition, replicas, militaria and other associated items.What this does is prohibit the use of PayPal to make payments for sales of legal firearms that are not antiques. Since PayPal is a private entity, they have the right to dictate these terms, but that doesn't mean that I agree with them.
When you sign into PayPal you are required to agree with the new terms and conditions. I declined the new terms this morning, which just means that I am only delaying their effectiveness until June 4, 2003 (when they become effective whether I've agreed or not). I sent the following to PayPal customer service this morning:
It was with consternation that I read your new acceptable use policy concerning firearm sales. While I am not a seller, I am a law-abiding collector of firearms. As a private entity, I agree that you have the right to restrict the use of your service. However, I will not continue to use the service under these terms. As PayPal bills itself as a payment service, as long as no laws were broken in the transaction, PayPal should only concern itself with brokering payment.The people on the email list were suggesting a boycott of PayPal. I'm not quite ready to go to that extreme, as I'd like to give them a chance to respond. However, I will not do business with anti-gun organizations. Posted by Aubrey at March 19, 2003 09:11 AMI will continue to monitor this situation in the hope that PayPal will discontinue this misguided policy. However, I will close my account in June if the policy continues, rather than become subject to the new terms.
I've heard before that PayPal isn't gun friendly. I never followed up because I never used their service. Like you said, they have every right to restrict the use of their service, and I have every right to refuse to give them my money in favor of a service that supports my rights.
Posted by: Bitter B. at March 19, 2003 05:07 PM
Did PayPal’s “Agree To It or Else” Page Dupe You Too?
By Mike Fleming
If one has a PayPal account, as I do (at least for the next 27 days and counting that is, or until I agree to the “New User Agreement”) they might be supportive of any sort of legislation that would prohibit those menacing advertisements that require the account holder to click the “Continue To My Account Button.” However, I am inclined to think that PayPal would be first in line to oppose such legislation and would further offer they would not reveal to us the real reason why.
The story changes with each person I have asked yet it is essentially the same and plays out something like this: “On Monday there was a soap advertisement and I clicked the button to continue through it. Tuesday it was a software product I can‘t recall and I clicked through that as well. Wednesday it was a blurb about some sort of New Agreement and if I didn’t click the word “Yes” on three boxes they would close my account, so of course since I had over $367 in my account, I clicked the “Continue” button one more time.” And that is how millions of American consumers blindly agreed to PayPal’s twenty-five page New User Agreement that prohibit them from filing suit against PayPal for any dispute under $10,000 and requiring them to agree to arbitration at their own expense in the event of disagreements with the company.
Of course it would not be fair of me to write of this without providing you with PayPal’s version of what any reasonable person would consider a classic and blatant episode of consumer fraud. “PayPal has recently made several important changes to our User Agreement and Privacy Policy. Please read the new User Agreement and Privacy Policy, because they contain important information about your PayPal account, your rights as a PayPal user, and the ways in which PayPal will use your personal information.” Then if you click a link that is embedded in the words “several important changes,” you get a more detailed version of these important changes (three to be exact). The first reason, and logically in my mind, the most important is: “We wanted to consolidate all of our legal documents to make them easier for you to read, navigate and understand.” What a great idea they have, I thought to myself because it is a bit confusing. The second reason is “We wanted to re-organize the information so you more easily understand your legal rights and obligations and to help you find answers to your questions our various services more quickly.” Again, I could not agree more! I’ve always found it difficult to read the agreement and am starting to gain a new found respect for PayPal. The third reason is a one line sentence that seems rather unimportant so I just glance over it rather quickly and it says “We decided to update our arbitration clause in order to clarify your dispute resolution alternatives.” Now I’m not the brightest light bulb in the hallway, but buried on this second page and under the first two reasons I may have finally found the catch.
What a coincidence it is that PayPal “decided” to update their arbitration clause several months after their motion to enforce the arbitration clause was denied by a judge in San Francisco, California on the grounds that it was unfair to consumers. And as they trudge along the path of what might be one of the largest class actions lawsuits of the year, their timing is interesting in that it essentially tricked many of the company‘s customers into giving up that right and affording PayPal the opportunity to limit their potential damages and forcing everyone who may have wanted to perform a financial transaction on PayPal over the past several months into a binding twenty-five page contract.
Is this deceit? If I were a customer service representative that answers the unlisted phone number and talks to the very smart and persistent (and mostly enraged customers) who go to great lengths to find the number as it does not appear in the User Agreement and I‘ve yet to find it while navigating the hundreds of pages of www.paypal.com, I would say what I was told to say… “Go to our website and click on the Help Section and submit it to us on the contact form.” However, I would predict that at some point in the future an attorney representing the company will be standing before a judge explaining that everyone was cleary told to read the agreement and of course it is was a legally binding and simple contract that fell within the criteria of the law and was a meeting of the minds.
The fact is my wife wanted to pay for a toy she bought on Ebay for our son and was in a hurry, so if they got you too, don‘t feel so bad cause she‘s pretty sharp. Here are four more facts and I’ll lay them out for you as PayPal might: (1) When your done reading this article you will have read a lengthy 907 words. (2) The Declaration of Independence contains a whopping 1,335 words! (3) The Louisiana Purchase Treaty dwarfs The Declaration of Independence and swells at 3,425 words!!! (4) PayPal’s New User Agreement is easily readable in one sitting at a measly 26,540 words.
