1. PayPal
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PayPal Inc.
cc
Type Subsidiary of eBay Inc.
Founded Palo Alto, California, U.S. (1998)
Headquarters San Jose, California, U.S.
Area served Worldwide
Founder(s)
Ken Howery
Max Levchin
Elon Musk
Luke Nosek
Peter Thiel
Key people
Patrick Dupuis, CFO
David Marcus, President
Revenue US$4.4 billion (2011)
Owner eBay Inc.
Website https://www.paypal.com
Alexa rank 38 (August 2012)[1]

2. Advertising Yes
Registration Optional
Available in Multilingual
Current status Active
[show][show]Screenshot
eBay's North First Street satellite office campus (home to PayPal's corporate headquarters)
PayPal is a global e-commerce business allowing payments and money transfers to be made
through the Internet. Online money transfers serve as electronic alternatives to paying with
traditional paper methods, such as checks and money orders.
PayPal is an acquirer, performing payment processing for online vendors, auction sites, and other
commercial users, for which it charges a fee. It may also charge a fee for receiving money,
proportional to the amount received. The fees depend on the currency used, the payment option
used, the country of the sender, the country of the recipient, the amount sent and the recipient's
account type.[2] In addition, eBay purchases made by credit card through PayPal may incur
extrafees if the buyer and seller use different currencies.On October 3, 2002, PayPal became a
wholly owned subsidiary of eBay.[3] Its corporate headquarters are in San Jose, California,
United States at eBay's North First Street satellite office campus. The company also has
significant operations in Omaha, Nebraska, Scottsdale, Arizona, and Austin, Texas, in the United
States, Chennai, Dublin, Kleinmachnow (near Berlin) and Tel Aviv. As of July 2007, across
Europe, PayPal also operates as a Luxembourg-based bank.

3. On March 17, 2010, PayPal entered into an agreement with China UnionPay (CUP), China's
bankcard association, to allow Chinese consumers to use PayPal to shop online.[4] PayPal is
planning to expand its workforce in Asia to 2,000 by the end of the year 2010.[5][6][datedinfo]
Between December 4–9, 2010, PayPal services were attacked in a series of denial-of-service
attacks organized by Anonymous in retaliation for PayPal's decision to freeze the account of
WikiLeaks citing terms of use violations over the publication of leaked US diplomatic
cables.[7][8][9][10]
Contents
[hide]
 1 History
o 1.1 Beginnings
o 1.2 Acquisition by eBay
 2 Services
o 2.1 PayPal business model evolution
 2.1.1 Phase-1
 2.1.2 Phase-2
 2.1.3 Phase-3
o 2.2 Local restrictions
 2.2.1 Japan
 2.2.2 Taiwan
 2.2.3 Brazil
 2.2.4 India
o 2.3 PayPal Labs
 3 Payment sources and destinations
 4 Regulatory status
 5 Safety and protection policies
 6 Security
o 6.1 Security token
o 6.2 MTAN
 7 Regulation
 8 Fraud
 9 Phishing
 10 Shop-for-free Bugs
 11 Criticism and litigations
 12 Litigation
 13 See also
 14 References
[edit] History

