PayPal to Levy Fines for Gambling, Porn

Reuters.com ^ | September 10, 2004 | Lisa Baertlein

[Still Thinking]

SAN FRANCISCO (Reuters) - PayPal, the online payments arm of eBay Inc., on Friday said it will soon fine people up to $500 for uses related to gambling, adult content or services, and buying or selling prescription drugs from noncertified sellers.

The new policy, which takes effect Sept. 24 and applies to both buyers and sellers, marks the first time PayPal has imposed fines for violations of its use policy, spokeswoman Amanda Pires said.

In addition to fines that could be applied to each violation, PayPal may take legal action to recover losses in excess of the fines, Pires said in an interview.

PayPal processes transactions on the Net and at one time had received almost 10 percent of its revenue from online gambling. But it halted the practice under regulatory pressure after its acquisition by eBay in 2002 and now prohibits the processing of gambling and adult transactions. Now it has decided to enforce that policy with fines.

"What you're seeing here is an evolution of our program. We're trying to deter people who would offer PayPal as a way to pay for anything in these categories," said Pires in an interview.

Under the new policy, prescription drug sellers who do not have Verified Internet Pharmacy Practice Sites certification from the National Association of Boards of Pharmacy, and the people who buy from them, also face fines and possible legal action if they do business using PayPal.

Pires said the changes were not in response to any sort of pressure from regulators.

Eric Jackson, a former PayPal executive and author of the new book "The PayPal Wars," had a different view.

He called the new policy "draconian" and said it was likely a two-fold strategy to discourage certain behavior while heading off regulators.

"I can only surmise that PayPal is coming under increasing regulatory pressure and has no choice at this point but to take an aggressive posture," Jackson said.

"I think they're making an emphatic statement that they're making a clean break from gambling in particular," he said.

[AndyJackson]

Typically you pay paypal using a credit card. You can think what you want about what you would like a business to be able to do, but reality is very different. You have to specifically authorize credit card payments. For instance, suppose you specifically authorize a contractor to charge a deposit on a credit card for work he will do. That is an authorized charge. Suppose then he completes the work and it is unsatisfactory and so you refuse to pay the balance until he fixes the work, he cannot go ahead and add the outstanding balance to your credit card. That is not an authorized charge. In fact you can probably go back and charge back the deposit if the work is really unsatisfactory.

That is federal law regarding credit cards.

[KosmicKitty]

If you buy used sex toys, you have bigger issues than how to pay for them. ;-)

Believe me, if I were ever to buy anything even close to that, it would have to be brand spanking, new, in a hermetically sealed package with the surgeon general's seal of approval!! =8-0

[Skooz]

This is not a credit card. It is a PayPal account.

The two are very different. I have a PayPal account and it is in no way attached to any credit cards.

If, when setting up the PayPal account, one agrees to such a charge in advance, they have no room to complain if the charge is assessed as per the agreement they signed on to.

[AndyJackson]

I have had a paypal account. Charges were made to my credit card as the form of payment. I don't know how you agreed to pay them.

I don't care about your opinion. Contract terms contrary to law are unenforceable. I have a merchant account and a lot of experience knowing what I can and cannot do. A credit card is not a merchant's open invitation to charge a clients account willy-nilly. If a client contests a credit card charge you better have a document, recently signed, specifically authorizing that specific charge.

[montag813]

PayPal is a quasi-criminal enterprise. Check out www.paypalsucks.com for nightmare stories regarding PayPal's disgraceful behavior. I don't get how they exist outside the law.

[Skooz]

This is not a credit card. It is a PayPal account.

They can charge the account without charging a credit card. They charge mine all the time and have not once charged a credit card. It comes out of my account balance.

I am NOT talking about unauthorized credit card charges. The issue is whether or not they can charge one's PayPal account for charges both parties agreed to when establishing or renewing the account.

It seems their lawyers have decided that they can.

[AndyJackson]

Are you f'n dense or what? Listen - please. When I opened a paypal account years ago, I paid paypal by credit card. A lot of other people here obviously did the same thing. I did not give them authorization to debit any bank account (which is a really really really dumb thing to do. I mean it is so dumb it is beyond belief). I would hope that the only account you have with them is that you send them money by check. Never ever ever ever give someone unrestriced access to your bank account.

[AndyJackson]

It seems their lawyers have decided that they can.

It seems that their lawyers just spent a lot of money being wrong to.

[Skooz]

Are you f'n dense or what?

No reason to get angry and personal. I am not the one insisting that a PayPal account IS a credit card.

I have given PayPal NO authorization to access my bank account in any way. I cannot conceive of the depths of stupidity it would take to do that.

I have no doubt that PayPal consulted their lawyers before enacting this policy. And I have to believe, though I haven't read the policy, that PayPal would only charge the PayPal account, not a credit card.

Bottom line: Don't like it? Don't use PayPal.

[jbstrick]

"I guess they never heard of a little something called due process."

I guess you never read their terms of service.

[Skooz]

It seems that their lawyers just spent a lot of money being wrong to.

