[HN Gopher] Don't store cash in Venmo and PayPal, US regulator w...
___________________________________________________________________
Don't store cash in Venmo and PayPal, US regulator warns
Author : thunderbong
Score : 161 points
Date : 2023-06-03 16:56 UTC (6 hours ago)
(HTM) web link (www.cnn.com)
(TXT) w3m dump (www.cnn.com)
| digdigdag wrote:
| Instead of warning consumers, why not do what regulators do and,
| well, regulate? Here, you have entities storing unsecured funds
| and doing god knows what with it. In the interest of the public
| good, a just government and a conscientious regulatory body
| wouldn't busy itself warning anyone. Rather, they would be
| bringing down the hammer on these entities and making them an
| example of what happens to companies that try to destabilize the
| financial system.
| [deleted]
| LapsangGuzzler wrote:
| > a just government and a conscientious regulatory body
| wouldn't busy itself warning anyone.
|
| Regulatory bodies issue warnings all the time, that's one of
| the most essential functions of a government. Why? Because we
| don't like it when the government unilaterally acts on our
| behalf.
|
| Warning people is also the cheapest option here, which matters
| in a society that is constantly obsessed with government
| spending. There are tons of bank-adjacent services out there
| (pay-day loans are just one example) and it would cost a
| fortune in legal fees to force everyone that holds cash for
| customers to register as a bank.
|
| This way, consumers know the risks and businesses don't need to
| take on excessive regulatory burden. How is that a government
| failure?
| ouid wrote:
| >the government unilaterally acts on our behalf.
|
| The fuck are you smoking? We elected them to do exactly that.
| Johnny555 wrote:
| _Because we don 't like it when the government unilaterally
| acts on our behalf_
|
| We're not all libertarians and many of us believe that the
| government has a hand in promoting a well functioning society
| -- including regulating bank-like entities to be sure that
| they are a safe place to keep our cash.
|
| While I _know_ that Paypal isn 't a bank, it's not at all
| obvious that my money is less safe stored in my Paypal
| account than in a bank and that if Paypal goes bankrupt
| tomorrow, I can lose whatever cash I have with them.
| ryandrake wrote:
| Exactly. If I had to pick only one job that I want the
| government to do, it would be coming down like a ton of
| bricks on companies that are behaving badly and profiting
| at the people's expense.
|
| Most of the problems in the USA right now can be root
| caused to "the rich and corporations running roughshod over
| everything and everyone."
| bumby wrote:
| Not the same as govt failure, but possibly govt
| ineffectiveness. If all the govt did was warn, we may not
| have the mental bandwidth to process all that into rational
| actions. We rely on on institutions to act on our behalf to
| overcome this limitation. The question is really about where
| the risk threshold is that transitions their role from
| warning to regulating.
| LapsangGuzzler wrote:
| > If all the govt did was warn, we may not have the mental
| bandwidth to process all that into rational actions.
|
| The government does not exist to make sure that you just
| get the right amount of information that you need so you
| aren't cognitively overburdened while they handle
| everything else for you behind the scenes. It's never
| worked that way.
|
| > The question is really about where the risk threshold is
| that transitions their role from warning to regulating.
|
| This came from CFPB, which exists primarily to warn against
| bad actors in the financial world. They're positioned to do
| this largely because the finance industry has repeatedly
| lobbied successfully to block effective regulation. To get
| around this, Elizabeth Warren created CFPB as an office
| explicitly to watch how the finance industry interacts with
| consumers post-2008. The fact that this warning even exists
| represents an improvement because CFPB was created exactly
| to do this. They do not have the power to declare who's a
| bank and who's not.
|
| And to be clear, PayPal et al haven't committed any crimes
| here, CFPB is just pointing out that they're not insured as
| bank so you can't rely on the government bailing them out.