4. [edit] Beginnings
The current incarnation of PayPal is the result of a March 2000 merger between Confinity and
X.com.[11] Confinity was founded in December 1998 by Max Levchin, Peter Thiel, Luke Nosek,
and Ken Howery, initially as a Palm Pilot payments and cryptography company.[12] X.com was
founded by Elon Musk in March 1999, initially as an Internet financial services company. Both
Confinity and X.com launched their websites in late 1999.[13] Both companies were located on
University Avenue in Palo Alto. Confinity's website was initially focused on reconciling beamed
payments from Palm Pilots[14] and X.com's website initially featured financial services. Both
services offered email payments as a feature.
At Confinity, many of the initial recruits were alumni of the Stanford Review, also founded by
Peter Thiel, and most early engineers hailed from the University of Illinois at Urbana-
Champaign, recruited by Max Levchin. On the X.com side, Elon Musk recruited a wide range of
technical and business personnel, including many that were critical to the combined company's
success, such as Amy Klement, Sal Giambanco, Roelof Botha[15] of Sequoia Capital, Sanjay
Bhargava and Jeremy Stoppelman.[16]
To block potentially fraudulent access by automated systems, PayPal used a system (see
CAPTCHA) of making the user enter numbers from a blurry picture, which they coined the
Gausebeck-Levchin test.[17]
eBay watched the rise in volume of its online payments and realized the fit of an online payment
system with online auctions. eBay purchased Billpoint in May 1999, prior to the existence of
PayPal. eBay made Billpoint its official payment system, dubbing it "eBay Payments", but cut
the functionality of Billpoint by narrowing it to only payments made for eBay auctions. For this
reason, PayPal was listed in many more auctions than Billpoint. In February 2000, the PayPal
service had an average of approximately 200,000 daily auctions while Billpoint (in beta) had
only 4,000 auctions.[18][19][20] By April 2000, more than 1,000,000 auctions promoted the PayPal
service.[21] PayPal was able to turn the corner and become the first dot-com to IPO after the
September 11 attacks.[22]
In 2011, PayPal announced that it would begin moving its business offline so that customers can
make payments via PayPal in stores.[23]
[edit] Acquisition by eBay
In October 2002, PayPal was acquired by eBay for $1.5 billion.[24] PayPal had previously been
the payment method of choice by more than fifty percent of eBay users, and the service
competed with eBay's subsidiary Billpoint, Citibank's c2it, whose service was closed in late
2003, and Yahoo!'s PayDirect, whose service was closed in late 2004. Western Union announced
the December 2005 shut down of their BidPay service but subsequently sold it in 2006 to
CyberSource Corporation. BidPay subsequently ceased operations on December 31, 2007. Some
competitors that offer some of PayPal's services, such as Google Checkout, Wirecard, and
Moneybookers remain in business, despite the fact that eBay now requires everyone on its
Australian and United Kingdom sites to offer PayPal.[25][26] eBay Australia was subsequently

5. forced to moderate its position by the Australian Competition & Consumer Commission,
mandating that sellers on eBay Australia offer PayPal as one of the (but not necessarily the only)
payment methods.[27] These accepted payment methods include bank deposit, cheques and
money orders, escrow, and credit cards (processed by other than PayPal).[28]
In January 2008, PayPal agreed to acquire Fraud Sciences, a privately held Israeli start-up
company with expertise in online risk tools, for $169 million, in order to enhance eBay and
PayPal's proprietary fraud management systems and accelerate the development of improved
fraud detection tools.[29] In November 2008, the company acquired Bill Me Later, an online
payments company offering transactional credit at over 9000 online merchants in the US.[30]
PayPal's total payment volume, the total value of transactions, was US$ 60 billion in 2008, an
increase of 27 percent over the previous year,[31] and US$ 71 billion in 2009, an increase of 19
percent over the previous year.[32] The company continues to focus on international growth and
growth of its Merchant Services division, providing e-payments for retailers on eBay.
[edit] Services
As of 2011 PayPal operates in 190 markets and manages more than 232 million accounts, more
than 100 million of them active. PayPal allows customers to send, receive, and hold funds in 25
currencies worldwide.[31] These currencies are the Australian dollar, Brazilian real, Canadian
dollar, Chinese renminbi yuan (only available for some Chinese accounts, see below), euro,
pound sterling, Japanese yen, Czech koruna, Danish krone, Hong Kong dollar, Hungarian forint,
Israeli new sheqel, Malaysian ringgit, Mexican peso, New Zealand dollar, Norwegian krone,
Philippine peso, Polish zloty, Singapore dollar, Swedish krona, Swiss franc, New Taiwan dollar,
Thai baht and U.S. dollar. PayPal operates locally in 21 countries.
Residents in 194 markets[clarification needed] canuse PayPal in their local markets to send money
online.
PayPal revenues for Q1 2009 were $643 million, up 11 percent year over year. 42 percent of
revenues in Q1 2009 were from international markets. PayPal's Total Payment Volume (TPV),
the total value of transactions in Q1 2009 was nearly $16 billion, up 10 percent year over year.[33]
In 2008, PayPal's TPV off eBay exceeded volume on eBay for the first time. PayPal's Total
Payment Volume in 2008 was $60 billion, representing nearly 9 percent of global e-commerce
and 15 percent of US e-commerce.[34]
At an analyst day on March 11, 2009, eBay CEO John Donahoe announced that PayPal could be
a larger driver of revenue than the eBay marketplaces business.[35] RIM announced that PayPal
will be the only payment mechanism for its Blackberry App World, which launched on April 1,
2009.[36] However, by April 2011 Rim offer two other options: credit card and bill payment from
carrier.[37]