I guess they should just hang around internet bulletin boards and get their legal advice there.

[AndyJackson]

Tell me that you do know that paypal just settled a really large class-action suit before you stick up for how smart their lawyers are.

[Skooz]

I have no idea "how smart their lawyers are."

And I never, ever, ever "stick up for" any lawyers, anywhere, regardless of who signs their paycheck.

[AndyJackson]

Stop putting words in my mouth. I didn't say PayPal is a credit card. Try to get this through your feeble brain. Point 1. Many PayPal client pay PayPal by credit card. [Do you understand this point?] Point 2. for those who pay PayPal by credit care, the only way PayPal can collect on the $500 fine is to charge the credit card. [Do you understand this point?] Point 3. If I did that to one of my clients it would be an unauthorized charge, me client would successfully charge it back, and I would pay a nice fee to my credit card processor. If I established a pattern and practice of this, my merchant priveleges would be terminated.

[Skooz]

Stop putting words in my mouth

I wouldn't presume.

I didn't say PayPal is a credit card.

No. But you have repeatedly stated that government regulations which apply to credit cards apply equally to PayPal accounts.

Try to get this through your feeble brain.

Testy, testy.

Point 1. Many PayPal client pay PayPal by credit card. [Do you understand this point?]

Why, yes, I do. How nice of you to point that out.

Point 2. for those who pay PayPal by credit care, the only way PayPal can collect on the $500 fine is to charge the credit card. [Do you understand this point?]

Yes. But you obviously have not read my posts, as I have addressed this previously.

I stated that they could certainly charge the PayPal account, but charging a credit card would be an entierly different matter.

You might want to read a post before you respond to it. Good policy. Keeps you from looking like a dork.

Point 3. If I did that to one of my clients it would be an unauthorized charge,

Probably. Sure. But, that is, of course, irrelevent to the discussion. (See above).

me client would successfully charge it back, and I would pay a nice fee to my credit card processor

Visit the states often? I've always wanted to visit Liverpool but, alas, the constraints of finances and the demands of time preclude any such travels for the time being. Maybe upon retirement.

If I established a pattern and practice of this, my merchant priveleges would be terminated.

There. Feel all better?

[B4Ranch]

I figured I'll put the 'agreement ' up where you'll all be able to read what you are streniously post about. Yes, I am a 'fact' man.

7.2 Restricted Activities.

Your Information and your activities (including your payments and receipt of payments) through our Service shall not:
(a) be false, inaccurate or misleading;
(b) be fraudulent or involve the sale of counterfeit or stolen items;
(c) consist of providing yourself a cash advance from your credit card (or helping others to do so),
(d) be related in any way to gambling and/or gaming activities, including but not limited to payment or the acceptance of payments for wagers, gambling debts or gambling winnings, regardless of the location or type of gambling activity (including online and offline casinos, sports wagering and office pools), with the exception of payments for gaming transactions that are expressly authorized by law in the jurisdiction of both the sender and the recipient of the payment;
(e)violate PayPal's Acceptable Use Policy;
(f) infringe on any third party's copyright, patent, trademark, trade secret or other property rights or rights of publicity or privacy;
(g) violate any law, statute, ordinance, contract or regulation (including, but not limited to, those governing financial services, consumer protection, unfair competition, antidiscrimination, or false advertising); (h) be defamatory, trade libelous, unlawfully threatening or unlawfully harassing;
(i) be obscene or contain child pornography;
(j) contain any viruses, Trojan horses, worms, time bombs cancelbots, easter eggs or other computer programming routines that may damage, detrimentally interfere with, surreptitiously intercept or expropriate any system, data or other personal information; or
(k) create liability for us or cause us to lose (in whole or in part) the services of our ISP's or other suppliers.

If you use, or attempt to use the Service for purposes other than sending and receiving payments and managing your account, including but not limited to tampering, hacking, modifying or otherwise corrupting the security or functionality of Service, your account will be terminated and you will be subject to damages and other penalties, including criminal prosecution where available.

http://www.paypal.com/cgi-bin/webscr?cmd=p/gen/ua/ua-outside

[Hildy]

If you're not concerned about porn because it's not illegal, why are you concerned about gambling. The gambling sites on the internet ARE legal. They're offshore and they are legal.

[AndyJackson]

But you have repeatedly stated that government regulations which apply to credit cards apply equally to PayPal accounts.

I thought you agreed you would not put words in my mouth, and then there you go again. Federal Laws (not regulations, laws) apply to the acts of PayPal making charges on its customers credit cards.

Visit the states often?

I am a retired US Naval Officer and I operate a business here.

[Skooz]

But, I am NOT talking about credit cards.

If you actually read my posts, you would know that.

[AndyJackson]

That is fine. I entered into this argument responding to someone who believed that PayPal could just go ahead and levy a $500 fine for using the service to pay for, say, porn, and I am only saying that however they intend to do that they likely cannot do that by charging a customer's credit card.

Terminate service as they say they will do - sure they can do that.