| CFPB sued Wells Fargo over the fraudulent account scandal,
| etc. They're more than capable of acting when crime has
| occurred. The problem (and this is the product of the
| finance industry understanding the game) is that a company
| failing isn't itself a crime. No bank execs went to prison
| over 2008 because they didn't commit any crimes as the
| legal system defines them. The best thing the government
| can do in so many cases is warn people not to be stupid
| with their money. They can't actually manage it for you.
| MereInterest wrote:
| > It's never worked that way.
|
| Yes, it has. When the FDA was formed in 1906, it didn't
| write memos to notify buyers about the state of the meat-
| packing industry, it banned them. When thalidomide was
| found to cause birth defects, it was banned.
|
| When the Federal Reserve Act was passed, the result was
| not just a letter written to customers of specific banks.
| It brought specific changes on how banks may legally
| operate.
| zzzeek wrote:
| > This way, consumers know the risks
|
| going to guess most paypal / venmo users don't read the WSJ
| and likely missed "CFPB Director Rohit Chopra's Thursday
| statement"
|
| even if 50% of paypal's users did, that means "the
| government" is servicing only those consumers that have lots
| of free time and motivation to be reading the business
| section. for those losers working 12 hour days who lose their
| money stored up in venmo someday, sucks for them!
|
| nope, I like the regulation idea here.
| nerdponx wrote:
| Maybe the problem is that they do not have jurisdiction to
| regulate these organizations, so the best they can do is issue
| warnings.
|
| That or it's regulatory capture. Hard to say without knowing
| the details of relevant legislation and case law.
| kevin_thibedeau wrote:
| They really should force US Paypal to become a bank. Clearly
| that is workable for their European operations.
| chmod775 wrote:
| PayPal is already a bank in Europe, so it should be
| workable indeed.
| logical_ferry wrote:
| I have used PayPal once or twice some 15 years ago when I bought
| some stuff on eBay, but never since, I never had any need
| afterwards. I didn't quite understand it back then, I was rather
| young.
|
| Nowadays I buy from web shops when I need something, I give them
| my one time Revolut debit card number and that's it, risk free.
|
| So my question is:
|
| Why would someone use PayPal? What is the use case here?
| silisili wrote:
| Many sites require PayPal for purchases, unfortunately. I'm not
| sure how many people just love using it otherwise...
| whoopdedo wrote:
| You would use PayPal exactly the same way you use Revolut since
| they live in the same space. Neither provides insurance for
| deposits, which is what the CFPB is cautioning against in TFA.
| So I return the question to you. Why would someone use Revolut
| over PayPal? That's a rhetorical question, you don't need to
| answer.
|
| (Law of the internet: if an opinion/review of a product
| mentions a competing product by name then it is in fact an
| advertisement for the competing product.)
| PeterisP wrote:
| At least for me (in EU) both PayPal and Revolut are literally
| banks and both provide deposit insurance - most likely
| because they don't have a choice.
| mikece wrote:
| I have tried removing the several hundred still in a frozen
| PayPal account (for over three years now) but PayPal won't give
| me access to MY money nor will they tell me how to get access in
| order to remove it.
|
| They are nothing more than common criminals in FinTech drag, in
| my opinion.
| cratermoon wrote:
| So the regulator's solution is not to rein in the problematic
| behavior using their regulatory power, but to tell people to be
| individually responsible? It's OK for Venmo and PayPal to go on
| being predatory because why?
| JumpCrisscross wrote:
| > _the regulator 's solution is not to rein in the problematic
| behavior using their regulatory power_
|
| What regulatory power does the CFPB have over PayPal in this
| matter? Particularly in respect of deposit insurance?
| cratermoon wrote:
| That's a fair criticism if we are looking at "regulator" to
| strictly apply only to the CFPB. However, the government of
| which the CFPB is a part is able to regulate financial
| institutions, but has not.
| seydor wrote:
| In europe, they are a bank which means that deposits are insured
|
| In any case, evidently Paypal has been more stable than banks.
