Is This Fraud?

So you may have seen me say recently that I wanted to buy a new book by Mark Steyn but couldn't because I couldn't pay with Paypal and I was having trouble with my bank account. Fortunately, an individual has offered to give me a copy as a gift, and that's awesome. But it still leaves me with trouble with my bank account.

Well, I'm not going to go into all of it. There's quite a bit of history, and it all goes back to some fraudulent-esque charges. I phrase it that way because I feel the charges are fraudulent, but I haven't filed a fraud complaint yet, so I haven't found out if it legally is. Regardless, the company is supposed to give a full refund and reimburse my costs, so it shouldn't matter. The problem is the process will take a little time (deadline is next week).

In the meantime, my bank account was overdrawn. That means lots of fees. To avoid more fees, I transferred money into the account to cover the money I'm owed. I only put the minimum in though because I'm in the process of transferring to a bank closer to where I live (the nearest branch of the other is an hour away). I didn't think anything of that because, why would I ever use an account I know has no money in it?

So that's how things stood. I figured while I was getting my new bank account set up, I'd use cash and if I needed to pay for anything online, I'd use Paypal. No big deal, right? Wrong. It turns out Paypal decided to withdraw money from my bank. Why?

Because I'm a valued customer.

I kid you not. That is what Paypal told me was their reason when I called.

I was such a valued customer with such a proven track record with Paypal, they decided to enroll me in a feature where instead of taking money from my Paypal account, they would take it from my bank account.

They didn't ask me. They didn't tell me.

It turns out there was a little note in the confirmation window when I made my purchase, but who reads those? I've seen a hundred of those. They've said the same thing every time. It's not like I'm going to suddenly decide to read it again on my 101st purchase.

Now, I guess I should clarify what this nifty little feature of there's did other than try to take money out of my bank account without my permission. Multiple times. Four times, in fact. Each time, resulting in a $27 fee because I didn't have the money in my bank account to cover the purchase.

But it's not like Paypal just got me charged $108 in fees to try to take money out of my bank account to cover purchases it could have covered with money in my Paypal account. It's not like it just did so even though I had explicitly set my Paypal account to never take money out of my bank account if I could cover a purchase with money in my Paypal account.

It's not like the only reason I ever linked my two accounts was so I could transfer Paypal payments people made to me into my bank account. It's not like I could have have transferred the money Paypal needed into my bank account from Paypal to let Paypal withdraw it from my bank account if I needed to, for some godforsaken reason.

No. No, no, no. You see, Paypal actually had a kind of cool idea. They instituted a program called "Pay After Deliver." When using it, Paypal will front the money for purchases you make, giving you 14 days before it takes money out of your account so that if you're not satisfied and want to dispute a payment, you can do so without ever having money taken out of your account.

But notice how I keep saying "your account"? It turns out "your account" means "your bank account," not "your Paypal account." Why? I have no idea. It seems insane to me.

In fact, it seems fraudulent. As far as I'm concerned, if I tell Paypal not to take money out of my bank account (unless I don't have sufficient funds in my Paypal account), then it has no right to take money out of my bank account. It doesn't suddenly gain the right to do so simply because I'm such a valued member it feels like enrolling me in a new, cool program that it won't even bother to tell me about or get my permission for!

Oh, and it gets better. I checked my e-mail confirmation on the purchases I made, and it turns out they do mention this new program. Again, I don't read e-mail confirmations for purchases I make. I've received a hundred of them. But after realizing there was a problem, I did, and I saw:

If you want to change your Pay After Delivery preferred payment options, go to My Money in your Profile and click Update.

Here's the thing, there is no "My Money" section to your Profile. There is a Pay After Delivery button, but you have to just look for that specifically. I would take screenshots to show you guys this, but... um, apparently that's not an option now. After I called Paypal to complain and to get them to inform my bank they didn't have authorization to try to take money out of my account, they took me out of the program.

They didn't ask me if I wanted out. The guy said he was going to turn the feature off, which I was fine with, but I didn't realize that meant it would be completely taken out of my user interface. So now I can't even show you the details of the program. I can't even show you the program exists!

So yeah, I'm a bit upset. I assume the $108 in fees will be waived. If so, all this really cost me was about an hour of my time. Given how much convenience Paypal has given me over the years, that's a relatively small price to pay.

But still, this is not okay. Paypal can't just go into people's bank accounts and take money without their permission. If that's not fraud, it's certainly theft. Who the hell came up with this idea?!

