EBay Expands 21 Day Payment Hold Policy To All Sellers?

18 Jan

Introduction and Previous Correspondence (We Have Been Through This Already)

My second favorite PayPal policy is the 21 Day Payment Hold (referred to as 21DPH when I’m feeling lazy).  It might seem odd that I have a list of my favorite PayPal policies taped over the pictures of my three least favorite grandchildren (just kidding Isabella, Madison, and Olivia although I do really wish you were boys), but when I say I live, breathe, and die PayPal I’m not kidding.  If you’re unfamiliar with the 21 Day Hold, I have covered the topic in unnecessary length at PayPal 21 Day Payment Hold – What It Is And How To Deal With It.  In short, when the 21DPH is activated, PayPal holds most or all of a seller’s payments for up to 21 days.  While the payment is “on hold” the seller is unable to withdraw the funds or use them to send payments, pay for shipping, etc.  As we can all imagine, this is quite upsetting to just about everyone who is hit with the hold.

Why, Why, Oh Why???????????????

PayPal processes well over 60 billion dollars a year from almost 200 million different accounts.  Although the great majority of PayPal users are legitimate humans with legitimate addresses, bank accounts, and credit cards, there are also many accounts created by users wanting nothing more than to defraud and steal from as many people as possible.  The defrauding of others often costs PayPal a great deal of money.  By my last count, there are 3,913 different ways of defrauding eBay buyers using PayPal.  When a seller has withdrawn all of their funds to their bank account and closed the bank account, PayPal has no immediate way of accessing the seller’s funds.  PayPal may choose to refund buyers who are defrauded, even when PayPal can’t recover the funds from the seller.  I have on good authority that this process is called the “Pot Of Gold Refund Ceremony.”  Although I do have camera phone footage of this ceremony taking place, I am unfortunately sworn to secrecy and cannot provide the footage at this time.  By holding a seller’s payments until PayPal can verify the buyer has either received the item or is happy with it, PayPal is in much less danger of having to refund buyers from their own pocket because the money is available in the seller’s account.

The general consensus is that PayPal holds payments in order to collect interest.  It is true that PayPal has access to more than three billion dollars at any given time and payment holds will only increase that amount.  However, I believe the real reason that PayPal is expanding the 21DPH (21 Day Payment Hold) is because eBay has recently moved dispute resolution from PayPal to eBay.  Previously, with PayPal disputes, PayPal would usually hold the buyer’s payment once a dispute was initiated.  This guaranteed that PayPal would have access to the seller’s funds and was not in any danger of performing the “Pot Of Gold Refund Ceremony.”  With eBay Dispute Resolution, PayPal does not hold the funds of a specific transaction that is being disputed by the buyer.  This gives the seller time to withdraw all of their money from PayPal.  EBay will still refund the buyer if they win the dispute, even if eBay is not able to recover the funds from the seller’s PayPal account.  Thus, PayPal is holding on to more sellers’ payments in order to lessen the chances that a seller will drain their account and not reimburse eBay and PayPal for the cost of the dispute.

Not Meeeeeeeeeeeeeeeeee!!!??11!

Yes, you.  The rumor is that all sellers will be subjected to the hold policy soon.  Many sellers, some of whom have 100% positive feedback numbering in the thousands, have been complaining that their accounts have been hit with payment holds over the last few days.  Before December 2009, most sellers that had 21DPH were either new or low volume sellers or had low Detailed Seller Ratings.

According to Paypal, they hold payments for sellers who meet any of the following conditions:

  • You have been an eBay member for less than 6 months, and you sell an item for more than $100, or
  • You have an eBay feedback score of less than 100, and you sell an item for more than $100, or
  • You have a Buyer dissatisfaction percentage** 5% or greater than 5%, or
  • You have an average Detailed Seller Rating (DSR) of less than 4.5, or
  • You have received fewer than 20 Detailed Seller Ratings in the last 12 months, or
  • You are listing your item in a high-risk category such as gift certificates, video games, cell phones, computers or consumer electronics.

Paypal will stop holding payments if you meet these criteria:

  • You have been an eBay member for 6-months or more, and
  • Your total Feedback score is 100 or greater, and
  • Your Buyer dissatisfaction percentage** is less than 5%.

