How should an online financial services company treat its loyal and reliable customers? Well, it could refuse to have anything more to do with them unless they provide additional personal financial information to "verify" who they are. That seems to be PayPal's approach, anyway.
In the last month I've seen a flurry of gripes from readers who have been informed by PayPal that they have now reached the $2,000 limit puts on payments funded from accounts with only a registered credit card. Per the PayPal terms of service regarding payments, therefore, the customer would be required to "verify" their account by registering a bank account as well.
"My view is that this is an obtrusive intrusion into my privacy and potentially dangerous," wrote one reader. "Maybe I shouldn't be so sensitive -- my bank account and routing numbers are on every check I write -- but I see no reason for them to have that information. I use PayPal for buying small things on eBay, and it's taken me over three years to flow $2,000 through the account. Since the limit seems senseless, I assumed they would revise it, let me start over or whatever ... I called them and was told that I have to become 'verified' and the only thing they accept now is bank account information. I was also told that if they made an exception for me, they'd have to make an exception for everybody. I am torn between opening a bank account just for PayPal or just abandoning an otherwise convenient service."
"If I'd run up $2,000-worth of charges a few weeks after opening my PayPal account, I would understand the need to put a hold on my purchases," wrote another reader who is reaching $2,000 in purchases after five years with PayPal. "There has been no disputes over any of my purchases or sales before this, and both (PayPal parent) eBay and PayPal have profited from my business. To freeze my ability to make a small bid at this point due to an artificial limit is outrageous! They are quite simply punishing me for being a good customer for so many years."
The limit does indeed seem to put less trust in customers with the best track records. And that makes some readers to wonder what PayPal's motives are for such a policy. "Why does PayPal bully you into 'verifying' your bank account details?" mused a four-year PayPal customer. "Why does it want to deprive you of the inherent protections of making credit card payments? I have written PayPal and challenged them to prove they can safeguard the security and privacy of my bank account details. I've pointed out that eBay's filings with the SEC acknowledge PayPal's business risks include the potential exposure of customer data from security breaches or employee fraud. Based on these clear risks, PayPal has no right to demand that I provide it with my bank account information. I have yet to receive a response from PayPal."
The sudden burst of complaints about the $2,000 limit certainly made me wonder if it was a new policy or perhaps somehow related to the recent PayPal class action settlement. A PayPal spokesperson, however, says the policy has been in effect for a number of years. "In the early days we had no limit, but that exposed us to a greater risk of fraud," the PayPal spokesperson said. "We do understand the verification process can be slightly inconvenient, and -- particularly for established good buyers -- we are going to be looking at the $2,000 amount to see if it's something we need to change."
In my humble opinion, it's not the amount that needs to change; it's the policy itself. Of course, PayPal should (and does, from the gripes I've heard) suspend any transaction that its fraud models flag as suspicious. But a fraud model that automatically penalizes loyal customers for having done a certain amount of business through the years needs some serious re-thinking.
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