Saying bye-bye to PayPal & getting your money back

Saying bye-bye to PayPal & getting your money back

For those who are following me on a regular basis: remember how PayPal thought it was cool earlier this year to seize my money, force me to hold a reserve, then play dead to requests to close my account and repay the money? Well, it seems that the Finacial Services Supervisory Commission Luxemburg got their attention. All of a sudden, the funds are back.

I would like to use this blog to share some of the experiences with others. So, if you're a merchant and have had issues with PayPal seizing and holding your funds (including after you have closed your account) and if you are based in the EU, then the following process which I used to recover my money may be helpful. However, it will likely mean that you business relationship with PayPal will come to an end. This is something that I did not find particularly troubling, though I realise many small merchants depend on PayPal as their primary payment provider. You should know, however, that there are many activities which give PayPal the right under their TOS (look up the correct version for your country under User Agreement "Restriced Activities and Holds" and the rather cleverly hidden List of Prohibited Activities) to seize your funds and to keep them to create a reserve that is, for all practical purposes, money that you have no access to for as long as you use PayPal as a payment provider for your activities.

So what works in order to get your money back from PayPal short of a long and expensive lawsuit? In the EU, this is the process I went through and that I can recommend:

  1. If you resolve to end your business relationship with PayPal and recover your funds, stop receiving payments via PayPal and disconnect it from your seller sites. Deactivate automatic debit from your card or bank account.
  2. If they have created a "reserve", then you'll need to wait until the 180 days for buyer protection for your last transaction have expired, which is PayPal's reason for keeping your money (dispute resolution). At this point you can already write to them requesting repayment of your funds to which you'll probably get no or a bla-bla response. Make sure you save and file the documentation.
  3. Once there are no more transactions covered by buyer protection, write a formal complaint to, which is the email address of the designated member of management for complaints under EU law. Attach your previous correspondence. You can close your PayPal account, though I kept mine open for ease of transaction of the funds back to my account and closed it afterwards - I did request it to be closed and funds to be repaid in my letter.
  4. If you receive no, or an unsatisfactory, reply within 4 weeks, then you can escalate it to your national banking supervisory authority. In many cases, e.g. in Germany, PayPal is not subject to their regulation because it maintains only non-executive branches in those countries. Therefore you need to write to the arbitrators of the CSSF in Luxemburg, where PayPal's European head office is located. The process for requesting an out-of court settlement is very easy and transparent and available in English, German, French and Luxemburgisch. Make sure you submit all the requested information and a narrative of events.
  5. The CSSF will then get in touch with PayPal. My and others' experience suggests that PayPal will blink (though giving all sorts of explanations that they didn't do anything wrong) and repay your funds before this goes to arbitration.
  6. Collect your money, close your account (my recommendation is: you want to say bye bye to PayPal after this episode because you can't be friends any longer). If you achive your aim before a formal settlement then you will need to let CSSF and PayPal know you're withdrawing your complaint. That's it.


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