Update: PayPal Holds Half of Indie Developers' Money

[roseofbattle]

Update: PayPal Holds Half of Indie Developers' Money

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Developers for original 2D fighting game Yatagarasu Attack on Cataclysm only receive half of their funds from PayPal.

Crowdfunding sites like Kickstarter and IndieGoGo are wonderful for getting independent games off the ground, but things don't always go as planned. Nyu Media, independent publisher for a 2D fighting game called Yatagarasu Attack on Cataclysm, successfully completed their IndieGoGo campaign last month, raising double what they posted as their goal, but they have received only a part of the funds. In an update posted on their campaign page last night, Nyu Media founder Seon King announced PayPal had restricted the company's account.

"The email from PayPal advises us that they have 'reserved' the funding and will release 'up to 50% of the funds' before Yatagarasu AoC is released and the rest only after they have verified copies of paid invoices," King said. PayPal advised Nyu Media to contact them closer to the release date beginning of next year to arrange the release of the remaining funds.

King said Nyu Media has already given PayPal documents "providing the bona fides of Nyu Media, the developer, and the campaign." Access to only half of the funds for the game concerns King. Without access to all of the funds, "it potentially derails game development."

Similarly, PaypPal restricted funds earlier this year for the independent developers who raised money to create new DLC characters for Skullgirls, another 2D fighting game. [http://www.escapistmagazine.com/news/view/123465-PayPal-Halts-Crowdfunding-Payments-To-Skullgirls-Dev]

King will contact PayPal's customer service. King said their best case scenario would be "reason and PayPal's new "Customer First" direction bring this to a swift conclusion." If that doesn't work, Nyu Media may refund PayPal contributions and arrange donations by other methods.

Source: Indiegogo [http://www.indiegogo.com/projects/yatagarasu-attack-on-cataclysm?c=activity]

Update: As of this afternoon, PayPal and Nyu Media have resolved the problem. PayPal issued the following statement via email: "We have reached out to Nyu Media and the issue has been resolved. We want to reiterate that supporting these campaigns is an exciting new part of our business. We are working closely with industry-leaders like IndieGoGo and adapting our processes and policies to better serve the innovative companies that are relying on PayPal and crowd funding campaigns to grow their businesses. We never want to get in the way of innovation, but as a global payments company we must ensure the payments flowing through our system around the world are in compliance with laws and regulations. We understand that the way in which we are complying to these rules can be frustrating in some cases and we've made significant changes in North America to adapt to the unique needs of crowd funding campaigns. We are currently working to roll these improvements out around the world."

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[rednightmare]

Ok, maybe I'm missing something here, but what exactly gives PayPal the right to do this?

 

[UltimatheChosen]

Ok, maybe I'm missing something here, but what exactly gives PayPal the right to do this?

I would assume the user agreement that everyone agrees to when they sign up for the site. It's not necessarily right, but I expect that it something that people agreed to without necessarily realizing it.

 

[lacktheknack]

Why do people even bother with PayPal?

I know it's convenient, but from the stories I've read lately, it's like riding an angry tiger home from the zoo "because it's more convenient than walking".

 

[Zombie_Moogle]

So I see I'm not the only one that'd previously stopped using Paypal in this forum

Any chance we can get everyone else to do this too? Maybe they'll just go away (probably taking a lot of people's money with them) if we don't pay attention to them

 

[KDR_11k]

Yay, donate money to fund development, money won't arrive until development is complete. And PayPal collects the interest on it.

Ok, maybe I'm missing something here, but what exactly gives PayPal the right to do this?

By not being a bank PayPal can fuck you over however they want without the law interfering.

 

[Albino Boo]

Ok, maybe I'm missing something here, but what exactly gives PayPal the right to do this?

So I see I'm not the only one that'd previously stopped using Paypal in this forum

Any chance we can get everyone else to do this too? Maybe they'll just go away (probably taking a lot of people's money with them) if we don't pay attention to them

Why do people even bother with PayPal?

I know it's convenient, but from the stories I've read lately, it's like riding an angry tiger home from the zoo "because it's more convenient than walking".

