Other than a permanent eBay suspension, the Paypal limitation is by far the worst thing that can happen to an eBayer. At any time, for any reason, Paypal can limit access to an account. If your account becomes limited you will not be able to send or request money, withdraw funds to your bank account, close your account, and in some cases receive additional funds. If you are unable to complete the steps to reinstate your account, Paypal will keep all of the money in the account for 180 days. The Paypal limitation catches many sellers by surprise and most can’t believe Paypal can hold funds that don’t belong to them for 6 months. Nonetheless, this fact is outlined in Paypal’s User Agreement that everyone agrees to before using Paypal. Paypal will also permanently limit your account if you get suspended on eBay. If that happens, there is very little chance you will see any of the money that’s in the account for 180 days.
Why Does Paypal Limit Accounts and How Can I Avoid Them?
The main purpose of the Paypal limitation is to reduce Paypal’s risk of loss. As I explained in my Paypal verification guide, very little information is required to sign up for a Paypal account. In addition, that information can be completely fraudulent. Paypal wants as many people as possible to sign up for accounts and they know that if they started requiring Social Security numbers and utility bills that far fewer people would open accounts. The Paypal limitation usually requires the account holder to provide a Social Security number to confirm identity, a land line phone number to verify location, shipment tracking numbers to prove items have been shipped and delivered, and supplier information including invoices to prove that the items sold are genuine and authentic. Paypal will also run a credit check on the Social Security number to see if the account holder has past problems with debt. If an account holder’s balance goes in the negative or there is another reason Paypal needs to track down the user, Paypal can use the information gathered from the Paypal limitation to do this.
According to the Paypal User Agreement, Paypal can limit accounts if any of the following things happens:
- Reports of unauthorized or unusual credit card use associated with the account including, but not limited to, notice by the card issuing bank;
- Reports of unauthorized or unusual bank account use associated with the account;
- Complaints received regarding non-shipment of merchandise, non-delivery of services, merchandise not as described, or problems with merchandise shipped;
- Initiation by a buyer of a reversal process through the buyer’s issuing bank without first pursuing the Buyer Complaint process described below;
- Receipt of potentially fraudulent funds;
- Excessive disputes or reversals, or attempts to “double dip” by receiving funds in a dispute both from PayPal and through a reversal or a refund from the seller;
- Refusal to cooperate in an investigation or provide confirmation of identity when requested;
- Initiation of transactions considered to be cash advances or assisting in cash advances;
- Sending unsolicited email or posting referral links on websites where they are not permitted;
- Opening multiple Personal accounts;
- The account has been used in or to facilitate fraudulent activity;
- Violations of this User Agreement;
- Name on the bank account associated with the PayPal account does not match the name on the PayPal account;
- Return of an incoming Electronic Funds Transfer for insufficient funds in the bank account, incorrect bank routing number, or incorrect bank account number;
- Use of an anonymizing proxy;
- Participating in prohibited transactions and activities, including but not limited to multi-level marketing programs, gifting clubs and other pyramid schemes, and listing items for sale that have a delayed delivery date of 20 days or more after the transaction list, and other activities that are prohibited in Part II of this Agreement;
- Reports from credit agencies of a high level of risk;
- Receipt by PayPal of excessive complaints regarding your account, business or service; and/or
- Logging in from a country not included on PayPal’s permitted countries list
As you can see, this list is fairly exhaustive. Paypal really can limit an account for any reason they can dream up. When I say Paypal, what I really mean is Paypal’s computers. Paypal has one of the most sophisticated computer systems in the world and their fraud detection software is just as complex. Doing various things will cause the system to flag your account. This includes adding and removing addresses or accounts, inputting the wrong password, signing in from a computer that isn’t normally used, receiving an unusually large amount of money in a short time, withdrawing too much money at one time, receiving complaints, and the list goes on forever. The trick to getting Paypal to leave your account alone is raise as few red flags as possible. Here’s how:
The best way to minimize the risk of getting limited is to provide Paypal with as much of the information they’re going to want before it comes to a limitation. If you sign up for the Paypal Plus Credit Card, you will verify your Social Security number as well as your location by activating the card Paypal sends in the mail. If you don’t want another credit card, you can also give Paypal your Social Security number during verification or by signing up for the Money Market Fund. Signing up for the Money Market Fund will also pay interest on the money you have in the account, and should it ever come to a permanent limitation, Paypal will continue to pay interest on the money for the 180 days it’s stuck there. You can also sign up for the Paypal Debit Card if your account has been active for more than 60 days which will also verify the information.