6. PayPal launched Student Accounts for teens in August 2009 allowing parents to set up a student
account, transfer money into it, and obtain a debit card for student use. The program provides
tools to teach teens how to spend money wisely and take responsibility for their actions.[38][39]
In November 2009 PayPal opened its platform, allowing other services to get access to its code
and to use its infrastructure in order to enable peer-to-peer online transactions.[40]
PayPal Operations Center and main office located in Omaha, NE
Although PayPal's corporate headquarters are located in San Jose, PayPal's operations center is
located in Omaha, Nebraska, where the company employs more than 2,000 people as of 2007.[41]
PayPal's European headquarters are in Luxembourg and international headquarters in Singapore.
In October 2007, PayPal opened a data service office on the north side of Austin. The company
sometime back opened a technology center in Scottsdale, Arizona,[42] and Chennai, India.[43]
On November 28, 2011 PayPal reported Black Friday brought record mobile engagement
including a 538 percent increase in global mobile payment volume when compared to Black
Friday 2010.[44]
[edit] PayPal business model evolution
PayPal’s success in terms of users and volumes was the product of a three-phase strategy
described by former eBay CEO Meg Whitman: “First, PayPal focused on expanding its service
among eBay users in the U.S. Second, we began expanding PayPal to eBay’s international sites.
And third, we started to build PayPal’s business off eBay”.[45]
[edit] Phase-1
In the first phase, payments volumes were coming mostly from eBay auction web-site. The
system was very attractive to auction sellers, most of which were individuals or small businesses
that were unable to accept credit card, and for consumers as well. In fact, many sellers could not
qualify for a credit card “merchant account” because they lacked a commercial credit history.
The service also appealed to auction buyers because they could fund PayPal accounts using
credit cards or bank account balances, without divulging credit card numbers to unknown sellers.
PayPal employed an aggressive marketing campaign to accelerate its growth, depositing $10 in
new users’ PayPal accounts (+$10 for each new user they referred).

7. [edit] Phase-2
The biggest challenge in 2000 remained PayPal’s unsustainable business model. Initially, PayPal
offered its service with lower cost, planning to earn interest on funds in users’ PayPal accounts
(i.e., the “float”). However, most recipients withdrew their funds immediately. Furthermore, a
large majority of senders funded their payments using credit cards, which cost PayPal roughly
2% of payment value, rather than relying on much less with business accounts qualified for seller
protection against losses due to chargebacks, provided that they complied with reimbursement
policies (e.g., retaining traceable proof of shipping to a confirmed address or requiring a
signature receipt for items valued over $250).
[edit] Phase-3
After fine-tuning PayPal’s business model and increasing its domestic and international
penetration on eBay, PayPal started its off-eBay strategy. Strong growth in active users growth
by adding users across multiple platforms, despite the slowdown in on-eBay growth and low-
single-digit user growth on the eBay site. A late 2003 reorganization created a new business unit
within PayPal—Merchant Services—to provide payment solutions to small and large e-
commerce merchants outside the eBay auction community. Starting in the second half of 2004,
PayPal Merchant Services unveiled several initiatives to enroll online merchants outside the
eBay auction community, including:
 Lowering its transaction fee for high-volume merchants from 2.2% to 1.9% (while
increasing the monthly transaction volume required to qualify for the lowest fee to
$100,000)
 Encouraging its users to recruit non-eBay merchants by increasing its referral bonus to a
maximum of $1,000 (versus the previous $100 cap)
 Persuading credit card gateway providers, including CyberSource and Retail Decisions
USA, to include PayPal among their offerings to online merchants.
 Hiring a new sales force to acquire large merchants such as Dell, Apple's iTunes, and
Yahoo! Stores, which hosted thousands of online merchants
 Reducing fees for online music purchases and other “micropayments”
 Launching PayPal Mobile, which allowed users to make payments using text messaging
on their cell phones
[edit] Local restrictions
PayPal, as of yet, has not provided its services to many places that are known[by whom?] to have a
high percentage of internet shoppers such as Bangladesh, Pakistan, Egypt, Afghanistan, Kosova,
Albania, Serbia, Montenegro and Georgia.
[edit] Japan
In late March 2010, new Japanese banking regulations forced PayPal Japan to suspend the ability
of personal account holders registered in Japan from sending or receiving money between
individuals and as a result are now subject to PayPal's business fees on all transactions.[46][47]