|
| There's a real need for digital payments and none of the
| regulatory frameworks in europe or america take that seriously.
| So people will keep flocking to those easy to use ubiquitous
| services
| charrondev wrote:
| There's SEPA in Europe and Interac in Canada.
|
| In the US I've had decent luck with Zelle in the past (my bank
| had support for sending with it), but recently I've just been
| using Apple Cash with family.
| noAnswer wrote:
| "More stable" in what way?
|
| It's the only bank/money service I used that terminated my
| account. I didn't used it very much. One day I got an email
| that I violated TOS. (At first I thought it was fishing. lol)
| They gave me 180 days to withdraw funds, though. (Which is nice
| of them. I guess.) My last payment/money transfer before the
| ban was a donation to OpenBSD. That shouldn't be illegal.
|
| My boss used Paypal for several years for odd eBay sells.
| (Commercially, but only three, four times a year.) When they
| suddenly wanted to see copies of bills and passports. He
| eventually gave up, with still around ~100EUR locked up.
| dsr_ wrote:
| You can't say "Paypal has been more stable than banks" until
| you read the regulator's report.
|
| Have you?
| madsbuch wrote:
| In Europe you have SEPA. That insures that you can send EUR
| between all European banks instantly for free.
| teetertater wrote:
| Receiving SEPA is not instant however, it usually takes 24
| hrs or longer in case of weekends.
|
| When I lived in Canada I really took e-transfer for granted
| and was surprised to learn it's not a thing in other places.
| hocuspocus wrote:
| The SEPA Instant Credit Transfer rollout has started a few
| years ago, it's really common today.
|
| But even old school SEPA transfers shouldn't take more than
| a few hours nowadays, outside weekends and holidays.
| rini17 wrote:
| There's instant SEPA being rolled in, if sender and
| receiver bank support it.
| AH4oFVbPT4f8 wrote:
| I learned this the hard way nearly many years ago. Sold an item
| via eBay, customer paid via PayPal. PayPal accepted the funds I
| shipped the product and thought all was well until PayPal takes
| the money back saying the customers card was stolen. So then I
| was out the item and the money. I don't keep a cent in the
| account for a second longer than I have to now.
| gnopgnip wrote:
| With paypal as long as you ship to the paypal address and have
| proof of delivery you are covered under seller protection. Most
| other credit card processors don't provide this.
| wcoenen wrote:
| When you accept Paypal payments, you are accepting credit card
| payments. Credit card payments can easily be reversed. For the
| payer this is a feature, and for the payee this is a risk.
|
| So this doesn't sound like a Paypal-specific issue. The same
| could have happened if you accepted credit card payments
| through some other entity like Square.
| xp84 wrote:
| Yes and no. PayPal and eBay are both notoriously "buyer-
| biased" - meaning the chance of a buyer dispute being
| resolved in the seller's favor is basically none, while with
| a normal credit card, it's possible for a seller to win if
| you have good evidence. It's guaranteed that if you buy a
| laptop, even from a seller with a great reputation, and send
| them a picture of a box with a brick that supposedly was
| delivered, PayPal and eBay will both rule in your favor. They
| can afford to completely burn sellers like that (who may not
| even have a viable plan B) more than they can afford word
| catching on among consumers that you can simply lose your
| money to fraud on the platform.
| pessimizer wrote:
| > When you accept Paypal payments, you are accepting credit
| card payments.
|
| When you accept Paypal payments, you get no access to the
| customer's credit card information or identification. This is
| either a legal interpretation that allows Paypal to push all
| of its risk down to its customers and make money for nothing,
| or the actual law is explicitly allowing Paypal to push all
| of its risk down to its customers and make money for nothing,
| but either way it's corrupt.
| jt2190 wrote:
| Source:
|
| Consumer Financial Protection Bureau Consumer advisory: "Your
| money is at greater risk when you hold it in a payment app,
| instead of moving it to an account with deposit insurance", June
| 1, 2023 https://www.consumerfinance.gov/about-
| us/newsroom/consumer-a...