Or

  • Your average DSR is 4.5 or greater and
  • Your have received 20 or more DSRs in the last 12-months
  • Your buyer dissatisfaction percentage is less than 5%

PayPal doesn’t know you (unless you’re Buy.com), they don’t know your business, they don’t know how you operate, and they don’t know whether or not you’re plotting to screw(definition 22, thanks Henrietta) them.  Unfortunately, past behavior is not necessarily indicative of future behavior.  Many “good” sellers have gone “bad” over the years and PayPal and eBay have no idea who’s on first, let alone which sellers will snap at some point.  You’re not going to be able to convince them that you’re a nice Christian woman either.

On top of that, it really doesn’t take much to owe PayPal money and one does not necessarily have to set out to defraud others to be put in a position where “screwing” PayPal seems like the most logical solution.  Neither eBay nor PayPal Dispute Resolution is “fair.”  In fact, I think it would be fair to characterize them as decidedly “unfair” because buyers “win” just about every single dispute, no matter what the merits of the dispute may be.  There may be 3,913 ways to scam buyers, but there are more than 15,412 ways to scam sellers.  It is not uncommon for eBay to force a seller to refund a buyer’s payment in full even though the buyer has received the item or has not yet returned the item.  If eBay refunded $250 to the buyer for an item they did not return, would you then willingly reimburse PayPal $250, even though you were completely screwed out of both the item and the payment?  The answer is sometimes “No.”  PayPal does not want to put itself in a position where the seller has any choice in the matter, which is why they are expanding 21 Day Holds, possibly to every single eBay seller.

Whining

The most common argument against the hold is that once my item sells and my payment is received it becomes “my money.”  Technically, this is both true and not true whether the payment is held by PayPal or not.  The payment is not really yours until the buyer decides they aren’t going to open an item not received or item not as described dispute or otherwise wants to return the item.  At any time, for any reason, a buyer can open a dispute on any eBay purchase.  It doesn’t matter what the return policy is on the listing, or how accurate the listing is, or anything else.  All (unless you’re Buy.com) eBay sellers are at the mercy of the buyer.  This is true whether or not a seller’s account has payment holds activated.  Just because you are able to withdraw the money into the “safety” of your bank account does not mean Paypal will not remove the funds from your bank account if they deem it appropriate.  You agree to let them do this when you add your bank account to your PayPal account.  For this reason, all PayPal payment s are “on hold” until the buyer allows the seller to keep the payment issued.  Dealing with the 21DPH may be an unsettling hassle at first glance, but as I will explain later, it is relatively easy to get 95%+ of your payments released within 7 days of receiving them.

Misunderstanding

The biggest problem surrounding the 21DPH is that many sellers simply don’t understand it and certainly aren’t expecting it.  PayPal has never been particularly good at explaining policies and it is in their best interest to keep policies such as this “hush hush” so people aren’t aware they exist.  Imagine if there was a gigantic warning screen on the eBay home page that said, “PayPal will deny access to any funds collected on every single item sold on eBay for up to 21 days.  Any shipping costs will come out of your own pocket.  You may not withdraw funds or use them for any purpose until PayPal decides to release them.”  This is the Hold in a nutshell, but PayPal doesn’t want anyone to know that’s how it works.  Unfortunately, like any other secret, it only makes finding out about it that much worse down the line.

PayPal has changed the wording of the email sellers receive when a payment is on hold several times.  For one reason or another, each version gets more and more cryptic and the details become more and more unclear.  The email reads as follows:

You received a payment from eGovernator, Meg Whitman

This money is being temporarily held in your pending balance. It will be held for up to 21 days. While it’s being held, it won’t be available for withdrawal.

We’ll move the money to your available balance after 21 days as long as your buyer hasn’t reported a problem. It may be available sooner if we can confirm that the item was delivered or, if this is an eBay item, your buyer leaves positive feedback.

To get access to this money more quickly, please process this order right away and communicate with your customers early and often.

As you can see, PayPal does not explain the reasoning behind the hold or what specifically the seller can do to get their funds released sooner.  On top of that, there is also a nice dose of misinformation added for good measure.  Communicating with the buyer “early and often” will do nothing to get “access to the money more quickly,” unless the buyer leaves positive feedback.  Processing the order quickly may speed up the process, but as I explain in the next section, unless the seller prints their label directly with PayPal the funds may not be accessible until day 22 either.  PayPal has no idea when buyers “report a problem” to the seller directly.  PayPal will only continue to hold the funds if the buyer files a dispute with PayPal, which they would do regardless of whether or not the funds were originally on hold.

