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

[thornwolf.livejournal.com]

Check this link for Paypal's official rules screencapped as pertaining to this situation. Ignore the obviously biased opinion of the blogger, but the screencaps of the rules are directly going against what was said in the Regretsy chat log:
http://thegreengeeks.wordpress.com/2011/12/06/why-paypal-is-wrong-regarding-regretsy-according-to-their-own-policies/

[raeraesama.livejournal.com]

Yeah. I scoured for info on the donate button when I set it up on my site, myself, so seeing the Regretsy thing had me rather bewildered.

[thornwolf.livejournal.com]

I have a donate button on my FA page and my LJ so people can donate towards the time spent uploading art. I also researched it, but the thought was that it takes a lot of time for me to scan images for people to enjoy for free, if people want to help me out so I can keep bringing them what they came to see, I'd have a donate button. I looked and there didn't appear to be any rules against it. Thinking of removing it now :/

[raeraesama.livejournal.com]

As am I, even though Paypal backed down. They need to be clearer on their donation policies.