| reaperducer wrote:
| Common sense. My accountant warned me about this years ago.
|
| Just because it acts like a bank doesn't mean it's a bank.
| gregschlom wrote:
| It's not really common sense if you need a professional to
| give you this piece of advice, though.
| bombcar wrote:
| Banks are also more regulated than PayPal and when they screw
| you over you can complain to a banking regulator who can make
| their life hell.
| droopyEyelids wrote:
| You're correct and I want to tell other readers that
| PayPal/Square are regulated by the CFPB and the CFPB is a
| very useful way for a regular person without a lawyer to
| fight back when something goes wrong.
| lvl102 wrote:
| Paypal and its CEO are the worst. They screwed over so many
| people during the pandemic.
| zakember wrote:
| The UPI system adopted by India sounds promising to solve
| problems like these, where users can use the app of their choice
| and connect it to the bank account of their choice.
|
| Eventually, you have a system where bank-to-bank transfers happen
| instantly with no intermediary apps holding your money.
|
| https://en.wikipedia.org/wiki/Unified_Payments_Interface
| matthewgrossman wrote:
| I recently had my venmo account terminated out of the blue, and
| this is the best explanation they could give me:
|
| > We have systems in place that monitor activity on Venmo, but
| please note that we don't reveal information about our internal
| systems in order to keep these systems robust. However, I'd
| recommend looking over our User Agreement for information on our
| policies surrounding acceptable use and high risk activity.
|
| > I apologize that we're no longer able to assist you.
|
| Thankfully I was able withdraw my cash, but I've been telling
| everyone I know to be careful when dealing with venmo; you really
| can't trust them
| twelve40 wrote:
| now that zelle has adoption I don't even know what venmo adds
| anyway
|
| I still use the old paypal for juggling payment methods, like
| when I leave a credit card at a bar and cancel it, I don't have
| to punch in a new one everywhere, just paypal.
|
| but cash transfers to people have been bank to bank anyway so
| no need for extra services there anymore.
| mulmen wrote:
| I can never get zelle to actually work. I get into some
| endless loop of email validation and can't actually send
| anything.
| twelve40 wrote:
| take it up with your bank i guess? been using them for
| years with my bank regularly
| pgwhalen wrote:
| What sort of account activity of yours was suspicious to them,
| do you think?
| chrisbolt wrote:
| Here's an example:
| https://news.ycombinator.com/item?id=33410044
|
| Seems that Venmo thinks they should be enforcing sanctions
| against Cuban restaurants in the US.
| matthewgrossman wrote:
| I could also believe that something dumb my friend or I
| said was flagged by their systems. Unfortunately they won't
| talk to me, let me explain any transactions, or give any
| hints about which transaction caused the ban -\\_(tsu)_/-.
| I've never had any warnings either; straight to
| permabanned.
|
| Salt in the wounds was watching John Mulaney's bit on
| venmo[1] the next week
|
| [1] https://www.youtube.com/watch?v=DBpDvCu8yYI
| matthewgrossman wrote:
| My theory (which I included in my emails) was that I was
| receiving funds from people I hadn't transacted with before.
| For my wedding, I had requested money for a "housing fund",
| and many friends/cousins/parents'-friends/etc were gifting
| via venmo
| chaostheory wrote:
| This is harder to discern with Apple Pay since there's now an
| Apple savings account backed by Goldman Sachs, an FDIC member
|
| https://www.nerdwallet.com/article/banking/apples-new-4-15-a...
| thoughtsimple wrote:
| "These apps are also not immune to the same type of panic-based
| bank run that closed down Silicon Valley Bank and others
| recently, the agency added."
|
| I'm thinking that worrying about Apple going the way of SVB
| isn't much of a risk.
