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

[amocin.livejournal.com]

Well darn... I take donations for my comic, which isnt a 'worthy cause' as its really just providing others entertainment. Adult entertainment no less.

I have no idea what I should do, aside from make sure that the money is always transferred to my bank. In the case where they apparently refund it back to its source... can they take it out of my bank to make up for that refund? Or as my account on Paypal is currently at 0 dollars would that put me in the negative should they decide to block me for my apparent donations?

[sigilgoat.livejournal.com]

I transfer if it goes about 20$ or so, personally. If they refund, it would come out of your current balance, and they can't do anything once it's in your bank (other than if you authorize a transaction)

[amocin.livejournal.com]

Thats good to know, I will make sure I keep my balance at 0 now. Thank you.

[meguroco.livejournal.com]

I'm a little confused. Are you saying that if your Paypal balance is at $0, that when they issue a refund that nothing will happen to your account?

My impression is that if Paypal refunds someone, if your balance is at 0, it will be taken out of your bank account.

[mistresswolf.livejournal.com]

Your PayPal account reads in the negative. They can't actually take anything out of your bank account without your authorization. I had a time once when an eBay customer claimed what I sent him wasn't what I advertised (it was, and there were even photos) and PayPal sided with him. Since I already withdrew the funds, they just set my balance as -$99 and I wasn't allowed to edit any of my profile information until I put $99 back into my account on my own.

[greenreaper.livejournal.com]

Your "worthy cause" sounds like taxable personal income to me . . .

[greenreaper.livejournal.com]

Oh, right, "isn't." Reading fail!

[wingsofjudas.livejournal.com]

I believe they can draw from your bank account... I recall getting slapped with a bank fee because they overdrew my account. The stupid thing was, I had the amount IN my Paypal, so I'm not sure why it came out of the bank account or why inuffient funds would overdraw instead of just not processing.

I've heard of other artists having refunds pulled from their bank accounts, though my situation was a payment.

[amocin.livejournal.com]

Well thats not comforting at all.