Paypal does SomethingAwful to the Red Cross
September 4, 2005 8:26 PM   Subscribe, which has been running on fumes since Thursday because they're hosted in New Orleans, added a Paypal donation link for Katrina relief to their barebones status update site yesterday, raising more than $3,000 an hour. Paypal then froze the account for "suspicious activity," preventing over $30,000 in donations from reaching the Red Cross.
posted by MegoSteve (19 comments total)
Why aren't the brick & mortar banks lobbying for banking regulations on Paypal?
posted by rolypolyman at 8:39 PM on September 4, 2005

Why aren't the brick & mortar banks lobbying for banking regulations on Paypal?

They probably want to succeed against the credit unions first.
posted by oaf at 8:54 PM on September 4, 2005

Sounds like something Paypal would do.
posted by dial-tone at 8:55 PM on September 4, 2005

God I hate PayPal!
posted by c13 at 8:56 PM on September 4, 2005

The most interesting part of this story, to me, is Paypal's claim that it can't free the donations to the intended charity because "we do not have a tie to the Red Cross," but can only send them to United Way.

Is there a more clear example of utter horseshit?
posted by mediareport at 9:01 PM on September 4, 2005

If paypal keeps a cent of profit for themselves they are dagnasty evil.
posted by lorrer at 9:23 PM on September 4, 2005

With apologies, I'll simply repeat GoRK's post on Slashdot here, as it lays things out quite well. I'm all for getting worked up and annoyed around this tragedy, but I'm also trying to be at least a little reasonable.

Can’t really disagree with them… - by GoRK (Score: 4, Interesting)
While I do know that in many cases (and probably this one too) Paypal likes to be quite draconian, in this case I have to wonder if they didn’t actually have a legitimate case against this particular account. After all, a friend of mine is also running a PayPal drive and has accepted far MORE money (Over $35,000) into it than the SA account and has had no problems whatsoever with paypal. Of course not only does he publish the records of the donation money going to charity at the maximum rate that he can extract the money from the paypal account ($3,000/day), he has also filed large amounts of paperwork with both the charities and with paypal to stay above board with all of this. The last time that he did a donation drive, paypal even reimbursed 100% of the transaction and CC fees to him.

Unfortunately, paypal makes this kind of a payment avenue and “tip jar” type donation system so easy for people to set up that most forget that there are a lot of complicated requirements when you start accepting and spending large amounts of money like this for the purposes of charitable donation. There are tax implications surrounding the money and requirements surrounding the donations for the donor, for the intermediary, for paypal, and for the charity. If you don’t abide by them properly you’re going to get shut down.

I’m sure they are sincere, but the way SA operates kind of makes you think that they could easily have brought this on themselves — going nuts about the Paypal freeze probably isn’t the best thing to do to get it resolved either, but it’s typical SA style. I hope for the sake of all the donors and the charities involved that at least for once the SA people act maturely in this dispute or else all that money will be sitting there for weeks while the SA forums go crazy with the typical threats of retaliation and the normal fare while nothing happens.

posted by VulcanMike at 9:28 PM on September 4, 2005

SomethingAwful was up briefly last night (it's down again now, due to the hurricane). The members were, of course, screaming "goon justice" and cursing PayPal. Lowtax, the forum administrator, was also hopping mad, but with good reason: $3,000 in donations (at least) was being lost every hour, and there was no word on when the money would be released.

SA has proven itself to be a good charity citizen in the past. Just last week, goons bought $7,000 worth of toys and donated them to the Ronald McDonald house in New York City. They banded together to buy body armor for units headed out to Iraq. Lowtax set up the "tip jar" account instead of a direct link to the Red Cross because he wanted to send out free SA merchandise to people who donated more than $10, and Paypal information was the best way to get donors' addresses.

I understand that Paypal has an obligation to freeze accounts with suspicious activity, but for god's sake, they should at least do a little research first, and not be so impenetrable when users try to figure out how to get their money released. Lots of money that could go to a very good cause is being lost here.
posted by galamud at 9:41 PM on September 4, 2005

Unexpectedly sensible words.

It remains baffling why Paypal can't send donations to the Red Cross. Was there a problem with that in the past? Who shut it down, Paypal or the ARC? I'd like to know who, how, and why.
posted by dhartung at 9:46 PM on September 4, 2005

Right, paypal made about $520 in fees for this drive, and they could have spent 10 minutes on the phone trying to straighten things out?

I realize they need to be careful, but careful dosn't mean cheap and lazy.