Posted by: Mike at May 17, 2003 07:27 AMhttp://www.theaxcess.net/money_01_0703.html
eBay facing multiple probes by state and federal regulators
By Armando Duke - Axcess Business News
According to complaints filed with numerous state insurance commissioners by PayPal users, eBay's subsidiary has been offering a money back guarantee program that may be in violation of state insurance laws.
Philip Kress of the Office of the Commissioner of Insurance for the state of Wisconsin, one of the states probing into PayPal's practices, stated in an email to one of the complainants that "a company can guarantee its own products or services but not the products or services of a third party." Mr. Kress' office stated they were pursuing a response from PayPal on the complaint.
Wisconsin is not the only state looking into PayPal's practices. According to posts on www.PayPalMayBeTheNextEnron.com, Oklahoma, Florida and Nebraska are also looking into PayPal's online practices.
Earlier this week, eBay announced a new buyer protection plan to be offered to its U.S. and Canadian customers before offering it worldwide. The offer may be in response to the numerous probes under way by state insurance commissioners over the company's PayPal Money Back Guarantee, which may be in violation of state insurance laws.
PayPal had changed the name of Financial Guaranty Insurance to "Money Back Guarantee Program" which was announced in July 2002. The company began offering it throughout the US in September of that year.
eBay said the new guarantee program will initially be available to sellers in the US and Canada and will cover buyers for non-delivery of items and items that are substantially not as described. But the move may have come to late, according Mike Fleming, who has been struggling with the frustration of his money market funds in his PayPal account having being frozen for months.
Fleming had been selling goods on eBay when he notified them to transfer those funds to his bank, instead of a transfer from his PayPal Money Market account, which eBay controls, PayPal notified him that his funds were frozen and could not be released. That's when his nightmare began.
According to Fleming, PayPal's Terms of Service Agreement leaves him no recourse to recover his funds, which he states were seized by the company over discrepancies in prior sales he'd made online. When he attempted to follow the process outlined in the Terms of Service Agreement PayPal gave him several different answers with no results.
Fleming stated that, "PayPal's attorney told me in an email that I had to accept the new Terms of Service Agreement in order to get my funds released, but after being given the run around too many times I've refused. Fleming was already a user of eBay's auction service at the time PayPal's attorney demanded that he agree to the new terms of service.
PayPal’s twenty-five page New User Agreement prohibits users from filing suit against PayPal for any dispute under $10,000 and requiring them to agree to arbitration at their own expense in the event of disagreements with the company.
PayPal updated their arbitration clause several months after their motion to enforce the arbitration clause was denied by a judge in San Francisco, California on the grounds that it was unfair to consumers. And as they trudge along the path of what might be one of the largest class actions lawsuits of the year, their timing is interesting in that it essentially tricked many of the company‘s customers into giving up that right and affording PayPal the opportunity to limit their potential damages and forcing everyone who may have wanted to perform a financial transaction on PayPal over the past several months into a binding twenty-five page contract.
The Securities and Exchange Commission is also probing into eBay's Money Market fund management practices. According to a compliant filed with the SEC, eBay's PayPal Asset Management, Inc. is charging over 1.80% in expenses when its Money Market Fund Prospectus states that those rates are 0.10%. The complaint states that eBay owns PayPal which own PayPal Asset Management, Inc. and that the act of using software to arbitrarily seize funds held in a separate money market account is consumer fraud.
According to PayPal Sucks, "PayPal does $16 million per day in transactions. Multiply that by their 'average' of 2.9% (credit card fees) and you see they're making $464,000 A DAY, or about $14 million a month."
PayPal Sucks contains a remarkable amount of information, links and helpful suggestions for PayPal users whose funds were frozen like Mike Fleming's. Ken Dreifach, Chief of the Internet Bureau for the New York Attorney General's office said, "We made good use of your site in evaluating complaints we've received about PayPal, so from both a law enforcement and first amendment standpoint, we're very supportive of "gripe sites" (assuming no libel, etc.)."
It remains to be seen whether the complaints will lead to more official investigations into the practices of eBay, or its PayPal subsidiary. The new User Agreement's arbitration clause points to the company's awareness of what eBay views as loopholes needing tightening. Even with the new arbitration clause, it appears more an admission of guilt than anything, and may be signs of an impending settlement of the class action suit brought in California.
At the very least the changes announced on July 2nd supports an awareness by eBay that their operations are less than perfect and while there may be a growing discontent amongst users, the auction site continues to grow.
Shares of eBay closed Thursday, July 3 at $110.13, a new 52 week high, on volume of 6,069,910 shares. Average volume was reported to be 6,513,636 shares. The NASDAQ reported short position on June 13 was 18,132,799 shares. eBay's short position has been slowly falling from a high of 22,956,547 shares on March 14, 2003.
eBay was added to Axcess Business News Stock Guide's "worst picks" column on June 13th, which perhaps to the hundreds of disenchanted eBay users was an appropriate date (Friday the 13th).
Axcess Business News will continue to report on eBay and other securities investigations in the Internet sector. Watch your in-box for any news alerts on this and other late breaking business news. If you're not a member, please consider joining now and you can get these great market alerts too!