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Submission + - PayPal's Unethical Rolling Reserve (

phx_zs writes: I recently became one of the many disappointed and unsuspecting victims of PayPal's dark secret, the "Rolling Reserve" system they impose on merchant processing accounts. For those unfamiliar with this, PayPal requires from merchants that a certain percentage of each day's transactions be held for a long time before it's released to the merchant (usually 30% per day, released after 90 days). I was frustrated by this and their support's unwillingness to bend on the issue, but I really became disgusted when I did a quick search of their message board and found post after post of horror stories from small businesses, charities, and others who literally have tens of thousands of dollars locked in "Pending" that they're unable to access. One guy was even losing his home and belongings because he needed the reserved money but PayPal wouldn't release it.

What makes this unethical is that PayPal is making money off the reserves. While a non-profit can't operate because $75,000 is being held from them, PayPal is earning guaranteed interest on it for 90 days. This is all on top of some of the highest monthly fees and transaction charges in the industry that merchants pay for a PayPal account, adding insult to injury.

PayPal's side of the issue is that the rolling reserves are "for their protection and ours" from customers who want a refund but the merchant can't cover it. But read through the message board and you'll find that many merchants say they've never had a refund in years. PayPal's argument is obviously an absurdity and though this practice is legal (we agreed to the small print) and not unheard of, it's truly a slap in the face to all of the users and businesses who have helped PayPal become as successful as it is. With things like this coming to light in addition to their obviously poor moral judgement as shown by the Wikileaks debacle, it begs the question: Is it time for a widescale boycott of PayPal?

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