There are several ways to minimize the risk of a serious Paypal limitation if you do not want to give out your Social Security number. Be aware that you will have to give it out at some point in the future unless you are comfortable with the 180 day hold. Paypal limits accounts it deems to be risky, so minimizing risk to Paypal is what it’s all about. First, make sure you verify your account before you start accepting payments. An unverified account that starts receiving payments won’t last long before limitation. If you’re selling on eBay you also will not be able to list more than 15 items before you’re forced to link a verified Paypal account. To learn how to verify an account without a credit card, read http://www.auctioncope.com/guide/verify-and-lift-limit-on-paypal-account-without-credit-card-or-social-security-number/. Second, start selling slowly and try to mix in items in categories Paypal does not deem high risk. For high risk items, see my guide on the 21-day hold. Third, when you sign up for a seller account, choose Paypal as the way you pay your fees. If there is anything Paypal and eBay are more concerned about than risk, it’s whether or not you pay your eBay fees. Fourth, if you receive a call from 402-935-7733 answer it and be ready to answer questions about your eBay and Paypal activity. Paypal calls to verify that the phone number is legitimate and that you’re the account holder. They will ask questions about what you’re selling, where you get it from, how you ship, how much you expect to sell, and whether or not you’re familiar with various Paypal services. Be ready to answer these questions in a way that will please Paypal. If you say something that the Paypal representative isn’t happy to hear then you can look forward to a serious limitation very soon after hanging up the phone. Sixth, make sure you enter tracking numbers into Paypal if you don’t use Paypal shipping. Paypal is concerned about items being shipped in a timely manner and if you don’t input tracking numbers they won’t know that you’re actively shipping items. Seventh, minimize Paypal disputes and complaints. If a buyer has a complaint about an item, accept the return rather than risk a Paypal dispute. Paypal has been allowing buyers to return items to sellers for a full refund around 99% of the time recently, which means the buyer will be allowed to return the item to you for a refund no matter how ridiculous the buyer’s complaint is. Eighth, don’t withdraw money as quickly as you receive it. If you continually leave your balance around zero Paypal will have no choice but to limit your account and get your Social Security number so they can track you down if you rip a lot of buyers off and leave Paypal footing the bill. The most famous case where this occured is PayPal Australia Embroiled in Aftermath of Seller Collapse. This happened during Paypal’s failed attempt to make eBay Australia Paypal only. The two stories together were devastating for eBay in Australia.
The bottom line is that Paypal will limit all heavily used accounts sooner or later. If you’ve accepted $10,000 over several months you can expect to receive a limitation and that amount can be much less if don’t minimize your limitation risk. The easiest way to avoid a limit is to give up the information Paypal will ask for anyway. If you do that, you likely won’t be limited unless you begin to receive a lot of complaints and disputes or you have feedback problems on eBay.
How Do I Know My Account is Limited?
You will receive an email with the subject “Notification of Limited Account Access OMARCP” from firstname.lastname@example.org which may have the sender’s name as “unknown sender.” The email will say something like:
“As part of our efforts to provide a safe and secure environment for the online community, we regularly screen account activity. While reviewing your PayPal and eBay accounts, we observed activity that we would like to further verify. For this reason, limitations have been placed on your account(s) until we are able to gather some additional information from you. In order to resolve the account limitations, please complete the following steps: 1. Log into your PayPal account 2. Click on the My Account tab 3. Click on the sub-tab Resolution Center 4. Go to the Action column 5. Click on the Resolve button and complete the requested steps on each lifting requirement outlined. After we have gathered the necessary information, your account will be reviewed for reinstatement and you will be notified by e-mail of our decision. Please note that any sellers fees owed to eBay may become due and payable. Any outstanding amounts owed will be debited from the billing method on file unless previously disputed. We thank you for your prompt attention to this matter and apologize for any inconvenience. Sincerely, Account Review Department”
It may be followed up by this email if you do not respond,
“As part of our security measures, we regularly screen activity in the PayPal system. During a recent screening, we noticed an issue regarding your account.
PayPal occasionally performs credit checks on selected account holders. Your account has been selected to go through this process. We must complete a credit review in order for the warning on your account to be lifted. In most cases, the account holder’s personal credit is analyzed using a Social Security number and an address likely to generate a match with a credit bureau. Please log into your PayPal account to provide this information. If an examination of your business credit would be more appropriate, please contact our customer service department to supply your Tax ID number.”
