PayPal Holds User Funds To Increase Bottom Line

Financial Services Ombudsman to investigate complaint over BACS versus Faster Payment Services claims

by WireNews+Co News Desk

(WireNews+Co) - London, England - 17 January 2013

In our continuing report on the practices (http://www.wirenews.co/search/paypal/1) of PayPal (Europe) S.à r.l. et Cie, S.C.A. in the United Kingdom, WireNews+Co has received documents that show the company is committing fraud in an effort to earn extra interest income on its user's PayPal balance.

When a registered user asks PayPal to withdraw (or send) money from a PayPal account to another bank or building society account in the United Kingdom there's basically two methods to move the money. One is called Bankers' Automated Clearing Services or BACS. The other is the Faster Payment (http://www.fasterpayments.org.uk/) Service.

BACS payments take three working days to clear: they are entered into the bank system on the first day, processed on the second day, and cleared on the third day.

The 2009 European Commission Law: Payment Services Directive (http://en.wikipedia.org/wiki/Payment_Services_Directive), requires among other things for banks to provide faster payments, beginning January 2012, no later than next day.

As a result the Faster Payment Service was developed. This service is practically instant, but funds can take up to 2 hours to be credited to your account. The maximum value threshold for payments that can be processed through Faster Payments is £100,000 however individual banks set their own value limits for their consumer and corporate customers.

But PayPal is delaying the processing of payments, claiming that "funds can take up to 72 hours to appear in your bank account", but really, PayPal is just waiting 3 days and then processing the payment via the Faster Payment Service.

WireNews+Co has inspected documents that describe PayPal telling one of its registered users that a £100 transfer out of PayPal to a UK bank would take "up to 72 hours". The same user asked PayPal to send a second payment of just £10 to the same bank account. The second (smaller) payment was instantly credited to the bank account and "FPI" appears on the user's bank account statement proving that the payment was sent via the Faster Payment (Incoming) Service.

Three days later the first payment arrived in the user's bank account with the same "FPI" reference. The bank confirmed that both payments were made by the Faster Payment Service.

There is obviously some internal company-determined threshold above which PayPal holds onto the user's money for 3 days. The user has made several test payments; at £10, £35, £50, £88, £100 and £300 and in all except the £10 example PayPal placed a hold on the transfer for 3 days and then the company simply sent the money via the Faster Payment Service option after waiting and earning interest for a further 72 hours.

PayPal would like people to believe that the delay is determined by the user's bank, but the fact is that the company has actually devised a system to increase their bottom line, which many people just accept.

A complaint has been filed with the Financial Services Ombudsman (http://www.financial-ombudsman.org.uk/) in the UK, reference #1329-0940/GM/OS24.

Editor's Note: PayPal also wants people to believe that the company is based in Luxemburg. Emails from the company in the UK have this information at the bottom: PayPal (Europe) S.à r.l. et Cie, S.C.A. Société en Commandite par Actions, Registered office: 22-24 Boulevard Royal, L-2449 Luxemburg. However, the company operates at least one UK-based subsidiary, e.g. PayPal (UK) Ltd., Whittaker House, Whittaker Avenue, Richmond, Surrey TW9 1EH and the Faster Payment Service transfers require UK-based banking facilities in order to complete.