Peter Griffin: Payback if your online pal lets you down

COMMENT

It's a haven in the wild west of the web; a place where you can lay your money down and be sure that it goes to the right place, and that you will get your cash back if the goods do not turn up in a box full of bubble wrap.

Well, that's the theory. It's called PayPal and if you have been wheeling and dealing on auction websites or trading with online merchants, you have probably made or received payment through PayPal at some stage.

The US online clearing house is owned by auction site eBay and now boasts a staggering 50 million account-holders across 45 countries. Last year it processed transactions worth US$12 billion ($18.3 billion).

But the company faces a nightmare exercise in book-keeping in the next few months because it has agreed to pay US$9.25 million to its users as part of settling a class-action lawsuit.

Divvying up the money will tie up a lot of people for a long time.

Why was PayPal sued?

Well, some customers were outraged at having access to their PayPal accounts blocked or financial transactions frozen.

You see, if PayPal is to retain its integrity it has to take a tough stance on any type of fraudulent activity.

PayPal was making judgment calls on the legitimacy of members using its services - sometimes stopping transactions or shutting accounts, cutting people off from the money held within.

You can understand why PayPal does this - to protect its users. For instance, there is often a fine line between what constitutes a legitimate multi-level marketing scheme and an illegal pyramid scheme. And if PayPal thinks your account has been fraudulently hijacked, it will freeze it.

Where the service fell down was in the way it dealt with disputes. Communication was a bit of an issue and some innocent users were being blocked unfairly.

Millions of dollars ended up being frozen in accounts while PayPal and its members argued.

PayPal never accepted any wrongdoing in the case but settled anyway - presumably because the lingering lawsuit was not doing anything for investor confidence (eBay is listed on the Nasdaq exchange).

The upshot for New Zealand users is that you can lodge a claim if you were a member of PayPal between October 1999 and January this year and believe the service let you down. It may have blocked your account unfairly or failed to answer your questions properly. Now is the time for payback.

You can get the details on making claims here.

Even if you do not have a burning grievance you can still lodge a claim, drawing from a pool of $1 million set aside for sundry claims. Given PayPal's huge membership, you will probably come out with a few (US) cents.

There is a "short form" for claims up to US$50.

A colleague at the Herald falls into this category. Last year he found he was repeatedly unable to log into his PayPal account as his username and password were not recognised.

Imagine: You can't access PayPal due to a problem with their systems.

The seller of the goods is waiting for you to pay through PayPal - but you can't. The seller becomes frustrated and cancels the sale, posting bad feedback about you and effectively putting a black mark on your eBay track record.

Then there is the "long form" for more seriously aggrieved claimants who fall into the over-US$50 category. You will need to supply evidence of loss here and your claim will be investigated.

PayPal has sharpened up its act in the wake of the lawsuit. It will now let you lay complaints over the phone, with operators starting the investigative process.

No more emails that disappear into the ether.

If the investigation cannot be carried out within 10 days, PayPal has to "provisionally" credit your account.

You will receive regular statements from PayPal and receive three weeks' notice when it changes its terms of service. PayPal will also give you its reasoning for freezing your account if the freeze exceeds 45 days.

With lawyers taking a US$3 million cut of the proceedings, there will not be much cash to go round, so get in quick.

Paypal has been advertising the claim offer in US newspapers and millions of people will file.

The deadline for lodging online forms is October 23. Mailed claims must be postmarked by November 1.

* Email Peter Griffin