Why PayPal's bad reputation is bigger than Regretsy

Dec. 7, 2011 at 4:23 PM ET

Regretsy /

As GeekGreenGirl and other cyber citizens blasted soon after the PayPal vs. Regretsy debacle set the Internet on fire, PayPal had its own policies wrong when it shut down the surly satire site's holiday charity drive and froze the site founder's personal and business accounts.

Following a few days of public scorn, PayPal was so anxious to apologize that it issued public statements saying it had done just that — hours and hours before anyone at Regretsy received any kind of call. Which just goes to show: If you ever find yourself under the thumb of a corporate monolith, make sure you have an army of Internet followers to back you up.

That's the opinion of April Winchell — founder of Regretsy, an insanely popular satire site that pokes fun at the insanely popular craft marketplace site Etsy — and pretty much anybody who's had to deal with "customer service" — or the lack thereof in our increasingly automated age.

"The days of a company rewarding you for your loyalty are just over," Winchell wrote in a Regretsy update notifying readers of PayPal's official apology. "No one knows how to treat you anymore. No one cares."

"I think this is why this whole thing has resonated so deeply with people. We are all working very hard in a bad economic climate, and every cent we spend really matters. And corporations continue to treat us like they’re the only ones who are hurting."

Resonate indeed. Between Monday and Tuesday on my own Facebook account, I received no less than 30 links to Winchell's increasingly angry posts about how PayPal shut down the Regretsy Secret Santa charity drive, insisting that the site return the donations while keeping a service fee. The story blew up on Twitter as well as Facebook, with "Regretsy" breaking into Twitter's Top Trends by Tuesday morning.

The reason originally given Winchell for the closed account — that as a for-profit organization collecting for charity it needed to use the "Buy Now" or "Shopping Cart" buttons instead of the "Donate" button — didn't make sense to many. (Take a hop, skip and a jump over to the Green Geek's blog, where, in a post titled "Why PayPal is wrong regarding Regretsy, according to its own policies," the PayPal Terms of Service legalese is deconstructed, and evidence is presented to support this thesis.)

Eventually, it didn't make sense to PayPal, as Winchell says a rep told her:

According to the Paypal executive who called me today, “The information you were given about using the donation button was definitely incorrect, and at the end of the day, it was an error in judgment on the agent’s part.”

Notably, PayPal contacted Winchell only after it sent this statement to Digital Life — as well as other media outlets. And unlike the flat out "our bad" Winchell says she received, there seems to be some passive-aggressive blame placed straight up in Regretsy's lap:

We can’t comment specifically on the account due to our privacy policy. However, we can confirm that the funds have been released and we are working directly with the account holder on this matter. We are also making a donation to Regretsy to help families in need this holiday season.  We’re very sorry this occurred.

 For reference, we have clear guidelines for any business who uses PayPal to accept donations. For example, we require certain documentation to prevent misuse of the donated funds and, if the recipient claims charitable status, to determine whether they are properly registered.  As a regulated payment service, we’re also required by law to follow these guidelines.

 We appreciate that this can be an inconvenience, but we have a responsibility to all our customers – both donors and recipients; or buyers and sellers. In this instance, we recognized our error and moved as swiftly as possible to fix it.

So what did happen?  It seems the Secret Santa charity drive was a victim of its own success. Seeking to raise money for 200 hundred families in the Regretsy community "who might not get much otherwise," the $4,000 goal was met within hours after it was posted on the site:

According to Paypal, the red flags started flying because of how fast the donations came in. It wasn’t that we did anything wrong – it was that we did it too well. As I told you in this post, we were overfunded very quickly – in a couple of hours – and that set off a review process at Paypal.

And you know what? I have no problem with that. I have a 10+ year record of fundraising through Paypal, including over $150,000 raised in just the last two years for various causes. So I should pass any review with flying colors.

But this is where it all went wrong. Because according to the Paypal executive, this part of the process is “subjective”. At this point, a representative makes a call based on very sophisticated and nuanced criteria they don’t have to disclose to you, and by that I mean, I had a big lunch and I’m tired.

So it’s a crapshoot. And anything can happen. And it did.

As it stands, PayPal unfroze Winchell's personal and business accounts — after thousands of dollars in donations were returned – and discussed donating a $100 gift card to each of the 200 families in the Secret Santa Drive.

Well, at least that's resolved. Sort of.

Now, on to the many many many many many complaints over at, "the world's largest eBay and PayPal consumer gripe site network," which offers links to 18 "other quality sites about PayPal abuses."

"I think we all know that Paypal’s apologies and reversals were motivated by the intense scrutiny they’ve been subjected to," Winchell writes. "If I were Sally’s Soap Shack, I would be waiting out that six month hold right now and wondering how to make Ramen noodles taste like Christmas ham."

More on the annoying way we live now:

Helen A.S. Popkin goes blah blah blah about the Internet. Tell her to get a real job on Twitter and/or Facebook. Also, Google+.