Earlier this week Huel.com, one of the most popular new start-up businesses in the UK, delivered an excoriating judgment against PayPal, triggering an outpouring of similar condemnation from other businesses, who are now threatening an organised revolt against the much maligned web-based payment brand.
Huel’s judgement, following a decision by PayPal to withhold over £40,000 of the start-up’s money, has become the talk of the small business community. Some of the more serious comments made about PayPal on the 21,555 strong London Startups Facebook group include “(PayPal) are the most public criminal company out there,” and “(PayPal) are a digital scandal with so many cases.”
Possibly unknown to PayPal – who are not known for their social media intelligence – Huel founder Julian Hearn is reporting his case to the Financial Conduct Authority (FCA), and hundreds if not thousands of other London start-ups could follow suit, potentially triggering a formal investigation.
“PayPal are currently withholding over £40,000 of my money,” Hearn said. “I was given no warning and it took me three phone calls over three days, speaking to three people on each occasion to find out the reason. When they finally told me the reason I was shocked. A spike in sales - apparently we had sold too much stuff and generated too much commission for PayPal. Now my account won’t get reviewed for 90 days. And I will now get paid every 21 days. I question whether this is even legal?
“If this is not resolved quickly, I will be leaving PayPal. They probably won’t care, but hopefully the fact that over 21,000 start-ups are reading about, and potentially taking action against, PayPal’s anti-business policy, it might make them rethink.”
It’s not the first time that PayPal has been threatened by a customer revolt, although never before has there been such a highly focused collective uproar among angry and frustrated UK businesses.
PayPal has a reputation for being the company that froze funds planned for toys for poor children at Christmas, forced someone to destroy a violin rather than return it for refund, and blocked fundraising for Alzheimer’s research, among numerous other reasons.
Anti PayPal sentiment emerging on the London Startups Facebook group page include stories from respected organisations such as The Joe Strummer Foundation, who claim they “had a tough time with PayPal selling tickets for a festival they organised,” and the Outdoor Swimming Society who sold 1800 tickets for an event and had £150,000 withheld by PayPal until after the event. “An utter travesty,” they said. Another small business said it had “£50k locked up for months.”
Regretsy, the now defunct blog that highlighted some of the most ridiculous items listed on peer-to-peer commerce site Etsy, got into a fight with PayPal in 2011, after using the wrong button to accept donations for a Secret Santa campaign, which raises money to buy toys for needy children. Because Regretsy used the “donate” button rather than the “buy now” or “shopping cart” button, PayPal demanded that the site refunded all of the donations ($20,000), minus the transaction fees, shut down Regretsy’s charity campaign and froze the site founder April Winchel’s personal and business accounts. After attracting a lot of criticism, PayPal eventually backed down and made a donation to the fund.
Like Huel, it seems that Regretsy was a victim of its own success. Seeking to raise money for 200 hundred families in the Regretsy community “who might not get much otherwise,” the $4,000 goal was met within hours after it was posted on the site. According to PayPal, the red flags started flying because of how fast the donations came in. It wasn’t that Regretsy did anything wrong – it was that they did it too well, and that set off a review process at PayPal.
According to a PayPal executive, quoted at the time, this part of the process is “subjective. At this point, a representative makes a call based on very sophisticated and nuanced criteria they don’t have to disclose to you, and by that I mean, I had a big lunch and I’m tired.”
“PayPal acts like a law unto itself,” Hearn said. “It has to see sense or risk a serious customer revolt. Brands can fall as fast and as hard as they have climbed. While a reputation can take years to build, it can be battered or ruined in a very short time. Look at Tesco, VW, FIFA, J.P. Morgan, Hyundai, BlackBerry and Groupon to name but a few. No brand is bigger than it’s customers.”