Freezing Account Funds Lands PayPal and eBay in Class Action Lawsuit

A class action lawsuit has been filed against PayPal and eBay over PayPal’s “fraudulent” practice of freezing funds for up to 180 days on accounts that collect PayPal payments for product and service sales.

According to the lawsuit, PayPal not only collects interest on the frozen money owed to account holders, but also uses this money during the hold period. Anyone who asks PayPal why they can’t access their funds is told they need a subpoena in order to do so. “In other words, PayPal holds money belonging to Plaintiffs and the Class and tells them they have to get a subpoena or court order just to discover the reason why PayPal is denying [them] access to their own money.”

Surprisingly, this case is not about PayPal’s right to hold these funds, which has infuriated customers since it recently began the practice; it’s about the manner in which the freezing is done and the lack of information shared with affected customers, which violates the PayPal user agreement. If customers knew that their funds would be held for up to 180 days, the lawsuit says, “Plaintiffs would not have used PayPal’s services and would have used alternative methods of accepting payments.”

eBay is named in the class action lawsuit because “it is the dominant online auction website, with a virtual monopoly over the online auction industry” and basically pushes eBay customers to use PayPal. This means just about every person with an eBay seller account is affected by PayPal’s freezing practice.

The class action lawsuit will cover anyone whose funds have been held by PayPal for up to 180 days. It is also asking PayPal to release any funds it’s currently holding, reimburse class member for interest accrued on the held funds, and to establish a program that explains to customers why their funds are held and what they can do to regain access of their funds and prevent holds in the future.