For many, especially those taking part in international business transactions through such platforms as eBay, payment through PayPal for items won at auction is a commonplace and almost unavoidable practice. With more than two hundred million customers claimed, PayPal is the largest internet-based finance system for payments from one bank account to another in the world. Founded in 1998 and based in Jan José, California, PayPal has grown since its purchase by eBay in 2002 to become one of the largest and most widely used financial payment services available, with customers in one hundred and ninety nations.
The European arm of PayPal is registered in Luxembourg and received its patent as a bank from the authorities in Luxembourg in 2007, which resulted in the automatic transfer of all European accounts from their respective local companies under the PayPal name from the in London registered PayPal (Europe) Limited to PayPal (Europe) S.à.r.l. & Cie, S.C.A. It is regulated by the Commission de Surveillance du Secteur Financier (CSSF).
Unlike other accepted and long established banks, PayPal does not offer any of the securities normally associated with the banking branch, and few of the services. Overdrafts, loans and insurance are not included, nor is there any personal customer relations department or a means to consult with a member of the bank personally over financial matters. The service is limited exclusively to the transfer of payment from one PayPal account to another and all customers are required to have their own established bank account and a registered email address. Amongst the services offered to European customers is the automatic debiting of a checking or current account to settle bills raised through various actions. For this service PayPal receives payment from the customer receiving payment, based upon which country one or other of the accounts is registered.
It is this automatic debiting of an account which has, since its inception, raised a number of problems and shown the darker side of a company which claims, on the one hand, to be a bank and, when the situation is difficult for them, to be merely a financial transfer agent.
With an established bank, a direct debit from a personal account may be recalled within sixty days of its action, giving all customers a certain level of security against fraudulent claims and bills. It is then up to the person or company raising the invoice to stake their claim by contacting the debtor directly and, if necessary, going through the due process of law to gain final payment. With PayPal this basic level of security is not present. Once PayPal has debited a checking or current account with the sum of an invoice they have been presented with, the transaction is marked as closed. Regardless of whether the sum debited remains on the PayPal account of the recipient or is quickly transferred to another account, the paying customer cannot reclaim funds. Here PayPal insists that the customer, should there be grounds for reclamation, contact the supplier directly.
The only exception to this non-banking practice is with eBay. Here eBay, as parent company, assures all customers using the PayPal services that their money is secure and, in the event of a reclamation, may be returned to their account immediately, allowing the normal process of the law to then proceed from the side of the company attempting to gain funds. eBay is the only company excluded from the no-refund policy at PayPal, all others receive payment with the added security of knowing that few, if any, of their customers, or the people they have defrauded, can afford the process of making a reclamation through the courts – once the initial contact and request for refund as been refused – or are prepared to take on the complexities of fighting a claim in a foreign jurisdiction.