How hard could it have been to figure out how to transfer the money to the red cross?
posted by delmoi at 9:52 PM on September 4, 2005

thanks for posting this because it explains some of the problems i had this week trying to find a quick way to get the readers of my blog to be able to donate to the Red Cross.

i logged onto PayPal (which always gives you a stupid self-serving ad on their splash page) in search for a Red Cross link. the splash page didnt have one, so i went to the Community link on the My Account page

on the right hand side of the Community page it says

It's easy to donate using your PayPal account. Just visit the PayPal Shops page and click the Non-Profit category link to find a wide selection of charities to choose from.
so i click the PayPal Shops link and i dont see a Non-Profit category, i even clicked the View All link in the Shop Categories column and again, no Non-Profit category

so i type Red Cross into the search box and it gives me 21 pages of results NONE of which are to the Red Cross.

for a company that gets a lot right, owned by a bigger company drowning in profit, you'd think during a tragedy like this theyd get their act together.

so thanks for letting me know the non-relationship between PayPal and the Red Cross
posted by tsarfan at 10:04 PM on September 4, 2005

Lowtax is an immature cock, but he's an immature cock with a heart of gold...

posted by stenseng at 12:02 AM on September 5, 2005

see Matt's comment from a related thread:

I could see why paypal would lock accounts, as it seems that asking for hurricane relief donations that the owner swears he will give to the red cross sounds kind of fishy to an outside organization handling payments and trying to keep down fraud.
posted by mathowie at 8:14 PM PST on September 3 [!]

I think this explains the reasons. Nevertheless, it does not explain why the situation has yet to be resolved. Paypal is an unsavory business and their purchase by eBay seems to have done little to correct things. It is filled with fraud and their response in locking accounts, freezing funds and generally being hard to reach is nearly as bad. Since competition is limited, and they refuse to regulate themselves, it is time for the government to step in with some regulations that bring them into the banking fold. Either that or some plaintiff's lawyer takes them on in a class action suit seeking punitive damages. Meg should be ashamed that she lets this situation continue.
posted by caddis at 12:34 AM on September 5, 2005

Meg? Whch Meg, and what's the paypal connection?
posted by dabitch at 1:02 AM on September 5, 2005

Meg Whitman, CEO of eBay. She is really a very good executive, very bright and very ethical, yet she lets the Paypal miseries continue.
posted by caddis at 1:38 AM on September 5, 2005

ah, thanks caddis. She should put paypal out of its misery.
posted by dabitch at 4:30 AM on September 5, 2005

Regulating PayPal like a bank isn't the answer. Excessive regulation is what killed PayPal in the first place. Let them fester in their own bureaucratic largesse. It's only a matter of time before a competitor springs forth and steals significant market share from them.

But if you start forcing money transfer services to follow the maze of regulations banks are forced to follow, you'll make it impossible for any PayPal competitors to emerge. It would just be too expensive.
posted by rbalko at 4:38 AM on September 5, 2005

PayPal's response seems perfectly appropriate here -- and I think any bank or other payment processor would and should do the same thing. Think about it: What if I put a "click here to donate to the Red Cross" link on my web site, with the payments going to my own account (resulting in tens of thousands of dollars in payments)? What would be the appropriate response of the payment service?

I'm sure SA is well-intentioned but they've done something very stupid here. This is the Internet and the Red Cross can accept their own donations online -- it would be just as easy (easier, actually) to direct visitors to the donation form on the Red Cross's own site.
posted by winston at 6:40 AM on September 5, 2005

Eh? Did paypal just help LittleGreenFootballs out in a much similar situation? PayPal supervisor realizes error; avoids major PR fiasco, releases all LGF funds! (or what the heck is this?)
Courtney Grayson, a supervisor at PayPal, just saved PayPal from a public relations nightmare when she made the brave and outside-the-box judgment call to completely release all LGF funds raised for Hurricane Relief - $9,818.79 - which had been indefinitely quarantined after being identified by a PayPal computer as a possible phishing scam. Furthermore, she has put a notation on the account that it may not be restricted in the future without her personal permission!

This is the type of decision making needed in times of disaster. Her correct judgment call released donated funds which had suddenly been placed in indefinite limbo, until i had completed a registration process with the IRS. Had Ms. Grayson not exhibited flexibility and sound judgment in this situation, these funds would not have been available to further assist the 500 New Orleans refugees in the camp in Newton, Texas, which are currently eating food purchased with money from this relief fund.

posted by dabitch at 11:56 AM on September 5, 2005

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