Beware PayPal's Donation button

[fenris-lorsrai.livejournal.com]

I've seen some artists using Paypal's Donate button when they do a donation drive for a specific need or for variable rate commissions as donations. This may not be a good idea...

This is blowing up on internet right now, but PayPal came down on website Regretsy for using the "wrong" button to collect donations to provide holidays presents to the children of crafters in need. Been picked up by Consumerist

Basic issue: payPal lets you use the "donate" button to collect money without vetting you are a charity... but then gets to decide if it really is a "worthy cause" or not and may shut down, freeze, or lock account... including funds NOT from the donation button.

post on Regretsy at initial limiting
Update after Paypal locked ALL funds (including ones not collected through the donate button) for six months

something awful had a similar experience with donations for Katrina

You probably won't have this issue with small donations... but large ones may catch their attention and put you in a similar situation.

EDIT TO ADD: bunch of open source projects that had donations frozen

EDIT #2 Screenshots and breakdown of PayPal's TOS and AUP, plus PayPal rep encouraging use of the donate button by non-charities

EDIT #3 (geez I am the edit machine)
Paypal issues press release saying they HAD unlocked the money... but issued statement before actually doing so or actually talking to Regretsy Paypal's not very apologetic apology (there were also repeated reports that they were deleting comments left on the blog. those are obviously hard to prove one way or the other)
and then another update!
Paypal does...something. maybe. we think
I honestly can't figure out, if they ONLY want the button used by vetted charities, why they offer it to non-vetted individuals at all! There is a difference between personal and business account features, this should be stupidly easy programming to only allow use of the donate button to vetted charities.

Comments

[oceandezignz.livejournal.com]

After seeing what had happened to SomethingAwful - I never ever have suggested PP be used for donations. This seals the deal.

A Kickstarter would have been a better idea - especially since they got such an amazing response just by going through PayPal alone - a Kickstarter fund drive might have been a better bet somehow.

But yeah- this is why I don't keep funds in PayPal any longer than needed. Too risky.

[sigilgoat.livejournal.com]

I think they didn't go with Kickstarter because of the Amazon payment thing, but I bet they're looking into it now. So sad :/

[fenris-lorsrai.livejournal.com]

Amazon payments take 3-5% and then Kickstarter takes another 5%, so much higher processing fees compared to just using PayPal.

[meguroco.livejournal.com]

To be fair, I thought Paypal acted responsibly in the SomethingAwful fiasco.

While I believe collecting donations is an admirable thing to do, I'm not entirely sure why people needed to send money to that user to send to Red Cross, when people could have easily just donated directly to Red Cross. Instead of collecting the money, the user could've provided a link and asked users to donate.

If I were working with Paypal, and I saw an influx of $30,000 going to one user in under one day, I'd put the funds on hold and investigate the matter. I'm not entirely sure, to be honest, what the aftermath was after they froze the funds, but I believe their initial actions of holding the funds was justified.

[kayla-la.livejournal.com]

He did it through paypal because he wanted shipping addresses so he could send everyone that donated free SA merchandise.

[meguroco.livejournal.com]

If he wanted to send users SA merchandise for donating, I don't see why he couldn't have people take screenshots of their donation as proof and then PM him their address? Of course, there could be a chance of someone photoshopping/altering a screenshot to make it look like they actually donated, but I highly doubt that there'd be a huge number of people who would actually go through all that work just to get a couple of free items.

I'm not demonizing that user nor am I praising Paypal for being the best site ever, but I just see people bring up the SomethingAwful incident all the time whenever Paypal is mentioned in a sentence. I don't agree with Paypal's reaction after the user informed them of what he was doing, but I feel as the user could have executed his good intentions in a better way.

Anyway, I'm not entirely sure how off-topic this is getting, so I will stop there to prevent myself from actually going off-topic. :X

[kayla-la.livejournal.com]

He specifically wanted it to be a surprise, is all. He didn't want them to KNOW he was going to be sending them stuff, it was supposed to be a nice surprise thank you gift.

It's not that I don't understand that there were things he couldn't have done differently, but we all do things with good intentions and sometimes we don't make a full fledged battle plan because we don't even THINK our good deeds could go wrong, you know?

I just wanted you to understand why he did what he did and where he was coming from.