| digitalsin wrote:
| My Wife has had a small home-based business for 10 years and her
| customers pay through PayPal about 50% of the time. It was going
| great until she had a major surgery and put her business on hold
| for a few months. When she was able to resume, PayPal decided,
| seemingly arbitrarily, to hold all customer payments for 21
| business days going forward because her sales had dropped. That's
| all, that's the reason that was given to her.
|
| As a small business, this is devastating and there is absolutely
| nothing that can be done about it unless she increases her sales
| back to what they were previously, which unfortunately is
| unlikely given the inflation and economy here in the US. Anyone
| who runs a small business knows that you need cash to buy more
| inventory, and if your liquidity is sitting in PayPal so they can
| get interest on it, your sales are going to slow way, way down.
|
| In 10 years (nearly 11) she has had one customer complaint
| through PayPal. The customer said she never received her item
| because, according to the customer herself, it was stolen from
| her porch after USPS delivered it. In what world is that the
| seller's fault? Only in PayPal's (and apparently this particular
| customer).
|
| That is an incredible track record given that period of time and
| the number of sales she has had (10s of thousands of purchases
| over that period).
|
| Many of her customers have said they would go elsewhere if she
| drops PayPal as a payment provider, which will only make things
| worse (much of her business is repeat business, like 80%).
|
| PayPal finds or manufactures reasons to hold the money you worked
| your butt off to earn so they can sit on it and, I guess, earn
| interest. You have no recourse. Zero.
|
| Stay far away from PayPal.
| jacquesm wrote:
| This is actually the one thing that makes some sense in their
| fraud policies. It goes like this: if a business is growing
| then chargebacks that roll in later will roll in against a
| larger volume of transactions, so the merchant will be most
| likely flush enough to be able to pay the fees and roll back
| the charges. If there is a steady state then as long as things
| don't get into very high risk territory it should all still
| work.
|
| But if a business shrinks then suddenly PayPal itself becomes
| exposed: the volume in sales could drop faster than the
| liability from recent sales that are still in the chargeback
| window reduces and at some point there may be the possibility
| that PayPal will have to cover chargebacks for the newly
| defunct merchant. To guard against this possibility any rapid
| drop in charge volume will result in an increase in the hold
| back time.
|
| So while understandably very annoying it does make some sense.
|
| (I can't believe I've found a reason to stand up for PayPal for
| once and I hate them with a passion but this is simply the way
| any party that uses a shared merchant account will deal with
| the problem, if you don't want to have this you'll have to
| bring your own merchant account along and then things will be a
| little bit easier, but VISA, MC and AMEX all have similar rules
| on their books).
| KingOfCoders wrote:
| A company I've worked for transfered all money out of PayPal each
| night.
| iinnPP wrote:
| Paypal locked my account and won't do anything unless I provide
| data to prove something I care not to prove. All unsubscribe
| mechanisms are locked behind a login...
|
| The result has been a complaint to the CRTC(Canada) for sending
| CEM emails without an unsubscribe mechanism. Oops.
| booleandilemma wrote:
| Surely I can continue to leave the $20 I have in there?
| StimDeck wrote:
| [dead]
| lowbloodsugar wrote:
| Question: why are they not regulated like banks? They look like a
| bank to me.
| mwsfc wrote:
| They are licensed as a money transmitter like Western Union. It
| is a lessor form of regulation. So while they look "bank like"
| in some things they are not legally a bank.
| xp84 wrote:
| Good lobbying. They just do everything a bank does without any
| of the obligations. Honestly I'm surprised some real banks have
| not tried to become like PayPal to allow more sleaziness.
| tgv wrote:
| They can ask to be considered a bank. That would require them
| to implement all those regulations. I'm sure they don't like
| the idea.
| vezycash wrote:
| Forget insurance, paypal terminates accounts on a whim.
|
| I've not logged into my PayPal account in at least a year but got
| a termination notice for policy violation.
|
| That's the real threat.
