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Thread: Paypal on lease

  1. #1

    Paypal on lease

    I am not sure if this is right but some of my friends are using Paypal accounts of others. They pay between 10% and 20% to those with US Paypal accounts to receive payments for high risk businesses. In fact they are always in need of more and more accounts and even ask me for it. Is this right (or even legal)? If it is fine then I think I can make some money but I dont know of repercussions.

  2. #2
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    PayPal tends to close accounts they consider "high risk"..

    One type of business they happen to believe to be high risk is web hosting - mainly start up companies that offer pre-payment of 1-3 years for obvious reasons..

    They don't directly tell you but I've learned this over time running and working for small web hosting companies.

  3. #3
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    Quote Originally Posted by paymentconsultant View Post
    I am not sure if this is right but some of my friends are using Paypal accounts of others. They pay between 10% and 20% to those with US Paypal accounts to receive payments for high risk businesses. In fact they are always in need of more and more accounts and even ask me for it. Is this right (or even legal)? If it is fine then I think I can make some money but I dont know of repercussions.
    You are legally liable/responsible for the account and in order to become a verified seller, you need to provide proper documentation, bank account, etc.

    Still worth the risk?
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  4. #4
    That is super, duper, extremely not a good idea.

    I've worked in payments for 13 years, so I can explain why it's wrong at a high level "concept" type perspective. From a legal perspective, I just don't have any legal expertise to lend an opinion.

    But from my standpoint as a professional working in payments...

    First, this is specifically in breach of the KYC (know your customer) rules. Paypal cannot process money for endangered elephant hunting tours, nor can they process payments for the sale of enriched uranium. However, your friends due diligence on these other folks may not be as strict or intense.

    Stepping back from ridiculous examples, it might be considered a form of money laundering. (Or they may unwittingly be making themselves a party to money laundering).

    Stepping further down... what if the sale is for black market pharmaceuticals and someone buys one (from your friend), and then there is a fatal reaction to a bad product. What kind of liability are the exposing themselves to?

    It's most likely that your friend already had some idea of this when they got started. Common sense was probably whispering in their ear "hey... if nobody else will process for these folks... maybe there is a reason and I shouldn't either".

    Or, these folks could be totally legit people living in an area of the world where they just can't easily get access to merchant services.

    And honestly, I'm not qualified to give legal advice - at all. So this is just my "what if" and conservative nature talking. However, I think my points are fair and valid, and your friends are taking some risk in what they are doing.
    David Goodale
    Merchant Accounts.ca
    Canada's merchant account provider.
    Toll free: (888) 414-7111 ext. 5 | Direct: (905) 901-2254

  5. #5
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    Quote Originally Posted by Spluut View Post
    PayPal tends to close accounts they consider "high risk"..

    One type of business they happen to believe to be high risk is web hosting - mainly start up companies that offer pre-payment of 1-3 years for obvious reasons..

    They don't directly tell you but I've learned this over time running and working for small web hosting companies.
    This is very true! I have seen them go pretty far to get the results they want... Watch out.

  6. #6
    Quote Originally Posted by Tuxxin View Post
    This is very true! I have seen them go pretty far to get the results they want... Watch out.

    Web hosting is high risk because there is too much future delivery. That means people pay today for something that is provided over the upcoming year. If the web host shuts down then there is chargeback risk to the processor for all of the unfulfilled portion of the transaction.

    Since small startup web hosting companies are often not the most financially robust companies, it means that there is a relatively significant risk that this could happen.

    If you are a web hosting company, and want an easier approval, bill all of your customers monthly. That is the solution.
    David Goodale
    Merchant Accounts.ca
    Canada's merchant account provider.
    Toll free: (888) 414-7111 ext. 5 | Direct: (905) 901-2254

  7. #7
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    The web hosting market will never die. Virtual environments are forever the future and easily adapt to change. Welcome to the world wide web!
    Hey spluut, I love the signature!
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  8. #8
    Wow, extensive and experienced response as I hoped for. I have been a fan of WHT for a long time and having been reading various e-commerce related posts but have recently started posting, rather asking questions. Thanks all for responding quickly.

    @Splutt, @Dgoodale, @Tuxxin: What if they are selling service like PC support (for which I provide consultancy and know the business well, hence all these queries from merchants most of who are my friends) and sell low duration service like 1 week or 1 month? Also, what if they are able to confirm all transactions directly from the customers e.g. by calling them? What if all those guys use one name?

    @HostMantis: Is there any way out? Like selling under my friends' name? That way it's working in a way similar to an outsourcer.

    I hope you understand all these queries because if it is fine and if we know of all repercussions and can mitigate the risks then maybe I can also make some money without creating problems for anyone.
    Last edited by paymentconsultant; 09-07-2013 at 08:21 AM.

  9. #9
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    Quote Originally Posted by paymentconsultant View Post

    @HostMantis: Is there any way out? Like selling under my friends' name? That way it's working in a way similar to an outsourcer.
    If PayPal catches you doing it, they WILL close the account and disallow the account owner from opening an account in the future.

    So why would anyone waste their time doing it?
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  10. #10
    I also appreciate cheating PP as much as I can !!!

  11. #11
    @buythiscomputer lol.

    I think it might not be cheating if someone is selling under your name. What is the difference between this and outsourcing your service to someone?

  12. #12
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    Quote Originally Posted by paymentconsultant View Post
    @buythiscomputer lol.

    I think it might not be cheating if someone is selling under your name. What is the difference between this and outsourcing your service to someone?

    I agree with everyone on this post. Its illegal in Paypals terms of service. If they find out, they will close your account and freeze any money you haven't had a chance to take out. In rare cases, there could even be a law suit against you to follow. Good to know that its PC support and not controlled meds or something like that, but in the end, you never really know.

    This is essentially the same thing as opening a merchant account to sell flowers, but instead your selling something that is not flowers.. eventually the account will get shut down and all funds held.. in addition to this, you may be put on the Terminated Merchant File. Once this is done, you wont be able to get a merchant account very easily for around 7 years.

    Summary: not a good idea.
    Performance Card Service, Ltd
    ***Global Payments Experts***
    www.performancecardservice.com

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