In order to earn miles & points, many people “manufacture spend”. That is, people find ways to increase credit card spend (to get rewards) while getting their money back. There are many techniques for doing this, and PayPal is a component of some of them. Unfortunately, while these techniques are perfectly legal, they are often also used for money laundering and other illegal activities. As a result, PayPal frequently freezes accounts of those who manufacture spend because they appear to be doing something illegal.
In response to a recent post about PayPal freezing accounts, an anonymous PayPal employee stepped forward and offered to answer our questions. In this post, I’ve summarized answers to three such questions. Many more questions will be answered in future posts.
Question: Once an account is frozen, is there a good way to get access to frozen funds in less than the stated 6 months?
Funds are held for 6 months to prevent overdrafts in case charge backs are received. This is legal. That said, while Customer Service agents can’t release limitations on your account, they do have the ability to release funds.
Recommendation: Call to let PayPal know what you were doing that led to the frozen account and ask politely for a check to be mailed, or to be granted access to a portion of the funds. This may require several calls (wait a few weeks each time). It’s essential to be nice to the person you speak with.
Question: I’ve heard of people who have had their PayPal money tied up for years. Is that legal?
I believe this to be a misunderstanding of what has happened. Accounts that are no longer being used eventually go into escheatment.
Editor’s note: Google says “Escheatment is the process of identifying customer’s deposit (checking, savings, etc.) and time deposit (CD) accounts that are considered abandoned and remitting the funds to the appropriate state if the customer cannot be contacted to re-activate the account.”
Laws regarding escheatment vary by state. Generally, after 2 to 5 years, the money from those accounts goes to an unclaimed funds account in the state in which the account was registered.
Funds may also be tied up longer when law enforcement is involved.
Bonus question: Why do you work for such an evil company?
I like working for PayPal. It’s a good job and I enjoy the work I do.
I don’t believe that PayPal is evil. They’re constantly improving. When PayPal started, there were no other businesses like it. It is sort of a half bank and half money services business. As a result, PayPal is expected to follow rules and regulations designed for both businesses. It’s an overwhelming set of responsibilities and PayPal is doing its best to meet those requirements and serve its customers.
Further, the work PayPal does to prevent money laundering is important. True money laundering is done by true criminals including those involved in drug dealing, prostitution, tax evasion, child pornography, terrorist financing, etc. I see it as a very good thing that PayPal takes active steps to prevent money laundering.
Much more to come
Anonymous (AKA MSnowden) has many more answers for us. As I receive the answers (based on questions asked by readers in response to the original post), I’ll do my best to summarize those answers and alter phrases to protect Anonymous’ identity. Stay tuned.
If you have other questions for Anonymous/MSnowden, please head over to the original post and add your question to the comments section (if no one has already asked the question). Here’s the original post: Anonymous PayPal employee to answer manufactured spend questions. Don’t forget to press the “Previous Comments” button to see older comments that have fallen off the front page.