8. [edit] Taiwan
As of mid July 2010, users in Taiwan have noticed that the "Personal" tab for sending money has
been omitted without notice. There is no longer an option to send personal payments, thus
forcing all recipients to pay a fee.[citation needed]
[edit] Brazil
As of mid-November 2010, users in Brazil also have noticed that the "Personal" tab for sending
money has been omitted without notice. There is no longer an option to send personal payments,
thus forcing all recipients to pay a fee. Balance transfers between PayPal accounts of the same
account holder incur an additional 6.4% fee.
As of beginning January 2011, Brazilian users are no longer allowed to withdraw money using
credit/debit cards.[citation needed]
[edit] India
As of March 2011[citation needed], PayPal made changes to the User Agreement for Indian users to
comply with Reserve Bank of India regulations. Notable changes to the agreement were:
 Export related payments for goods and services may not exceed $500.
 Any balance or future payments must not be used to buy goods or services but transferred
to a bank account within 1 day from the receipt of payment.
 Credit/Debit cards must be used to pay through Paypal.[citation needed]
The per transaction limit just been changed to USD 3000, since 14 October 2011.
PayPal wants to make India an incubation center for the company's employee engagement
policies. In 2012, PayPal hired 120 people for its offices in Chennai and Bangalore. PayPal plans
to recruit 1000 candidates for its Bangalore Development center.[48]
[edit] PayPal Labs
PayPal's innovation environment, PayPal-Labs.com,[49] hosts several outreach and experimental
projects such as the storefront application,[50] the Myspace and Facebook donation widgets, and
the PayPal blog.[51]
[edit] Payment sources and destinations
Originally, a PayPal account could be funded with an electronic debit from a bank account or by
a credit card at the payer's choice. But some time in 2010 or early 2011, PayPal began to require
a verified bank account after the account holder exceeded a predetermined spending limit. After
that point, PayPal will attempt to take funds for a purchase from funding sources according to a
specified funding hierarchy. If you set one of the funding sources as Primary, it will default to
that, within that level of the hierarchy (for example, if your credit card ending in 4567 is set as

