In the past, I’ve been a reasonably strong defender of Paypal, a company that a not-insignificant number of people hate (with the fury of a thousand suns) for having what they claim are capricious policies and an impenetrable bureaucracy. (Most recently, I participated in a thread on MetaTalk, the discussion board for MetaFilter, defending Paypal’s general policies and behavior.) I have to say, though, that the experience that the folks over at Something Awful have had with Paypal over the past 24 hours has completely swung me to the other side of the fence. (Unfortunately, the main Something Awful servers are located in New Orleans, and thus are out of commission; the story has unfolded on the temporary server, and you can read the posts as information trickled in.)

As I understand it, the story is this: Rich Kyanka, the guy who runs Something Awful, set up a donation fund via Paypal to collect money for the Red Cross hurricane relief efforts. In under seven hours, he had collected over $3,000 an hour — nearly $20,000 total — and was nearly speechless in his admiration for the members of the site that had given so selflessly. Soon thereafter, though, Paypal shut down the account, claiming that they had received “more than one report of suspicious behavior” from his “buyers.” He was shunted into an automated dispute resolution process that demanded he provide some sort of “proof of delivery” for all the donation transactions; hilariously, Paypal’s web app won’t let a recipient of money proceed with the dispute resolution until he or she chooses one of the people who reported suspicious behavior from a pull-down and then upload tracking information, but the app didn’t list a single person as having made a complaint, so Rich wasn’t even able to proceed with the resolution request. (And the whole time, the $20K was sitting in Paypal’s accounts, not available either to Rich, the Red Cross, or the original donors.)

Rich had a hard time getting an actual human on the phone, and when he did, the woman wasn’t able to explain anything about why he had actually been shut down. (Looking over Paypal’s Acceptable Use Policy, neither can I.) She told him he’d have to send a fax to Paypal with all sorts of personal info (driver’s license, bank statement, credit card statement); after doing some sort of review of that information, they still refused to release his account. It wasn’t for many more hours that he finally received information from Paypal explaining that the only resolution they would agree to was a refund of all the donor’s money to each individual person. Stunning — Paypal’s seemingly-random jackassery means that $20K of money that could and should be going to the relief effort is now being returned.

Yep, I’m at the point where I can admit that perhaps Paypal does suck.

Comments

While I’m perfectly willing to agree that Paypal sucks for doing this, let me play devil’s advocate.
It seems the only reason for SA to have set up a special account to collect money for the Red Cross is so that they can put together a big lump sum and say it came from the SA users. So, what is more important, getting money to the Red Cross, or getting recognition for yourself? Maybe they should have just told people to send the money directly to the Red Cross and skipped the middleman. There is an old Jewish dogma I read somewhere, it says it is a bit less charitable to give money when people know where it came from, than to give money with no expectation of recognition of where it came from.
If you want to help with Red Cross donations, great. But don’t use it as a vehicle to improve your public image.

• Posted by: Charles Eicher on Sep 4, 2005, 11:49 PM

I’ve heard that argument, Charles, but I never understand it. We perform mass donation drives all the time in this country — telethons for 9/11 relief, donation jars on luncheonette countertops, the Jimmy Fund donation bins in Fenway Park, and on and on. There are people who are more likely to give when they can do so in the context of a person or group to whom they feel connected; in my personal experience, making generic pleas asking people to join the bone marrow donation registry is far, far less effective than are the bone marrow drives that individual communities run in the name of someone in that community with leukemia who needs a bone marrow transplant.

Those who want to donate directly to a cause generally have that option, and when a community starts up a fund drive, those who donate as a result of joining in that effort have that option as well. And in the end, it just means more resources for the charities to use to further their cause, which is as good as it gets.

• Posted by: Jason on Sep 5, 2005, 9:59 AM

It’s a fairly easy doctrine to understand. If you donate to charity anonymously and thus have no expectation of recognition, you are doing it solely out of charitable motivations. If you donate with the expectation of getting recognition for your donation, you may be doing it solely to impress people. This sort of thing is known as “spiritual materialism,” someone who goes around saying “lookit me, I donated THOUSANDS of BUCKS to charity” is merely applying the competitiveness of materialism into the spiritual realm.

• Posted by: Charles on Sep 5, 2005, 9:04 PM

good thoughts on metafilter/slashdot:

Canít really disagree with themÖ - 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 didnít 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 ďtip jarĒ 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 donít abide by them properly youíre going to get shut down.

Iím sure they are sincere, but the way SA operates kind of makes you think that they could easily have brought this on themselves ó going nuts about the Paypal freeze probably isnít the best thing to do to get it resolved either, but itís 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 PST on September 4

• Posted by: storyville on Sep 5, 2005, 9:21 PM

Fundamentally, so long as a charity gets the money they need, why should you — an outsider to the entire process — be at all concerned about the process of how the money got there? The people giving the money wanted to give it, and whether they donated directly or through a third-party intermediary, the charity gets the money.

Now, add to that fact that there are times when third-party intermediaries can motivate donations when they’d otherwise not be given; good examples are donation jars in restaurants, fund drives in workplaces, and things like the Something Awful fund drive. In these times, more money gets given to charities, which is hard to argue is anything but a good thing.

(By the way, Charles, it’s unclear to me why you are so worked up about this; my comments aren’t directed to you specifically, and it’s a little odd to me that you seem to be taking them that way.)

• Posted by: Jason on Sep 5, 2005, 9:27 PM

Storyville, by quoting that comment, do you condone the behavior whereby Paypal makes it harder to resolve a dispute proportionate to the amount by which one of the disputants discusses the dispute resolution process in public? If so, then I have become that much more saddened at the amount consumers are willing to let companies dictate the draconian terms by which they do business.

• Posted by: Jason on Sep 5, 2005, 9:31 PM

No. I also do not believe that consumers have much say about terms. We (Americans) are not too big of fans of worrying too much about what is happening to the other guy until it effects us. It is unfotunate, but I believe, true.

• Posted by: storyville on Sep 6, 2005, 7:36 AM

Did I seem worked up? I hope not, it wasn’t intended that way, I’m actually trying to be relatively dispassionate about the issue, since everything around this disaster is such a hot-button topic.
Ultimately, the important issue is that charitable relief gets to the people who need it. But the use of any tragedy to raise awareness for the donors, rather than the needy, always bugs me.

• Posted by: Charles on Sep 6, 2005, 2:10 PM
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