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The Top Three PayPal Rip Offs (That Can Be Avoided!)


Would you trust your money with an entity that is not considered to be a bank? For millions of people around the world, the answer is yes. PayPal has had more than its fair share of horror stories and lawsuits, yet people still flock to its services as a resource to send and receive money. For the three people below, it seems that PayPal isn’t all it is cracked up to be.

#1 – Alabama Woman Succumbs to Fraud- PayPal Refuses to Help


PayPal is renowned for giving the cold shoulder to foreign countries, but for this Alabama woman, the problems hit closer to home. Sheila Stawicki went through almost two months of long phone calls and myriads of emails in order to contact PayPal. The problem? Sheila had lost just under $3,000 due to fraudulent activity, and PayPal was proving to be no help even after 45 days of constant emails and phone calls.

Perhaps you have heard of PayPal’s support service- famous for hanging up on customers, being rude, and not to mention the long wait times to actually talk to a human. But it seems this horror story ends with a happy ending, believe it or not. 47 days later, PayPal finally makes a move to refund Sheila’s money- but only because the subject went public. Their response: they were just in a transitional phase in their customer support. And as a side note, they claim that PayPal is impervious to hacks of all types.


The best way to avoid PayPal’s customer service is to keep your account fraud-free. Make your password mean, long, and strong. Don’t fall for phishing scams, and certainly don’t use your PayPal login details on any other website. Lastly, only access PayPal on your own computer if possible- and run a current antispyware program to keep your computer clean.

#2 – Stoney Brody Loses His Business


Stoney Brody ran an online business with PayPal, particularly dealing with gold. Out of the blue, PayPal suspended his accounts for possible “fraudulent funds.” Outraged, Stoney demanded his funds to be withdrawn, as he claimed he had done nothing wrong.

Things took a turn for the worst when PayPal refused to release over $20,000 of Brody’s money. This is even after Brody consented to go through the verification process PayPal enforces for frozen accounts. With no luck demanding his funds back, Brody decided to sue PayPal- but tacked on another $400,000 in damages due to lost business.Sadly, Brody was forced into arbitration and ended up paying not only PayPal, but heavy fees for arbitration. This wasn’t such a good outcome for Brody, obviously.


PayPal has the right to freeze your account at any time for no reason whatsoever. This has led many people to follow one simple rule: never leave more money in your PayPal account than you can do without. This type of problem with PayPal also proves that the legal system might not be the best alternative.

#3 – Something Awful This Way Come


A rather famous incident involves the Something Awful website run by Rich Kyanka. This particular incident occurred two years ago, but still remains to be one of the biggest disputes in PayPal history.

After the events of hurricane Katrina, Something Awful decided to allow visitors donate to a PayPal account that was linked to giving charity aid to hurricane victims. So what was this sum of money? Try almost $30,000! PayPal froze the account as Rich Kyanka was about to donate it to the Red Cross. Kyanka kept calling, submitting to their verification process, and contacting them whenever possible.After many frustrating phone calls and investigations, Kyanka finally had to refund all of the donations-since PayPal was no help. Imagine paying PayPal fees on every single refund!


The account was frozen for two reasons: first, a major amount of money was donated at once. This flagged the account for PayPal review. Second, the account was linked to the hurricane relief effort- and as we all know, there are a lot of crooks out there that setup fake charities to steal money. PayPal claims it was looking out for the best interest of its users. Basically, be sure you don’t take in too many donations at once- and make sure you aren’t linked to any possible popular scams.

Closing Comments

PayPal is not a real bank, and thus, can generally screw anyone over without so much as a notice. The best practice to forego is to withdraw money as you receive it- don’t use PayPal as a warehouse for your money.With the advent of features such as the Money Market, you may feel compelled to leave a few hundred dollars in your account. Since these funds are not insured, keep in mind you are still running a rather large risk here.If worse does come to worse, make sure you have a good lawyer and a lot of money. You will have need of both if you hope to ever get a shot against PayPal in the legal system..


  1. Shool Loan Guy Says:

    Anyone who leaves thousands of dollars in their PayPal account is just asking for problems. Once you get that money in there, transfer it to a normal bank account. Good article, thanks.

