Dec 18 Update: This morning I was contacted by a PayPal manager from their fraud department who talked with me close to an hour. He went out of his way to apologize for their mishandling of my case. He told me that my account was initially so severely limited because in early October there were several attempted transfers that were marked as possible fraud. In fact, these attempts were my own attempts to fund the PayPal account using my own credit card by requesting money from myself. I needed the funds in order to perform a mass payment which is only possible if there is money in PayPal’s account. And I can’t fund my PayPal account from the bank in my country. I told the manager that these were my own attempts to fund the account and these are in fact my own credit cards and there was no attempted fraud there. But, according to him, when my account’s activity rose because of MacGraPhoto sale, the system took these funding attempts as additional fraud factor.

He later told me that all the representatives to whom I talked didn’t act professionally and didn’t perform the needed due diligence on my account to see that these funding attempts were one of the sources of the limitations. It made sense when we talked on the phone but now I’m not sure how it’s connected to their inability to understand that my business is legitimate. The original source of the limitation doesn’t explain their failure at investigating the case. He told me that it was very easy for him to see that the business was legitimate since I’m active on social media, have LinkedIn, Twitter and Facebook accounts, all of which are supporting my identity as Mac developer. Also, he admitted that it was easy to find info on MacGraPhoto promotion since it was quite well covered by the blogosphere and even an interview with me on Ars Technica about it.

Eventually, he lifted all limitation from my account and dismissed the October cases of my funding, which were marked as fraud. Of course, we’re very glad that our funds are now unfrozen but it still doesn’t clear PayPal of their mishandling of our case. For example, where the representative told me that she escalated my issue to the fraud department, she lied. There was no escalation. It looks like nobody has taken any serious look into whatever faxes that I sent because anyone with half a brain and 10 minutes of time could have found on the net all he wanted about me, my business, this specific sale and our partners in the bundle. I wrote it all on the first page of the fax, including the PayPal account emails of our partners, whom they could simply call.

End of Dec 18 Update. Original article below.

I’m running my Mac indie software business for more than 3 years now. For the first 2.5 years, all my sales went through Kagi and later I decided to switch to PayPal. The sales were not high, PayPal worked well and all was good.

This year, me and my partner Kosta decided to do some creative marketing for our picture framing application, ImageFramer. We decided to partner with several other developers of graphics software for the Mac and to sell all the software together, as a bundle, for 2 weeks. After months of preparations, negotiations and development, finally, MacGraPhoto bundle was launched on Nov 16.

We, at Apparent Software, were responsible for all the execution of the sale and part of it included handling all the money related issues, such as collecting the payments and distributing to other developers their shares. There were 6 other developers in addition to us. We corresponded over email, sent them a Terms and Conditions document and got their agreement to it by email.

We chose PayPal as our payment processor for several reasons but the main ones were the low fees, the fact that we already knew how to integrate it to the sales backend and that it should be easy to pay them and to affiliates. We used our regular PayPal account, which we used for regular sales. We didn’t expect what happened next.

The launch was successful and we were pleased with how the sales progressed in the first days. Three days into the sale I’ve got a phone call from PayPal and the person on the other side asked me about the nature of the spike in account activity. I explained that we had a 2-week sale, a special promotion and it looked like the call went fine.

The next day, without any warning, I get an email from PayPal that states, among other things:

We have observed activity in this account that is unusual or potentially
high risk.

For your protection, we have limited access to your account until
additional security measures can be completed. We apologize for any
inconvenience this may cause.

I log into my PayPal account and what do I see? “For my protection” they have limited the ability of my account to withdraw or send money but most severely, they also disallowed the account to receive payments!


Frantically, I go to MacGraPhoto’s buy page, click buy and see a message “The seller can’t receive payments at this time”. At about the same time I get an email from a potential customer that says that he can’t buy the bundle. In the server log, I see other people trying to buy the bundle and leaving. Lost sales. Not good. Not good at all.

My PayPal’s page lists lots of things that I need to provide to PayPal regarding my personal identity and regarding the sales. Some requests are totally not relevant to the case or to our business.

Luckily, I have a partner in this business. He also has a personal PayPal account which he uses to buy things. We quickly convert it to a business account and modify the system to use it instead. Total downtime of our ability to sell was above an hour. Luckily, this happened when I was near the computer and not during the night or we’d have long hours of downtime and thousands of dollars in lost sales, possibly ruining the whole operation because of lost trust.

I quickly send some Photo ID of myself to PayPal and call their customer support. After fighting for some time with their voice routing system (I mostly lost) I finally got to an “agent” who verified my identity and then transferred my call to a “Limitation Specialist”.

We talked about the nature of the business. They wanted to see some shipping confirmation and tracking numbers. I explained that we’re selling downloadable software and the “shipment” is actually an email with license codes. I also explain that it’s a 2-week promotion where we bundled with some other developers for a mutual sale. She then asks me to fax to her signed agreements that they, the developers, allow me to sell their software. I tell her that we only have email correspondence and she says ok, fax it.

I prepare fax with our terms and conditions document, 6 email correspondences where other participants agree to the terms and also, in the first page, explain the whole issue of the bundle sale. Total of 26 pages. It takes almost a day to see the faxes in the system. Finally, on Nov 22 I get an email that they’ve received the documents.

I call back customer support, finally get another “limitations specialist” who checks the faxes and says me that it looks ok but I’ll have to wait to get my answers over the email in the next 48 hours.