How To Turn the 21 Day Hold Into The 7 Day Hold By Just Doing It Right

The easiest way to get a payment hold released is by proving that the item has been delivered to the buyer.  Simply print shipping labels with PayPal and PayPal will automatically release 95% of payment holds two days after the Delivery Confirmation or tracking number shows that the item was delivered.  PayPal does not automatically release holds if the tracking or delivery information is manually added to PayPal or eBay.  This means that if you go to the Post Office to pay and ship packages and then come home to enter the tracking information, PayPal will not  release the hold because their system cannot track these packages automatically.  You can call PayPal and request them to release the hold on those payments, but I always recommend printing and paying for labels online with PayPal because it’s cheaper than the Post Office and easier to keep track of all the shipping information in one place.  Since shipping Priority Mail usually takes four days or less, you should be able to get most payments released within seven days of receiving payment if you diligently ship packages as payments are received.

PayPal will also release payments if the buyer leaves positive feedback.  First of all, do not require buyers to leave premature positive feedback before shipping an item or wait 21 days to ship the item so the payment will be released prior to shipping.  Many uneducated sellers try to do this and it will only lead to negative feedback and probably a quick eBay suspension or limited PayPal account.  I do not recommend hounding buyers to leave positive feedback either.  Although it is the quickest way to get a payment hold released, many buyers find emails from sellers requesting feedback annoying and few people who were not going to leave feedback will leave it after receiving a message begging them to.  Your feedback may also suffer, as an email might remind a buyer how much they hated the item and decide to leave negative feedback instead.  As I explain in my previous guide, the best way to ask a buyer to leave feedback is by sending them an email asking if they are satisfied with the item (without mentioning feedback).  This reminds buyers about the transaction and they are likely to leave positive feedback.  Plus, it shows that you care about the buyer so your Detailed Seller Ratings should improve as well.  Still, don’t expect a lot of responses because buyers who leave feedback generally do so quickly anyway, and those who do not leave feedback will not leave it, even if you threaten the lives of their children (been there – done that – do not recommend).

PayPal holds are also based on each eBay account, rather than the PayPal account as a whole.  For example, you are allowed to open as many eBay accounts as you want.  If you have been selling on one account and have 1,000 feedback and perfect DSR ratings and open a second eBay account to sell with, it is likely that the payments received on that second eBay account will be held as though you are a new seller.  This does not mean that you will receive holds on all of your eBay accounts; it simply means that PayPal doesn’t realize that the payments are coming from a trusted account.

Conclusion

The Twenty One Day Payment Hold looks like it’s a policy that will only expand to more sellers in 2010.  The policy is most upsetting because PayPal does not explain why the policy is in place or specifically how sellers can get their funds released as quickly as possible.  The bottom line is that PayPal does not want sellers to get their funds released any sooner than the full 21 days.  Sometimes I don’t think PayPal fully appreciates the implications of its policies.  Sure, PayPal might gain 1% interest on a few more dollars, but that pales in comparison to the hardship caused by holding excess funds from families that have to pay 35% interest on a credit card bill because PayPal arbitrarily decided to start holding payments for three weeks.  Their indifference is as absurd as it is appalling.

One Response to “EBay Expands 21 Day Payment Hold Policy To All Sellers?”

  1. Henrietta of Red Ink Diary 19. Jan, 2010 at 7:21 am #

    PayPal cares that sellers are paying 35% on credit cards? They would probably like to make a commission off providing you with a PayPal credit card!

    The ‘high risk category’ is remarkably elastic, all internet transactions are high risk from baby clothes and bedding to second hand paperback books, if PayPal chooses to make them so.

    Unfortunately at this point there is very little a non-enterprise level eBay seller can do other than to accept it. However, PayPal is starting to impose this policy on websites and other sales platforms and this I believe will backfire. Look for a Red Ink Diary article on remedies very soon.

    Auntie May says her crystal ball is predicting unpleasantness, i.e. regulatory action or a major slap upside de haid for PayPal (again) in the not too far distant future.

Leave a Reply