PayPal, account freezes, limits, holds, and nightmares. A guide to what you should do once PayPal requests “more information.”

This is about PayPal. I’d like to give our insight and our experience away to anyone willing to read, in the hopes that it may help a business owner being victimized by this company. They have ignored every effort we have made to communicate with them for twelve days, and the conclusion of this is their theft of customer money – to the point where we cannot even manually refund our customers. We must ask customers to perform chargebacks, than accept the chargeback in order to refund our customers.

Where it all started.

Two years and 1 month ago, I made one of the top five worst decisions of my professional life – trusting PayPal with our money. With your money.

We’ve been using PayPal without a hitch. I read these complaints after complaints, whining and moaning and wonder; is this all true? Here, you have someone with a six figure hold who have been brought to the brink of suicide by PayPal.

Nah, they must all be nuts I figured. We grew our business slowly, to the point where our PayPal fees alone accounted for over $3000/month.  We were in the top fee class. I had a representative we could call to bypass all the junior staff with any problem. Life was good! Communication and service quality were top notch.


This was so, up until 12 days ago. We received an email that read like so.

We need your help

Dear Louis Rossmann,

Recent activity on your PayPal account has prompted a review by the
Merchant Risk Monitoring group. Various levels of risk are inherent to all
accounts because through the transaction settlement process, we fund
merchant's accounts immediately but may have liability (i.e. chargebacks)
for those funds past the original transaction date for up to 180 days.  

Regular review of a company's financial condition and business model in a
credit-granting relationship is a very standard practice across all
industries and is part of PayPal's regular review process of our clients. 

To assist in completing our review please provide the following information
to the fax number below by end of business 2/13/2013.

*Need 6 months business bank statements
*Need 5 Supplier Invoices
*Agreement or Authorization to sell/repair Apple / Mac Products

Please contact me with any questions.

Thank you,

Jamie Hodges
Merchant Risk Analyst

Phone: 480-862-7357
Fax: 480-862-8208

I figured the “recent activity” was discontinuing sales on eBay. We have been selling off our listings, not relisting them, and focusing more on our private invoice customers & website. In Summer of 2012, we had begun putting together an exit plan for eBay, and this plan was coming into effect.

This notice from PayPal was understandable. We spent two years of banging out eBay sales, website sales, private invoices. We sent money to vendors all over the world. If we DIDN’T get an audit every now or then, I would doubt their legitimacy! Yes, this is a pain in the ass. It’s  also a small price to pay to make sure people aren’t using PayPal to trade ammonium nitrate and rocket fuel with radical organizations or re, and I accept that.

I sent in bank statements, supplier invoices, and a big question mark on the authorization to sell Apple products. I can state without a doubt five local companies off the top of my head that sell laptop LCD screens with absolutely no authorization from Apple, Dell, or any of these manufactures. Our sister repair company’s website says “proud to not be Apple authorized” stamped on it everywhere. We do not intend to mislead or misinform customers that we are Apple authorized.


Here’s where it gets funky. See that email address & phone number on the bottom? Try calling it. Seriously, if you have a cellphone with unlimited minutes, this will be a 35 second waste of your time. What you’ll find, as have I over the past twelve days with no response, is that it goes nowhere. This is wrong. You may say “well, they have lots of users. she’s probably busy. stop being so impatient!” You’re right! They ARE incredibly BUSY. They are a billion dollar company. As such, you’d imagine they have the staff to deal with this.

I called in to ask about this issue, and I was told that they were “short staffed in this office today.” I was told “there are only four people here where there are usually seven.” I’m just an itty bitty thousand dollar company. I’ve never passed or seen seven digits on my bank account. Pathetic, right? However, my idea of regular staffed is about 5-6 people. For me, short staffed is 3 people. What he’s telling me is that PayPal has approximately twice the staff that we do. Are you kidding? What kind of f#&king idiot do you think you’re talking to here?

The reason I have high expectations is not just because my issue is relevant – to ourselves, to our other customers, and to our business. It’s because of what we pay. Our account fees averaged out to $3000 per month over the course of a year. I call PayPal once every 9 months when something funny pops up. When you compare the rate of issues with the rate or transactions, this is practically passive income…. so is it that hard to pick up the damn phone?

At this point, I am going to split this blog into WHAT WE DID vs. WHAT WE SHOULD HAVE DONE, so that you – our end reader – can help yourself when PayPal attempts to take your business hostage.


I submitted the information, and was told that this looks like everything is in order. While we can’t contact her, or anyone who can speak to you regarding this matter, you’re probably fine. So, instead of getting ourselves riled up for nothing, we continued business as usual. At this point we can send money, withdraw, etc. The wheels are still turning.

Seven days later we continue to receive silly “X is not in right now, check back later” replies. This is troubling as it’s what I’d expect when trying to collect a debt of $20 from a crackhead neighbor. That is not the customer service I expect over 12 days from a multi-billion dollar financial services corporation.