9. the Primary over 1234, it will still attempt to pay money out of your PayPal balance, before it
attempts to charge your credit card). The funding hierarchy is (1) a balance in the PayPal
account; (2) a PayPal credit account, PayPal Extras, PayPal SmartConnect, PayPal Extras
MasterCard or Bill Me Later (if selected as primary funding source) (It can bypass the Balance);
(3) a verified bank account; (4) other funding sources, such as non-PayPal credit cards.[52]
The recipient of a PayPal transfer can either request a check from PayPal, establish their own
PayPal deposit account or request a transfer to their bank account.
[edit] Regulatory status
Peter Thiel, the founder of PayPal, has stated that PayPal is not a bank because it does not
engage in fractional-reserve banking.[53] Rather, PayPal's funds that have not been disbursed are
kept in commercial interest-bearing checking accounts.[54]
In the United States, PayPal is licensed as a money transmitter on a state-by-state basis.[55]
PayPal is not classified as a bank in the United States, though the company is subject to some of
the rules and regulations governing the financial industry including Regulation E consumer
protections and the USA PATRIOT Act.[56]
In 2007, PayPal Europe was granted a Luxembourg banking license, which, under European
Union law, allows it to conduct banking business throughout the EU.[57] It is therefore regulated
as a bank by Luxembourg's banking supervisory authority, the Commission de Surveillance du
Secteur Financier (CSSF).[58][59][60]
In Australia, PayPal is licensed as an Authorised Deposit-taking Institution (ADI) and is thus
subject to Australian banking laws and regulations.[61]
[edit] Safety and protection policies
The PayPal Buyer Protection Policy states that the customer may file a buyer complaint within
45 days if they did not receive an item or if the item they purchased was significantly not as
described. If the buyer used a credit card, they might get a refund via chargeback from their
credit-card company. However, in the UK, where such a purchaser is entitled to specific
statutory protections (that the credit card company is a second party to the purchase and is
therefore equally liable in law if the other party defaults or goes into liquidation) under Section
75 Consumer Credit Act 1979, the purchaser loses this legal protection if the card payment is
processed via PayPal.[62]
According to PayPal, it protects sellers in a limited fashion via the Seller Protection Policy.[63] In
general the Seller Protection Policy is intended to protect the seller from certain kinds of
chargebacks or complaints if seller meets certain conditions including proof of delivery to the
buyer. PayPal states the Seller Protection Policy is "designed to protect sellers against claims by
buyers of unauthorized payments and against claims of non-receipt of any merchandise". The
policy includes a list of "Exclusions" which itself includes "Intangible goods", "Claims for

10. receipt of goods 'not as described'" and "Total reversals over the annual limit". There are also
other restrictions in terms of the sale itself, the payment method and the destination country the
item is shipped to (simply having a tracking mechanism is not sufficient to guarantee the Seller
Protection Policy is in effect).[64] The PayPal Seller Protection Policy does not provide the
additional consumer protection afforded by UK consumer legislation (e.g., Sale of Goods Act)
and in addition it cannot be enforced in the Courts because PayPal operates from Luxembourg,
outside all three of the UK legal jurisdictions.
[edit] Security
A credit-card sized alternative to the keychain security token, the PayPal Keycard generates a
temporary login code to authenticate the user.
[edit] Security token
Main article: Security token
In early 2006, PayPal introduced an optional security key as an additional precaution against
fraud. A user account tied to a security key has a modified login process the account holder
enters his or her login ID and password, as normal, but is then prompted to press the button on
the security key and enter the six-digit number generated by it. For convenience, the user may
append the six-digit to his or her password in the login screen. This way he or she is not
prompted for it on another page. Using this method is required for some services, such as when
using PayPal through the eBay application on iPhone.
This two-factor authentication is intended to make account compromised by a malicious third
party without access to the physical security key difficult, although it does not prevent so-called
Man in the Browser (MITB) attacks. However, the user (or malicious third party) can