  2. D Says:

    Note that as PayPal does not operate as a bank, it is nonetheless a part of a huge corporation. The more money on high budget accounts that they can freeze, the more interest on that money eBay can make (as if they were not double-dipping enough with seller fees on eBay and then merchant fees on PayPal all for the same transaction). Of course, they say that their account limitations are motivated by trying to keep everyone secure. But they often limit accounts randomly and with no explanation other than 'you have been chosen to under go an identity verification process for your own security.' After submitting your social security number, driver's license, copies of bank statements, etc., and waiting for over a week, they might then allow you to use your account like normal but probably only after you have submitted more information as if the previous fax of everything about you was not enough. (Any employee at PayPal with a penchant for ID theft has a gold mine at their finger tips daily.) Also, when you withdraw money, it takes longer for it to reach a bank account than with other merchant processors, even if you have had your account in good standing for years. The thing to watch out for are PayPal disputes, people disputing payments made. But this is very hard to do. People these days will dispute payments at the drop of a hat, even after receiving exactly what they paid for if they suddenly want to send it back for a refund. If you have a new PayPal account with a few disputes in a month, and especially if you are accepting a lot of payments, expect a limitation and expect it to occur when the balance is higher than average. These funds become 'theirs' until they release it back to you to withdraw or you wait 180 days if they decide not to lift the limitation on your account. Of course they benefit from all of this extra cash - if they did not, they would not be doing their job for shareholders. It is just another way to increase the bottom line while increasing 'online security.' OK. Sure.

  3. Dan H. Says:

    Also keep in mind that if you get ripped off by someone not sending an item or a broken item etc... they will only refund your money
    a)when you jump through tons of hoops (hopefully within the small window of 30 days from purchase and upgrade the claim "after you arbitrate with the seller" within 20 days of dispute..blah blah blah)...


    B) IF the seller HAS the money IN THIER ACCOUNT (yes, you know, the same account you've been telling that you are filling a fraud claim against!)

    If the seller pulls thier money in that 3-4 week time frame (as mine did)
    paypal sends you a nice email saying:

    Yes, you were right, they are scum, you win... but they have no money in thier account, so if they ever decide to add funds to thier account (the one we are about to lock, so they cant access).. then we will call you. :(

    Paypal is a monopoly and DIRTY THIEVES. :(

  4. UBET Says:

    Credit Insurance Fraud?

    I was selling an item to a person who won it from me on Ebay auction. Paypal charged the buyer's credit card, credited my account, and then arbitrarily reversed my credit, stating "something fishy" with the cc transaction. On this "dispute" Paypal alone thus openened unasked, they listed me as the only party who could resolve it. The choices they gave me were I could issue a 'refund' (of reversed funds??) or ship the item. I called them three times to get THEM to resolve the transaction, since only they have a problem with it. buyer gave me their home address and email, and went back in to their Paypal account to confirm the transaction, and sent me the date the money was gotten from that account. However Paypal will not release it to me. They asked all three times I called for shipping tracking, which of course I didn't have because I hadn't shipped.
    After my second phone call to them, they changed the status from "Seller must take action" to "Paypal is reviewing", but I have screen shots of the 'dispute' from when it was in the initial "Seller must take action" status. The 'dispute' shows actions taken by Paypal, and the only ones shown are that they emailed ME, never the buyer whose transaction they supposedly suspect.
    They were vague and wouldn't answer questions about what THEY were going to do next. They said some kind of credit insurance could be invoked, and I will be paid, if I ship now. As of now, they are still retaining the $51, which my buyer confirmed with them upon my request.
    I can see how, if i give in to Paypal and ship this item, and provide tracking, they could claim it on some kind of credit insurance they say they have, and also turn over to me the buyer's money they are retaining.
    I hope you understand that I think Paypal has done several unethical things already, and I only take the chance of being banned by them for reporting this, for the sake of retired people they might be using all the time in some kind of double-payment, credit insurance scheme.

  5. anne stromberg Says:

    As a small promotional tee shirt wholesaler (my retirement hobby) all my customers order items to be "decorated" by printing or embroidery. All my customers purchases are shipped directly to the printer (3rd party). Recently a customer whose order had been shipped, "decorated" and sent on by the printer, told his bank the charge on his credit card from my pay pal account was unauthorised.

    In spite of solid irrefutable documentation that he had indeed authorised the purchase, Pay Pal
    returned his money and I have no recourse. I now have a merchant account through my bank.

    So much for a trustworthy way to do business. Pay pal operates primarily for EBAY business and is not a good choice for small businesses like mine.........slow learner and poorer for it.

  6. guillermo gilar Says:

    There is another way to get even. Before closing account. place some Bid on high ticket time such as a Ferrari Sports Car then forget about it.......

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