PayPal are complying with anti money laundering laws. They have to, by law, hold proof that money is not laundered and tax is being paid properly. The level of proof that the law requires varies on amount of money in the account. You can provide proof that you are an LLC but they need further information with higher amounts. If PayPal fail to collect the information they face criminal prosecution. Any other company doing the same thing is also covered by the same law. Barclay's bank settled a case with the US government by paying a fine of $298 million. Governments are very serious about getting the tax that they are owed and if you aid the evasion of tax by not checking they are going to hit you very hard.

 

[Nimcha]

Can we get Paypal's side on this story too? I see people already making far-fetching conclusions based on very little information.

 

[JarinArenos]

I still have a PayPal account, but I'm rapidly reaching the point where I don't have to use it anymore. There's finally other options out there for epayment, and businesses are starting to use them. So no, for convenience sake, I won't just be cancelling my PayPal account (even if there's part of me that wants to), but when given the choice, I DO prefer other services. Amazon Payments seems to be one that's stepping up rather quickly.

... paranoia makes me wonder how long until they start doing questionable things as well...

 

[Zombie_Moogle]

Ok, maybe I'm missing something here, but what exactly gives PayPal the right to do this?

So I see I'm not the only one that'd previously stopped using Paypal in this forum

Any chance we can get everyone else to do this too? Maybe they'll just go away (probably taking a lot of people's money with them) if we don't pay attention to them

Why do people even bother with PayPal?

I know it's convenient, but from the stories I've read lately, it's like riding an angry tiger home from the zoo "because it's more convenient than walking".

PayPal are complying with anti money laundering laws. They have to, by law, hold proof that money is not laundered and tax is being paid properly. The level of proof that the law requires varies on amount of money in the account. You can provide proof that you are an LLC but they need further information with higher amounts. If PayPal fail to collect the information they face criminal prosecution. Any other company doing the same thing is also covered by the same law. Barclay's bank settled a case with the US government by paying a fine of $298 million. Governments are very serious about getting the tax that they are owed and if you aid the evasion of tax by not checking they are going to hit you very hard.

Then they would put a temporary hold on the account, investigate, & release it once the tax information had cleared; not hold half the money hostage

 

[Albino Boo]

PayPal are complying with anti money laundering laws. They have to, by law, hold proof that money is not laundered and tax is being paid properly. The level of proof that the law requires varies on amount of money in the account. You can provide proof that you are an LLC but they need further information with higher amounts. If PayPal fail to collect the information they face criminal prosecution. Any other company doing the same thing is also covered by the same law. Barclay's bank settled a case with the US government by paying a fine of $298 million. Governments are very serious about getting the tax that they are owed and if you aid the evasion of tax by not checking they are going to hit you very hard.

Then they would put a temporary hold on the account, investigate, & release it once the tax information had cleared; not hold half the money hostage

They are allowed to use the money under the previous threshold.

 

[major_chaos]

Why do people even bother with PayPal?

a. Because the number of people in situations like this is vastly smaller that the number of people who have good experiences.
b. There really aren't any good alternatives.

 

[prinnydood3231]

Ok, maybe I'm missing something here, but what exactly gives PayPal the right to do this?

So I see I'm not the only one that'd previously stopped using Paypal in this forum

Any chance we can get everyone else to do this too? Maybe they'll just go away (probably taking a lot of people's money with them) if we don't pay attention to them

Why do people even bother with PayPal?

I know it's convenient, but from the stories I've read lately, it's like riding an angry tiger home from the zoo "because it's more convenient than walking".

PayPal are complying with anti money laundering laws. They have to, by law, hold proof that money is not laundered and tax is being paid properly. The level of proof that the law requires varies on amount of money in the account. You can provide proof that you are an LLC but they need further information with higher amounts. If PayPal fail to collect the information they face criminal prosecution. Any other company doing the same thing is also covered by the same law. Barclay's bank settled a case with the US government by paying a fine of $298 million. Governments are very serious about getting the tax that they are owed and if you aid the evasion of tax by not checking they are going to hit you very hard.

Then they would put a temporary hold on the account, investigate, & release it once the tax information had cleared; not hold half the money hostage

Before reading below I will state that I am not speaking on behalf of PayPal or eBay. Any opinions or expressions in this post are purely my own. I do not represent either of these companies.