11. alternatively authenticate by providing the credit card or bank account number listed on his or
her account. Thus, the PayPal's implementation does not offer the security of true two-factor
authentication.
The key currently costs US$29.95 for all users with no ongoing fees.[65] The option of using a
security key with one's account is currently available only to users registered in Australia,
Germany, Canada, the United Kingdom, and the United States.[66]
[edit] MTAN
It is also possible to use a mobile phone to receive an MTAN (Mobile Transaction
Authentication Number) via SMS.[67] Like all security measures, there have been reports of
vulnerabilities to older mobile handsets.[68]
[edit] Regulation
In Europe, PayPal is registered as a bank in Luxembourg under the legal name PayPal (Europe)
Sàrl et Cie SCA, a company regulated centrally by the Luxembourg bank authority, the
Commission de Surveillance du Secteur Financier (CSSF)[69] (note that all of the company's
European accounts were transferred to PayPal's bank in Luxembourg on July 2, 2007.[70]) Prior
to this move, PayPal had been registered in the UK as PayPal (Europe) Ltd, an entity which was
licensed as an Electronic Money Issuer with the UK's Financial Services Authority (FSA) from
2004. This ceased in 2007, when the company moved to Luxembourg.[71][72]
In the US, although PayPal has an extensive User Agreement,[73] PayPal is not directly regulated
by the U.S. federal government, because it serves as a payment intermediary.[74] PayPal is
regulated as a money transmitter, 31 C.F.R. 1010.100(ff)(5). PayPal is also subject to state
regulation, but state laws vary, as do their definitions of banks, narrow banks, money services
businesses and money transmitters. The most analogous regulatory source of law for PayPal
transactions comes from P2P payments using credit and debit cards. Ordinarily, a credit card
transaction, specifically the relationship between the issuing bank and the cardholder, is
governed by the Truth in Lending Act (TILA) 15 U.S.C. §§ 1601-1667f as implemented by
Regulation Z, 12 C.F.R. 226, (TILA/Z). TILA/Z requires specific procedures for billing errors,
dispute resolution and limits cardholder liability for unauthorized charges.[75] Similarly, the legal
relationship between a debit cardholder and the issuing bank is regulated by the Electronic Funds
Transfer Act (EFTA) 15 U.S.C. §§ 1693-1693r, as implemented by Regulation E, 12 C.F.R. 205,
(EFTA/E). EFTA/E is directed at consumer protection and provides strict error resolution
procedures.[76] However, because PayPal is a payment intermediary and not otherwise regulated
directly, TILA/Z and EFTA/E do not operate exactly as written once the credit/debit card
transaction occurs via PayPal. Basically, unless a PayPal transaction is funded with a credit card,
the consumer has no recourse in the event of fraud by the seller.[citation needed]
In India, as of January 27, 2010, PayPal has no cross-border money transfer authorization. In The
New York Times article "India’s Central Bank Stops Some PayPal Services", Reserve Bank of
India spokesman Alpana Killawalla stated: "Providers of cross-border money transfer service
need prior authorization from the Reserve Bank under the Payment and Settlement Systems Act,

12. PayPal does not have our authorization."[77] PayPal is not listed in the "Certificates of
Authorisation issued by the Reserve Bank of India under the Payment and Settlement Systems
Act, 2007 for Setting up and Operating Payment System in India".[78]
[edit] Fraud
The examples and perspective in this section may not represent a worldwide view of
the subject. Please improve this article and discuss the issue on the talk page. (January
2011)
If an unauthorized third party obtains and uses someone's PayPal login information and
completes a transaction using the accountholder's debit or credit card, EFTA/E and TILA/Z
make PayPal responsible for the breach. There are, of course, fact specific exceptions to this rule.
One is if funds are illicitly withdrawn from a PayPal deposit account. In that situation, neither
PayPal nor the bank is required to return the funds, because the agreement between a consumer
and PayPal makes those types of transactions authorized.[79]
PayPal account holders' private information is marginally protected under one federal law. Since
PayPal is a financial institution under the Gramm-Leach-Bliley Act (GLB), it cannot disclose its
account holders' non-public personal information to third parties unless account holders opt in to
those disclosures.[80]
If an account is subject to fraud or unauthorized use, PayPal puts the "Limited Access"
designation on the account. At this point, the account holder must:
 Log in
 Reset their password
 Develop a set of security questions (based on the subjective and not fact — e.g., "What is
your favorite ice cream?" not "What is your mother's maiden name?")
 Verify location by phone or by mail
 Provide a set of documents, including but not limited to, a copy of the user's social
security card and state ID, home utility bills, business licenses, and proof of original
purchase of recently sold good
[edit] Phishing
PayPal presents anti-phishing advice on their website[81] for identifying and reporting phishing.
PayPal encourages consumers to report all phishing emails to them.
[edit] Shop-for-free Bugs
In its x.commerce innovate developer conference 2011, PayPal presented to merchant developers
five types of security flaws which allow malicious shoppers to shop for free in vulnerable web
stores using PayPal.[82] The details of these flaws are documented.[83]