Paypal limitation emails are some of the most common spoof emails from hackers. Do not click any link in any email you receive about a Paypal limitation. To find out if your account is actually limited, log in to your Paypal account by opening up a new browser and manually entering Paypal.com. If your account is limited you will see the following screen:
Completing the Steps to Remove the Paypal Limitation
Paypal usually requires all or most of the following steps depending on the type of limitation. I recommend completing them in the order listed below. If you can’t get past the earlier steps then there is no reason to give Paypal your Social Security number just so they can track you down and run a credit check. Plus, if you give out your Social it will be impossible to create a new account in the future with the same name because Paypal will be able to link you to your previously limited account. It’s also important to complete as many of the steps as possible before uploading any documents, because after you upload a document your limitation will go into review, at which point Paypal will decide if the limitation will be lifted. You can be denied and have an opportunity to try again, but it’s best to wait to upload documentation until you have completed the other steps to the best of your ability. It is likely that you will have to call Paypal to get the limitation removed unless Paypal takes your Social Security number correctly and you have all of the other information that’s required. To call them to plead your case, dial 1-888-221-1161.
Go to the Resolution center and you will see a screen similar to this with all of the steps you need to complete to restore access to your account:
The reason it says that this account can withdraw funds is because it’s been limited for over 180 days. Paypal will likely not allow you to withdraw any of the funds while the account remains limited.
1. Confirm Location – Phone Verification
Click the “Resolve” button under “Action” to see what’s required to complete each step.
Paypal uses public records to match names and addresses with phone numbers. For this reason, you will have to add a valid landline phone number that matches the address and name on the Paypal account. If all of this information matches, you will receive an automated phone call from Paypal with a pin code. Simply enter the code and the address verification will be complete. If you try to use a cell phone for verification, Paypal will only give you one chance to add a valid laneline phone. Unlike eBay seller verification, Paypal will not accept a cell phone number for this step. If you’ve recently moved, live in a rental, or don’t have a landline, you will have to complete address verification by waiting for Paypal to send a letter to the address listed on the account, which may take up to two weeks or more. This letter will have the code you need to input.
It used to be possible to use a virtual phone number from vumber.com to get past this verification step. That is no longer possible. If you no longer have access to the address where your Paypal account is set up, you can sign up for an address change at USPS.com and have your mail forwarded from that address to whatever address you want. You can use a Simon Giftcard to verify the address at USPS.
2. Resolve Complaints
You can scroll down in the Resolution Center to see all of your open disputes. If there aren’t any, then this step should be completed.
“Resolving Complaints” refers to all of the item not received and item not as described disputes and complaints you have on file in the Resolution Center. This means closing all disputes by issuing a refund to the buyer manually, convincing the buyer to close the dispute, inputting a tracking number that shows delivery, or waiting for Paypal to make a decision on who will win the dispute. Waiting for Paypal to decide a dispute could take months, so it’s best to actively try to resolve disputes on your own by telling buyers to return items for a refund or refunding buyers that you don’t have valid tracking numbers for. This is another reason why you shouldn’t ship First Class International or any method that doesn’t have tracking. You run the risk of a lot of item not received disputes which will just make it more likely that your account will become limited. Numerous disputes is one of the most common reasons Paypal will limit an account, so reducing the amount of disputes is important to keeping your account in good standing.
Resolving these disputes can be a time consuming process if you have a lot of complaints. Even one complaint is a hassle, as you may have to issue a refund to close the dispute if you want to get your account back in good standing. At the very least, you will have to select “Return the item for a full refund” to all of the complaints, no matter how ridiculous the buyer complaint is. It’s easier to do that if you only have one or two complaints. If you have numerous complaints, you will likely have to issue a lot of refunds in order to get the disputes closed and this step completed. If you’re waiting for the letter from step 1 then you will have some extra time to resolve these disputes. You will have to get most of the disputes closed and all of the disputes at least “waiting for the buyer’s response” if you want Paypal to remove the limitation.
3. Provide Proof of Shipping
Providing proof of shipping should be easy if you use Paypal shipping or manually input tracking or confirmation numbers into Paypal because you print at USPS.com or go to the Post Office. Paypal will select several transactions for you to enter tracking numbers for. They may be entered automatically or there might not be any listed if you ship with Paypal. Paypal likes to pick the newest transactions, so you may not have had a chance to ship the items for the transactions they choose. Either way, if there are transactions listed, enter the tracking numbers. If you do not have tracking numbers, you’re going to need to send envelopes with Delivery Confirmation to addresses in the buyer’s Zip Code and enter those Confirmation numbers into Paypal. Paypal can’t tell if an item was delivered to an exact address because USPS Delivery Confirmation only confirms delivery to specific Zip Codes, not street addresses. If you ship First Class Mail International for international orders and do not have tracking numbers for those transactions, enter in tracking numbers for the other transactions and complete the rest of the steps and you should be fine. It may take a call to Paypal to get the account unlimited, but they should be understanding. The status under “action” may never change to “complete” from “resolve” for this step. Don’t worry, once you upload a file the review process will start and the Paypal agent will be able to see that you have completed this step.