You are partially right and without knowing the exact parameters behind the developers account there could be more to the story than what we see. A little background, I happen to know the PayPal system and lets just say I'm familiar with it inside and out as a seller. PayPal has two ways that they usually handle situations like these. Part of it is through limitations where they request documentation. Once this is done full access to the account is restored. Limitations don't necessarily have to restrict your access to money. As explained above AML laws are strict in this regard and any transaction that takes place on PayPal is not the Account Holders responsibility but the responsibility of the company facilitating the transaction (i.e. PayPal). So basically PayPal does as anybody would do in that same exact situation. Look at it like this, if you were in charge of a room full of people, and these people were all exchanging money for something. It could be a service or it could be an item. An officer walks in and says, "if anybody in this room exchanges money for purposes that is against the law, we will come after you". Wouldn't you be asking questions? Wouldn't you want to stop some of the people walking in and asking what's going on?

I know I would if it was my neck.

The second type of action is based on other risk factors. PayPal may make a decision that based off of what you are getting money for, who its going to end up benefiting and the risk of people filing to get their money back in its complaint process. This decision is known as a reserve on an account. Reserves hold a specific amount of money either as a lump sum or a % of the amount incoming on each individual payment. It holds these funds as collateral.

The example I give here are concert tickets. The reason be obvious if you look at the situation objectively. The concert could get canceled, the person selling the tickets may be selling fakes, or some other act that puts PayPal in a position as a payment processor.

Lets take a look at the case in point. Sure PayPal does have some information, but the information provided does not necessarily guarantee nothing is going to happen with the developer. PayPal does not know if this developer will deliver or not, whether people will start issuing chargebacks midway through their development, and since they are located out of the country PayPal doesn't have as many options to fight back if things go sour. As enthusiasts of the industry, we all know developers go out of business all the time at any time. Who's to say that will not happen here? The reserve is meant to cover some of the loss should this event happen.

In conclusion, although there are some consumer (or business) unfriendly practices, there are many consumer (or business) unfriendly threats as well. Would PayPal be able to protect consumers and make the claim that by using its product its the safest way to pay. If you were the owner of PayPal would you be able to stay afloat if your company suffered heavy losses like this should it not go as planned?

 

[Grabehn]

Funny enough, I've never trusted Paypal to begin with, although it might also have to be due to me being paranoid and refusing to even use a credit card for anything, except Steam stuff, cuz that's not my card and billing comes out almost instantly for those transactions.

 

[prinnydood3231]

Funny enough, I've never trusted Paypal to begin with, although it might also have to be due to me being paranoid and refusing to even use a credit card for anything, except Steam stuff, cuz that's not my card and billing comes out almost instantly for those transactions.

You are more liable have your credit card information stolen than PayPal, I keep mine on a security key and their fraud prevention measures are pretty good. Sometimes too good.

I've used them for years, and haven't had too many issues.

Why do people even bother with PayPal?

a. Because the number of people in situations like this is vastly smaller that the number of people who have good experiences.
b. There really aren't any good alternatives.

A. This

B. This as well, PayPal does do a good job. Is the system perfect? No, its a system. Systems are by design faulty. But they do work with you a lot more than what they did before.

 

[Baldr]

Ok, maybe I'm missing something here, but what exactly gives PayPal the right to do this?

They have an obligation to follow US laws, usually it not paypal/Amazon holding onto the money but a proxy account setup by paypal/Indiegogo or Amazon/Kickstarter.

It not like Paypal/Amazon want to do this stuff, it looks bad on them. It just that there are people out there who will likely and often abuse the system.

 

[J Tyran]

Yay, donate money to fund development, money won't arrive until development is complete. And PayPal collects the interest on it.

Ok, maybe I'm missing something here, but what exactly gives PayPal the right to do this?

By not being a bank PayPal can fuck you over however they want without the law interfering.

Rubbish, for a start its an EU registered bank and all of the relevant laws apply in the EU and while its only classified as an intermediary in the US and not subject to direct Federal regulation a whole bunch of laws like "Electronic Fund Transfer Act" and the "Truth in Lending Act" are applicable. State laws also apply but I don't really know anything about those.

As for around the world, every country will have financial legislation and consumer protection laws of varying descriptions.

 

[Kittyhawk]

This was silly, but was no doubt based in greed and nothing more. Paypal wanted interest from withholding the money for a few days. Don't make me hate you, Paypal or Mr Musk.