EBay Making Money on Sellers Money

Wouldn’t it be great if you had a site like EBay and if I sold something I could use your cash for 21 days before giving it to you? How much would you pay for that opportunity? There’s a great post in the New York Times called 21 Days of Rage for Some EBAy Sellers.

Here’s an email that the Haggler got:

Q. After more than a dozen years as an eBay buyer and seller, with a flawless record and 431 transactions, I received an e-mail from PayPal, the online payment company that eBay owns, with some exasperating news:

“Starting Jan. 16, 2012, money from payments you receive will be placed in a pending balance for up to 21 days. By doing this, we’re making sure that there’s enough money in your account to cover potential refunds or claims. Even though you can’t access the money right away, please ship orders quickly and communicate with your customers. After 21 days, you can withdraw money from each payment as long as the customer hasn’t filed a dispute, chargeback, claim, return or reversal.”

I could get the money sooner, the e-mail went on, if eBay could confirm that the item was delivered or if the buyer left positive feedback. In effect, the company is saying that I can no longer be trusted to deliver goods in a timely manner.

Why? “We reviewed your account and determined that there’s a relatively higher than average risk of future transaction issues (such as claims, or chargebacks, or payment reversals),” the e-mail said.

How I suddenly fell under suspicion is a mystery. My hobby — selling pottery and decorative accessories — has  hardly changed. What’s clear is that eBay/PayPal now gets to keep my money, at least temporarily, and earn interest on it, I assume.

If it were just my money, the interest earned would not be worth mentioning. But if you look on eBay seller sites, you will find a whole lot of people in this exact situation — treated as though they might try to fleece consumers, despite sterling histories. It’s enough to make you think that eBay is using all this held money to pad its bottom line.

Could the Haggler investigate?

William Ferrall

Nantucket, Mass.

 

The Haggler called eBay and learned from Christopher Payne, a company vice president, that the 21-day hold was introduced last fall. The idea is to increase the quality of the auction experience by reducing the number of purchases that end in tears and/or refunds.

To achieve this worthy goal, the company devised a filter that is supposed to flag sellers who appear to be at risk of delivering a bad buying experience. There are many different triggers, including obvious no-nos like sending broken products. But as Mr. Ferrall’s case shows, the filter is kind of like a cop who thinks that even law-abiding citizens are on the verge of a crime spree.

With Mr. Ferrall’s permission, eBay looked into exactly how he landed in the company’s dreaded cash purgatory. There were two reasons, it turned out. First, Mr. Ferrall took some time off from selling last year, and, second, the value of the merchandise he sold when he kicked back into action was lower than what he had been selling before.

In other words, eBay’s filter looked past Mr. Ferrall’s perfect record as a seller and said, in effect: “You’ve taken a few months off and you’re now selling cheaper stuff. That’s fishy.”

Does a seller with an impeccable past deserve to be caught in this dragnet? After looking at the details, the company decided that the answer was no.

“We didn’t do right by you,” an eBay representative said in an e-mail to Mr. Ferrall a few days ago, “and we hope that moving as swiftly as possible once we learned of the error to correct it and get you back up and running was some consolation.”

Mr. Payne told the Haggler that eBay would tinker with its filter so that people like Mr. Ferrall wouldn’t be flagged in the future.

“We’re constantly refining these models,” Mr. Payne said, “and we’re going to learn from this experience.”

He added that sellers who are subject to holds can get their money in as little as three days if eBay concludes that the buyer is satisfied. Also, he continued, less than 1 percent of sellers have been given the 21-day hold treatment. Of course, 1 percent in a community of 25 million is 250,000 sellers.

Mr. Payne said that held money was parked in an interest-bearing account, though he wouldn’t be specific about how much interest this money earned, other than to describe the sum as “minimal.” (In public filings, eBay does not break out how much it earns from held money.) But on Tuesday, the company told the Haggler that from now on, held money would be placed in a bank account that didn’t bear interest.

“This was never intended to be a source of income for us,” Mr. Payne said.

The Haggler has two reactions. First: bully for eBay. Second: wait, there are bank accounts that don’t bear interest? The company is now in the midst of announcing the change and perhaps will offer more details.

E-mail: haggler@nytimes.com. Keep it brief and family-friendly, and go easy on the caps-lock key. Letters may be edited for clarity and length.

 

 

 

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