13. [edit] Criticism and litigations
This article's Criticism or Controversy section may compromise the article's neutral
point of view of the subject. Please integrate the section's contents into the article as a
whole, or rewrite the material. (May 2009)
See also: Criticism of eBay
In 2003, PayPal voluntarily ceased serving as a payment intermediary between gambling
websites and their online customers. At the time of this cessation they were the largest payment
processor for online gambling transactions. In 2010, PayPal resumed accepting such transactions,
but only in those countries where online gambling is legal, and only for sites which are properly
licensed to operate in said jurisdictions.[84]
In September 2005, Richard Kyanka, owner of the website Something Awful, set up an account
to collect donations for Hurricane Katrina to be given to the Red Cross. Owing to the high rate at
which donations were made, the account was automatically frozen, and Kyanka criticized the
time and difficulty involved in getting PayPal's customer service to unfreeze the account. In
response to the concerns of Something Awful members over the charity used by PayPal, United
Way, Kyanka finally opted to have the money refunded to the donors so that they could donate
directly to their charities of choice, though PayPal did not refund exchange and handling fees for
international donors.[85][86]
In March 2008, Australian current affairs show Today Tonight aired a segment criticizing
PayPal, with regard to safety, freezing accounts and customer service.[87]
Several PayPal gripe sites and blog posts[88] have been created complaining of problems such as
the freezing of accounts of eCommerce stores if they experience rapid growth, preventing them
from being able to pay suppliers and fulfill orders.[89] One such site, Paypalsucks.com,[90] ranked
third on a Forbes Magazine listing of "Top Corporate Hate Web Sites" in 2005 based on
"hostility" and "entertainment value" of web forum postings and other criteria.[91]
In June 2008, the Australian Competition and Consumer Commission found that, "The evidence
available does not support the view that PayPal is the most secure method of payment, or offers
the best service for all transactions."[92]
In February 2010, PayPal stopped or reversed all "personal" transactions in or out of India
without prior notice. Funds already transferred and transactions that had previously been
"completed" were reversed leaving many vendor accounts over-drafted. Companies, contractors
and service providers throughout India were left in debt to PayPal for services they had already
provided when PayPal, without warning or consent, returned funds vendors had already received
and withdrawn.[93]
In spite of its international reach, PayPal has limited functionalites for multi-country users, most
notably the impossibility to have bank accounts in several countries, or to have a shipping
address in a different country than one's bank account / credit card.

14. In March 2010, PayPal froze donations to Cryptome, seizing over $5300 of in-transit
donations.[94] PayPal refused to inform Cryptome of the reason for this action, claiming that to
disclose why the donations had been confiscated would violate Cryptome's own privacy.[95] A
week later, PayPal offered an apology, which was rejected by Cryptome founder John Young as
"insulting and unacceptable".[96]
In September 2010, PayPal froze the account of Markus Persson, developer of independent video
game Minecraft. Persson stated publicly that he had not received a clear explanation for why the
account was frozen, and that PayPal was threatening to keep the money if they found anything
wrong. His account contained around €600,000.[97][98]
In December 2010, PayPal permanently restricted an account used to raise funds for WikiLeaks
citing it was in violation of the PayPal Acceptable Use Policy. At a conference in Paris, a PayPal
VP, in response to an attendee's question, stated the account was restricted after PayPal was
allegedly pressured by the U.S. State Department.[99] Afterwards, PayPal reiterated the decision
was based on violation of PayPal's Acceptable Use Policy. This was followed by cyber attack on
the paypal.com website and a boycott of PayPal, in which some users closed their PayPal
account in protest.
In November 2011, PayPal moved all shipping to eBay. This move also forced businesses with
multiple users to use only their administrative passwords for all employees, which opens the
door to potential account fraud by merchant employees. As a result of this shipping change,
many PayPal merchants already frustrated with PayPal fraud protection moved their shipping
from PayPal/eBay to other online shippers such as Stamps.com[100]
In December 2011, PayPal froze funds in an account held by April Winchell, the owner of
Regretsy, used for charitable giving, requiring the account holder to refund the donations
collected but keeping the fees charged. Following some public outcry the account was reinstated,
PayPal apologized and donated to her cause.[101][102]
As of December 2011, PayPal is embroiled in a controversy over their policy of holding 30% of
vendor transactions for 90 days, which PayPal argues is intended to make funds available to
customers in the event that a transaction is found to be fraudulent; to provide PayPal the funds to
refund the seller. But PayPal has refused to provide information regarding the reasons particular
sellers have been identified to have funds reserved. There is also criticism about the perceived
arbitrariness of the 90-day waiting period, when customers have only 45 days to file a claim
against a seller, and complaints about the fact that PayPal has not paid interest on the funds held
back. Many sellers have surmised that the policy is due to a desire on the part of PayPal to use
their funds for investing. There is a class action suit pending regarding the practice.[103]
[edit] Litigation
In 2002, CertCo filed a suit against PayPal claiming patent infringement concerning the use of
distributed computing systems that process micropayments, or small cash amounts. In April
2002, CertCo dropped the suit and stated that they had come to a settlement involving, "a non-
consequential payment and mutual releases".[104]

