I love the idea of PayPal: a neutral broker that holds funds involved in online purchases until both sides have fulfilled their obligations. The buyer sends the funds for a purchase to PayPal, which tells the seller it has the money and holds it until the buyer confirms it has received the merchandise. The only wrinkle should be when there are disputes about the merchandise. In that case, PayPal adjudicates the dispute.
That’s the theory and as far as I know, that’s the way it worked in the beginning. But like many Internet sites, PayPal came to believe that they should police their users’ activities. That’s not completely unreasonable. After all, no one wants to be serving as a middle man for, say, drug sales or sex trafficking. But also like many sites, PayPal also prohibited actions that they didn’t like even though they might not be illegal.
Even that would probably have been okay if they simply refused to deal with those people and terminated their accounts for clear violations of a well defined and published terms of service. That’s where the problems begin. PayPal has apparently terminated some accounts, refused to say why, and seized the users’ funds. The amounts are not trivial: in one case it was $172,000.
Some users are fed up and are fighting back. They are suing PayPal and trying to get the suit certified as a class action. If the allegations are true, I hope the suits succeed and that criminal charges are filed. After all, how are these actions not stealing customers’ funds?
One could maintain that even terminating the accounts for legal activities that PayPal doesn’t like should be prohibited. Yes, PayPal is a private corporation but they are also, arguably, a public utility with a duty to serve anyone not breaking the law.