After 24 hours I receive an email that includes:

- Please provide a letter of authority from the original copyright owner
and copy of the licensing agreement which states you have the authority to
duplicate and distribute the product.

That’s exactly what I sent in the faxes, though. All six developers agreed by an email and trusted us and our email conversation to collect thousands of dollars worth of their share of the sales. Apparently, what’s good for all sides of the deal is not good for PayPal, who are only the means to transfer the money.

I call back PayPal support and talk to another “specialist”. I explain the whole sale issue anew and tell that the first “specialist” told me that the faxes were ok. Now this one tells me that no, email doesn’t count, I’ll have to fax real signed papers. I explain that we didn’t do these. It doesn’t help.

In the process of our talk, I also learn that these “specialists” are not actually the people who decide to accept or reject the documents. They are only phone support personnel who understand a little more in the whole limitation process. And, it’s totally impossible to directly talk to the people who actually decide. So, it’s like a broken phone anyway.

I ask the person to reconsider our previous documents and tell him that we started to collect signatures (we indeed emailed the 6 developers by this time and asked them to print and sign a one-page, three sentences paper about the bundle). He said ok. Wait another day or two.

During the day we collect most of the signatures and then I receive another email from PayPal. The subject was new: “PayPal appeal denied”. The content:

"... After reviewing your account, we have decided to close it because of security issues.
We are making every effort to minimize any disruption to your business....
Disbursement options
Option 1. If you owe refunds to any of your buyers, you can use the money
in your PayPal account to refund them....
Option 2. Money in your PayPal account will be held for 180 days. After 180
days, we'll email you information on how to receive your funds.
We regret any inconvenience this may cause"

So, now the money (most of which is not even ours but of our bundle members) is held for 6 months. Sure, they are “making every effort to minimize any disruption to your business”. Sure, no disruption at all.

I call PayPal again, get yet another “specialist” who tells me to fax the signed agreements when I have them. Next morning we finally get all the signatures, I prepare a fax and send it. A day later I get an email that they’ve received the documents. I call support again. Ok, got your documents. Wait up to “48 hours” again.

In the meantime, we’ve got really scared that the second account could be limited at any time as well, so as fast as we’ve got a bit of significant amount of money, we’d send it all to some of our 6 partners for a part of the sales.

I’ve got no response after 2 and even 3 days. I call again, another specialist tells me that since my account is kind of closed, she’ll escalate the issue to the fraud department. Expect a reply within 72 hours.

Within these 72 hours, Kosta’s PayPal account was also limited. But luckily for us, they still allowed the account to receive money, so at least we could continue to sell. There were still several days until the end of the sale. But we couldn’t pay to our partners now. And we didn’t have a 3rd PayPal account we could use for the sales. Had they also closed Kosta’s account to receive money, we’d have no choice but to close the bundle sale before its promised time, thus bearing a lot of financial and trust loss.

So Kosta started to work on lifting the limitation from his account. They asked him for a lot of things that they didn’t ask me. But at first, they didn’t ask him to send “license to sell” other software. In short, after about a week, lots of calls to support and faxes they actually removed the limitation from his account. This happened after the bundle sale finished and we needed to pay our partners soon. We still didn’t have all the money to pay them since a large sun lays frozen in my account.

Needless to say, I didn’t get any response, not after 72 hours nor after a week. I called support again and was told that they won’t respond me because my appeal was denied and they don’t reopen cases. I wondered why the previous 2 times that I called they did tell me to send the documents. What happened to the “escalation”? But talking to them was like talking to a brick wall. “PayPal decided that it doesn’t want to do any more business with you” was their standard response.

So, the bundle was a great and successful marketing experiment. We had to add from our own money to pay the developers and now won’t see our money from it until the end of May. Moreover, my PayPal account will stay forever limited and I won’t be able to use it for anything, even to pay for the services we use. And since my credit cards and bank account are also linked to this PayPal account, I can’t buy from any PayPal seller using them (I mean paying with a credit card through PayPal, without an account). I now either need to apply for a new credit card or don’t buy from people who only have PayPal as their payment option. And it’s not that I need another credit card in my life now only for this.

During one of my support calls, I asked the “specialist” if there was any way I could have prevented my account from being limited because of the higher transaction rate. For example, perhaps I could contact them and notify in advance of the upcoming sale. The answer was a definitive NO. You get it? I did nothing wrong. That’s just how their system works.

Even though Kosta’s PayPal account was “clean” for now we decided to leave PayPal as our payment processor at Apparent Software and moved to FastSpring. They have higher fees but at least they have great and personal customer service and we hope they won’t freeze our ability to do business without any reason, “for our protection”. We’ll also have to look for another solution for MacGraPhoto 2.

Summing this long story I want to say that I’m totally shocked about how PayPal treats its customers. Sellers are those who pay the fees and who make PayPal the business it is. I won’t be using PayPal to sell anything from now. They have grown too big to be efficient and caring for their customers. Quick to make totally disruptive decisions and to dismiss legitimate businesses without really taking a look at what it is.

They took the liberty to totally halt our business, to cause lots of lost sales and a major cash flow blow only because we got successful with one promotion, after being their customers for a long time. Right, they “regret any inconvenience this may cause”. They are “making every effort to minimize any disruption to your business”.

If you’re selling anything and use PayPal as your only payment option, I urge you to reconsider. They can cut your oxygen supply right at peak of your success, of course “for your own protection”.

Sincerely, Jacob Gorban. Apparent Software.

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