| xp84 wrote:
| Yup, and all because they are (and always have been) "not a
| bank" -- just a _tech_ company that you deposit your money
| into, who makes loans and investments with that money, and
| provides services to help you move that money around. It's
| completely different, see?
| jacquesm wrote:
| In Europe they _are_ a bank:
|
| https://www.finextra.com/newsarticle/16927/paypal-gets-
| banki...
| AH4oFVbPT4f8 wrote:
| They also like to suspend funds when they want or when it
| benefits them.
| zamalek wrote:
| I have heard this has happened so many times that I'm curious
| they consider terminated accounts as a source of revenue.
| pavlov wrote:
| This is their entire business model. The service they offer is
| predicated on aggressive fraud detection with lots of false
| positives.
|
| Don't use PayPal if this doesn't sound appealing.
| LinuxBender wrote:
| Adding to that their plans to engage in fining people for _"
| misinformation"_ [1][2] They back-peddled but I would not be
| surprised to see them take another stab at it.
|
| [1] - https://www.forbes.com/sites/emilymason/2022/10/27/after-
| pay...
|
| [2] - https://jolt.law.harvard.edu/digest/paypals-
| misinformation-f...
| tifik wrote:
| I would put "misinformation" into quotes, because iirc the
| policy was written so vaguely that it basically allowed them
| to fine you for whatever they disagreed with.
| ajkdhcb2 wrote:
| Isnt that what misinformation always means?
| wizzwizz4 wrote:
| No. Some organisations go to great lengths to try to
| narrow down what counts as "misinformation". But it's
| tricky: the campaigns they're trying to protect against
| are usually politically-motivated, and international
| regional politics is a fast-changing field, and any
| policy you put in place will be immediately gamed.
|
| It's like SEO, but with more lying.
| LinuxBender wrote:
| Agreed, I should have caught that. [Fixed]
|
| That is one of the reasons I terminated my account _of 20
| years_ without hesitation.
| vwcx wrote:
| And it's been the threat for 20 years.
|
| Wayback Machine (May 23, 2003):
| https://web.archive.org/web/20030523125359/http://paypalsuck...
| neilv wrote:
| Also, I wouldn't give them direct access to my main bank account.
|
| You don't want online fraud or some dotcom's Kafkaesque behavior
| to unexpectedly empty your main account of money that you need to
| pay rent, and have the dotcom simply refuse to talk with you.
|
| In general, I try to minimize how much money I have sitting in
| dotcoms ('move fast, break things, disregard regulations, cash
| out' sociopathy). Relatively trustworthy are some traditional
| institutions (e.g., Fidelity Investments, some retail banks and
| credit unions).
| heliodor wrote:
| > But industry trade group the Financial Technology Association,
| which represents both firms, defended the safety of the funds.
|
| > "Tens of millions of American consumers and small businesses
| rely on payment apps to better spend, manage, and send their
| money. These accounts are safe and transparent," the group said
| in the statement. "FTA members provide clear and easy-to-
| understand terms in all their products and prioritize consumer
| protection every step of the way."
|
| I don't see where the defense is in that statement!
| George83728 wrote:
| The defense (lie) is here: _" These accounts are safe and
| transparent,"_
|
| Safe: No, people lose their money to these companies all the
| time.
|
| Transparent: No, these companies stonewall people after
| stealing their money. They claim this stonewalling is legally
| required by AML laws or to deny information to criminals, but
| no matter which way you slice it, 'transparent' is a lie.
| toomuchtodo wrote:
| Good timing with FedNow going live, negating the need for these
| wallets. CFPB at the top of their game.
| esafak wrote:
| I previously read here that you should not let them access your
| bank accounts, either, because they can somehow freeze them too.
| Is that true?
| elforce002 wrote:
| Cash is still king. I don't want to live in a society where few
| corporations and banks have control over the money supply.
___________________________________________________________________
(page generated 2023-06-03 23:00 UTC)