15. In March 2002, two PayPal account holders separately sued the company for alleged violations
of the Electronic Funds Transfer Act (EFTA) and California law. Most of the allegations
concerned PayPal's dispute resolution procedures. The two lawsuits were merged into one class
action lawsuit (In re: PayPal litigation). An informal settlement was reached in November 2003,
and a formal settlement was signed on June 11, 2004. The settlement requires that PayPal change
its business practices (including changing its dispute resolution procedures to make them EFTA-
compliant), as well as making a US$9.25 million payment to members of the class. PayPal
denied any wrongdoing.[105]
In May 2002, Tumbleweed Communications filed a lawsuit against PayPal (and later expanded it
to include eBay) claiming that PayPal had violated its patents for sending personalized links
through e-mail, which PayPal uses to alert its customers about financial transactions. In January
2004, the two parties came to an agreement, but didn't disclose the financial terms of their
licensing agreement.[106]
In June 2003, Stamps.com filed a lawsuit against PayPal and eBay claiming breach of contract,
breach of the implied covenants of good faith and fair dealing, and interference with contract,
among other claims. In a 2002 license agreement, Stamps.com and PayPal agreed that
Stamps.com technology would be made available to allow PayPal users to buy and print postage
online from their PayPal accounts. Stamps.com claimed that PayPal did not live up to its
contractual obligations and accused eBay of interfering with PayPal and Stamps.com's
agreement, hence Stamp.com's reasoning for including eBay in the suit.[107]
In August 2002, Craig Comb and two others filed a class action against PayPal in, Craig Comb,
et al. v. PayPal, Inc.. They sued, alleging illegal misappropriation of customer accounts and
detailed ghastly customer service experiences. Allegations included freezing deposited funds for
up to 180 days until disputes were resolved by PayPal, and forcing customers to arbitrate their
disputes under the American Arbitration Association's guidelines (a costly procedure). The court
ruled against PayPal, stating that "the User Agreement and arbitration clause are substantively
unconscionable under California law," noting their unjustifiable one-sidedness and explicit
prohibition of class actions produces results that "shock the conscience" and indicate PayPal was
"attempting to insulate itself contractually from any meaningful challenge to its alleged
practices".[108]
In September 2002, Bank One Corporation sued PayPal for allegedly infringing its cardless
payment system patents.[109] The following year, PayPal countersued, claiming that Bank One's
online bill-payment system was an infringement against PayPal's online bill-payment patent,
issued in 1998.[110] The two companies agreed on a settlement in October 2003.[111]
In November 2003, AT&T filed suit against eBay and PayPal claiming that their payment
systems infringed an AT&T patent, filed in 1991 and granted in 1994.[112] The case was settled
out of court the following month, with the terms of the settlement undisclosed.[113]
In March 2004, PayPal and New York state's Attorney General, Eliot Spitzer, came to an
agreement to require PayPal to disclose clients' rights and liabilities more accurately and to pay
$150,000 to the state of New York for penalties and the costs of the investigation.[114]

16. In April 2007, one of two anti-trust lawsuits was filed against eBay/PayPal by Michael Malone
of Texas.[115] This suit claimed that the monopolistic relationship between eBay and PayPal
violates United States anti-trust laws. In March 2010, Judge Jeremy Fogel entered summary
judgement in favor of Paypal.[116]
In June 2011, PayPal and Israel Credit Cards–Cal Ltd. were sued for NIS16 million. The
claimants accused PayPal of deliberately failing to notify its customers that ICC-Cal was
illegally charging them for currency conversion fees.[117]