When you click on the “resolve” button, it will take you to a page that asks for “proof of inventory” for certain transactions. If you do not have tracking numbers for any of your transactions you may be able to take photographs of your inventory and upload them at the same place you upload invoices and supplier information. If you do this you will likely have to call Paypal to explain what you’ve done, but it may be enough to get this step checked off if you have completed the other steps to their satisfaction.
4. Set Credit Check Address
Paypal will run the credit check and identity verification with the name and address you provide here. If you signed up for Paypal using an address that is not on your credit report, you will have to add an address that will be on your credit report for this step.
5. Enter Social Security Number
There is no way around the Social Security number verification other than calling and begging Paypal to accept another form of identification or properly opening up a business and having a Tax ID. Begging works a lot less than it used to because Paypal’s Buyer Protection keeps them on the hook if a seller rips a buyer off and Paypal can’t retrieve the funds from the seller. The Social Security number is the best way for Paypal to track down sellers and threaten their credit. It’s also Paypal’s method to check a seller’s past history with debt. To remove the Paypal limitation you will need a Social Security number that matches the name on the account. There’s virtually no way around it, so make sure you have this information ready and are willing to give it up if you want to use Paypal to accept funds exceeding a few thousand dollars. In addition, there is legislation beginning in 2011 that will force Paypal to give the IRS revenue information in many circumstances, so expect Paypal to start asking for Social Security numbers sooner and sooner into the account’s life. If Paypal says your Social Security number is invalid online, you will have to call customer service and give it to an agent.
6. Supplier Contact Info
Paypal wants your supplier contact information to ensure that your items are authentic and genuine. Ever since eBay got sued for facilitating in the exchange of counterfeit goods, Paypal has been trying to crack down on fakes. The thing about the supplier information is that they can’t verify you actually get your items from where you say you get them. Your best bet is to tell Paypal you shop sales, sample sales, discount stores, inventory closeouts, thrift stores, etc. and buy your items from reputable stores for resale. The information can be vague and still be accepted. If you have a reputable supplier or deal with a manufacturer directly you can use that, but don’t expect Paypal to be impressed or more likely to work with you. Many sellers who get limited won’t have fancy contracts or big name suppliers so it will be necessary to provide other information. The supplier contact info likely won’t make or break your limitation appeal and Paypal will accept fairly vague information. I don’t recommend making some supplier up though, it’s better to give information that is plausible, but unverifiable. Create a Word document or a document in a similar program and enter some reasonable store names along with their addresses and phone numbers and be prepared to upload it at the same time you upload your invoices.
7. Provide Invoices
Clicking “Resolve” on the invoices will bring you to the master upload page where you can upload pictures of your inventory, utility bills to confirm location, credit card statements, or anything else you think will convince Paypal to remove your limit.
Paypal will pick several transactions that you will need to provide invoices for. If you have valid invoices from a legitimate supplier you can upload scans or photographs of those to complete this step. Otherwise, it’s best to provide receipts from stores or packing slips from items purchased online. Paypal can’t tell if the receipts and packing slips you upload are also the items you’re selling on eBay, but it’s best to provide the most plausible receipts possible. Specific receipts for the items in question are best. You don’t want to set off any red flags by saying you get your items from China or some fake person that you don’t have valid information for. Paypal only requires this information to cover their bases and make sure you don’t admit to selling counterfeits or give them reason to believe that’s what you’re doing.
The Paypal limitation is probably the biggest hassle you will ever go through during your tenure on eBay. It’s important to know what you’ll need before you need it, so you can have the documents ready to upload. Although it is possible to delay the limitation, it will happen to any serious seller at some point. The good news is that it should only happen once unless you begin to receive a lot of Paypal disputes or negative feedback. Beginning in 2011, expect Paypal to start collecting Social Security information even sooner as they will be required by law to report revenue to the IRS. This may change how necessary Paypal limitations are. The most important part of resolving a Paypal limitation is to remain calm and not say or do anything that makes you seem shady. Try to be as nice as possible on the phone and they should be willing to work with you to resolve your limitation. Remember, the purpose of the limitation is to find out who you are and what kind of business you’re running. If you submit reasonable information and have a Social Security number for the account then you should be able to restore your account access in a few days.