The program is great. I would enroll in it in an instant. I love the idea of being able to not pay for a product until after I've received it and verified I'm not going to demand a refund. I would be thrilled with Paypal for instituting the program.

And I'd even be okay if they told me a requirement for the program is that I pay out of my bank account. As long as I know about it, I can plan for it. And if for some reason I don't have money in the bank account, it'd be easy for me to transfer money from Paypal to my bank account. I'd have 14 days to do it.

But what kind of idiot decides, "Hey, people buying things with Paypal won't care if we just take the money out of their bank accounts instead"?! No!

If I'm buying something with Paypal, I expect to pay with my Paypal account. If I'm going to pay with any other account, you need to make that clear to me.

3:04 PM Edit: So the bank has waived $54 of the fees, but it says it can't waive the whole $108. They say a full reimbursement will have to come from Paypal. It looks like they might refuse to give me one though. I'm going to make one more phone call, but I may have to wait until tomorrow to do more so I don't wind up yelling at anybody.


  1. It isn't fraud, but I suspect Paypal is legally obligated to pay the fees here. I'm pretty sure you need more than a check box to enroll in (or not enroll in) a new financial plan.

  2. Oh, there's no doubt about that Carrick. Years of business with Paypal with my account explicitly set up to only pay via Paypal (unless I don't have sufficient funds in Paypal, of course) cannot be overridden by a single check box in a generic confirmation screen. Especially since there was no enrollment option. You're automatically enrolled in this program. The only thing I apparently clicked on was a confirmation that I would use it instead of the regular, old-fashioned pay out of Paypal method when I made my two purchases.

    That means Paypal literally forced me into this program without my knowledge. Then, it apparently set it the program as the default payment option at Ebay (where I made the two purchases) and possibly other sites. So the only time I would ever find out about the program to "agree" to it is when I went to "check out" and selected Paypal. Apparently the little default box that popped up with my account information there didn't display the normal information, but instead displayed some other information about Pay After Delivery, and that's the only time I was ever presented any information about this program.

    From no legal perspective was that sufficient to claim I authorized Paypal to take money out of my bank account. But they don't care. They're a big company, and it's only $108. There's no way I can even talk to anyone at Paypal who could authorize any action to reimburse my costs. I've tried. The people I've talked to were all very friendly, helpful and sympathetic. They just don't have any authority to do anything because, as far as Paypal is concerned, that one little brief notice was sufficient legal basis.

    And of course, doing anything to prove them wrong would be such a huge burden it wouldn't be worth $108. So I wouldn't. I'm sure that's what Paypal would count on if anyone there even thought about this. It might actually work too. I'm the type of person who would be willing to pursue something this trivial no matter how long it took, but if Paypal stonewalled me, I don't think I have the financial means to make them do anything. Right now, I wouldn't be able to afford a lawyer for even the most basic of proceedings.

  3. Hi Brandon,

    Have you considered the "small claims court" in your jurisdiction? Represent yourself, fill out pre-printed forms from the county, send a registered letter... Not cost free, but not much more than the amount you're out.

  4. Hey Pouncer,

    I've only given that the most passing of thoughts. Right now, the first step is to see if I can get a friendly resolution with PayPal. Not only is that just a good idea, the PayPal user agreement explicitly requires it be your first step (seriously).

    After that, if I'm not satisified, I'll go to my bank and report the charges as fraudulent. That should, as I understand it, include filling out an affadavit attesting to the facts of the case as I understand them and filing a police report. Then the bank would investigate, and if it finds in my favor, credit any charges/fees arising from those charges.

    I believe that is correct, but it's just based on what I've gathered from the internet. Regardless, it's only at that point I could reasonably pursue a lawsuit. You do raise a good point in that with it being small claims I could file and represent myself, which I'd be willing to do. The problem I see is I don't know that I could really recover antthing. If the bank covered the costs and I was ultimately not out anything, I don't have monetary damages. If not, my monetary damages would still be tiny.

    On the other hand, I have had to spend quite a bit of time pursuing this matter in these last few days. If one believes time ie money, then I could perhaps argue damages due to the trouble this has caused.

    So... yeah. Prior to writing this comment, I hadn't thought about the idea much beyond hoping it doesn't reach that point. Almost all the attention I've paid to lawsuits has been with big ones, not little ones.

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