On the 14th, we receive a notice that our account is limited. Funny thing, we’re asked for bank statements again to resolve the problem, as well as supplier invoices. The same PDFs we submitted seven days earlier. Sigh. Is anyone even reading what we upload?

Once again we try calling. I am agitated, and audibly annoyed, instead of being patient, calm, and understanding. Rightfully so. No one ever calls us back or keeps us in the loop. During the hold, we can still receive funds, but not withdraw or send them. We are able to refund customers at this point.

I’m told it should be resolved, it looks like you’ve submitted everything, I will reach out to X and X’s manager, we want to get you off the phone so we can go on ruining other people’s lives, blah blah blah. Well, not so much the last part. The 19th comes, and we receive a letter stating that almost the precise amount in our account was the amount that was to be held.

I had been debating refunding all of the customers over this time period and apologizing to them for the inconvenience. I didn’t want to go ahead with this because of two reasons.

a) The representatives at PayPal were steadfast in their opinion that this could be resolved without misery, limitations, or otherwise based on account history and information provided.

b) This would inconvenience the customer, who just wants to put their paypal/cc info into a website and get their screen in the mail in 2-5 business days.Worst case scenario, if it isn’t resolved ,we can refund them and move on… right?(more on this right? later)

When the 19th came we were unable to do anything useful. So, PayPal is holding money for about five business days worth of transactions, but they are also asking us to refund these out of our own business account. This is double jeopardy – PayPal cannot hold a customer’s money, and ask us to refund a customer using our own money, while holding that customer’s money. This would constitute a double refund. At this point we are unable to even refund customers.

Thankfully, Chase bank is fairly helpful. I explain the situation to the representative who explains that he gets this all the time when he is speaking with online merchants. For merchants who use a separate bank account for PayPal, he recommends they put a hold on the account for debits, not credits – and that the existing monies be transferred to one’s main account. For those with one primary business checking account, he recommends placing a hold on debits to the account, so that money can be credited ,not debited. Prior to doing this, he suggested one create a 2nd account that be used for expenses(vendors, payroll, etc) in the meantime. Chase was very helpful.

After sorting this out, we went to change merchant service providers, and are in the process of setting this up as we speak. Approval was almost instant with the plethora of information we supplied underwriters for the merchant services provider on our company.

I had figured if things went sour, we could simply refund customers, and all would be fine. I truly wish that the ability to communicate with PayPal had existed between February 7th and February 14th so that I could take a course of action that would most benefit our customers. At any step of the way, I could have made decisions that would have been smoothest for our customers based on communication from PayPal.  PayPal resorted to locking our ability to refund customers with no aforementioned notice, so we cannot even do that. Refunds will not work without the purchaser filing a chargeback. PayPal has forced our hand to the point of having to walk buyers through chargebacks, which is truly awful.  I must apologize personally to each and every customer who is going through this. We are happily accepting liability for each chargeback, which forces PayPal to release the funds they have taken hostage and to give them back to the customer.

Had PayPal provided us with any form of response or communication other than “X is not here right now and can’t help you, try calling back later”, this entire situation could have been avoided.


Hindsight is 20/20. I am not going over this for myself – I am going over it for YOU! The business owner who may be in the very same predicament. I do not want you to have to explain the same thing to your customers that we are to ours – that someone who has PAID us for a service now has to resort to a time wasting chargeback to return RIGHT BACK where they started.

We trusted that PayPal would work with us and that on the 18th, or 19th, we would be able to continue using the account. What we should have done, in hindsight was begin refunding people on the 14th, and switch to completely. Working with PayPal allowed us zero downtime to our customers who need parts, however, it also caused this mess. We could have closed down for a few days, and reopened, without our customers being put through the inconvenience of chargebacks.

WHAT WE REALLY, REALLY SHOULD HAVE DONE. (and what you should do too)

The second PayPal began asking for more information out of the blue without being reachable by phone or email, I should have spotted this as a sign of trouble. PayPal is always reachable about problems, only hiding when they have bad news. Upon spotting this, I should have

  1. Immediately discontinued use of PayPal and disabled it on our website.
  2. Immediately withdrawn any funds in the account.
  3. Immediately have applied for merchant services account from a competing vendor such as
  4. Live with a few days of downtime.
  5. Closed bank account associated with PayPal to prevent withdrawals to cover holds once the withdrawal clears.
  6. Set’s deposit/debit account to work with our primary business bank account, not with the PayPal-used checking account.
  7. Be on my merry way.

PayPal relies on the fact that you don’t want to go through this hassle. They screw your business and your customers -as a result.

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Written by Louis


+Louis writes his rants & advice on the laptop & cellphone parts supply industry. Topics include the business of supplier relations and the road bumps involved in being a supplier. Find us on twitter @RossmannSupply

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About Louis

+Louis writes his rants & advice on the laptop & cellphone parts supply industry. Topics include the business of supplier relations and the road bumps involved in being a supplier. Find us on twitter @RossmannSupply
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