PayPal glitch freezes sellers' cash for weeks

A problem with some PayPal payments being held by the company was just a glitch, not a cunning plan to claw more money out of buyers.

Earlier this year PayPal introduced a scheme to flag certain transactions it regarded as suspicious. Payment for items where eBay determined the buyer might be dissatisfied would be held for 21 days, or until the seller received positive feedback from the buyer. Then the funds would be transferred.

But a problem last month meant payment was not being released even after positive feedback for the seller had been posted. Extending payment terms to 21 days did go down with some eBay sellers.

PayPay told us:

A very small proportion (less than 1 per cent) of PayPal transactions on eBay are regarded as potentially posing a risk to buyers. This typically represents people who have not used PayPal before, who are selling high value items or who have recently received a significant amount of feedback from dissatisfied buyers. These transactions are held until the buyer posts positive feedback, up to a maximum of 21 days. Payment is released automatically after positive feedback is left, or after 21 days without any complaints from the buyer. This approach is intended to ensure that eBay is a safe marketplace for buyers and sellers. We communicate the policy clearly to our customers.

In September, for a few days, we experienced a glitch in the system that releases payments automatically after positive feedback has been received. It affected a very small number of payments, all of which were subsequently released. Only those payments normally regarded as potentially posing a risk to buyers were affected.

Forum posters and Reg readers who got in touch with us accused PayPal of deliberately sitting on the money in order to make a few weeks' interest. Reg reader Rob said: "By locking up the funds for 21 days after transaction, all its doing is covering the arse of PayPal and earning them interest at the expense of the sellers." There's more in the eBay forums here and here.

Opinion seems quite divided - PayPal and eBay are always either going to annoy sellers who get checked before getting paid, or buyers who feel they've been cheated because payment was made too fast. As several posters in the forums point out, if you don't like it, go and sell somewhere else.

The company also had recent problems with its top-up cards. These were all fixed by 11 October. ®