PayPal admits ‘error’ on firm alleging customer-spying directive

Online payment giant PayPal has reinstated the account of a German firm that accused it of trying to make it spy on its own customers.

Seafile, a Dropbox rival in file-sharing and storage, had been using PayPal as its only payment option. Then PayPal sent Seafile questions about Seafile’s service, and posted a notice on Seafile’s PayPal account saying Seafile was violating an unspecified area of PayPal’s user terms.

Seafile CEO Silja Jackson told Fortune magazine it appeared PayPal had classified her firm as a service for sharing files illegally. She said Seafile told PayPal it didn’t offer free accounts and that customers had to disclose their addresses.

But PayPal was apparently unsatisfied, and demanded that Seafile monitor customers’ data traffic and files to find anything illegal, and send PayPal detailed information about the file types passing through the service, the Fortune article said.

“In our opinion and our lawyers’ opinion, that would violate privacy laws,” Jackson told Fortune. “We also think that giving PayPal (statistical) information would violate our customers’ privacy rights.”

PayPal then “dropped Seafile as a customer,” the article said.

Jackson said her firm was still operating its service, but collecting no money, while it sought another payment service.

But after media coverage this week, PayPal on Wednesday issued notice that it had reinstated Seafile’s account.

“Privacy is at the core of PayPal’s business model and we do not and have never required a merchant to intrude on the privacy of its customers,” PayPal’s statement said. “In our role as a global payments provider we must look at the full details of a service’s operations and compliance, including how the company addresses the laws and regulations related to the sharing or dissemination of illegal or infringing content as well as the policies of PayPal’s processing banks and card networks.

“We review these matters on a case-by-case basis. We regret that we made an error in the case of Seafile and apologize for any disruption this may have caused to their business.”

However, the apology and reinstatement didn’t spark a happy reunion between the two companies – Seafile said it wouldn’t come back, with Jackson telling Fortune it “cannot trust (PayPal) anymore.”


Photo: PayPal offices in San Jose (AP Photo/Paul Sakuma)


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  • Ray Gordon

    So Paypal wants user files monitored, yet somehow they miss a blatant MASS-PIRACY site based in the US that has continued to sell a DVD with 1,044 PIRATED commercial works. Not only do they process the sales of these illegal DVDs (the postal inspector has been put on notice), but they did it AFTER THEY WERE SUED LAST YEAR for this, for the same e-mail address!

  • Notwithstanding the otherwise constant stream of disingenuous and delusional nonsense that flows from eBay/PayPal, the share price history of these two clunky operators demonstrates the reality:

    Aug 2007: (pre John Donahoe) EBAY ~$40; AMZN ~$40;
    Jul 2015 (pre eBay-PayPal split): EBAY ~$66; AMZN ~$480;
    Jul 2015 (post-split): EBAY ~$28; PYPL ~$37; AMZN ~$530;
    Recently: EBAY ~$24; PYPL ~$36; AMZN ~$715—LOL …

    PayPal is standing still, and eBay has for years been effectively going backwards—at a steady rate of knots.

    Notwithstanding the “spin-off” of PayPal from eBay, eBay and “PreyPal” remain effectively joined at the hip—for at least the next five years—and anyone that thinks otherwise is simply uninformed; and, thanks to a continuation of most of the destructive policies introduced over the eight year reign (2007–2015) of the “Pain from Bain”, John Joseph Donahoe II, the eBay marketplace is continuing on its slow journey down the toilet; nevertheless, during Johnny Ho’s occupation of the eBay corner office, this cretin and his gang of hand-picked Keystone Kops still managed to obtain for themselves massive, unearned, “performance” bonuses—while the company’s “long” shareholders received not one penny.

    PayPal is a clunky, non-bank-licensed, non-deposit-insured, virtually non-regulated, “pretend” bank; a higher fee-charging payments intermediary that, in the main, rides on the back of the world’s banks’ existing payments systems, with no formal agreement with those banks other than PayPal’s operating of a credit card merchant account facility with, and the making of direct debits/credits on some users’ bank accounts via, one of those real banks.

    PayPal is, in its own words, “a merchant of sorts”; it is not a licensed “bank”; virtually everything that “PreyPal” does is done via “marketing” arrangements with licensed financial institutions—for example, look for the identity of the actual credit provider (in the micro print) on their credit providing instruments.

    Merchants’ funds received via “PreyPal” are at risk of being subjected to lengthy arbitrary holds; $18 billion of users’ funds left “on deposit” with the PayPal faux “bank” are not FDIC deposit-insured. Even more perilous (for PayPal’s shareholders), the great majority of PayPal’s business originates from its (still) effectively mandated place on the eBay marketplace, so it logically follows that—with the destructive Johnny Ho-Ho-Ho now sitting at the head of the PayPal boardroom table—”PreyPal” will undoubtedly be accompanying eBay on its journey to the sewage farm.

    The reality is, PayPal’s parasitic, higher fee-charging payments operation has little long-term future—outside of its mandated place on the atrophying eBay marketplace—now that professional online/mobile payments offerings from MasterCard (“MasterPass”) and Visa (“Visa Checkout”) are available to any online merchant that has (or can obtain) a credit card merchant account with a real bank.

    With respect particularly to “mobile” payments, notwithstanding Apple Pay’s disappointing initial showing, methinks Apple Pay, Samsung Pay, Android Pay, “MasterPass”, and “Visa Checkout”, that is, those entities that have formal relationships with the world’s retail banks and MasterCard/Visa, will soon enough bury PayPal’s parasitic operation.

    PayPal users should never give PayPal an authority to direct debit their bank accounts; PayPal should only ever be given access to funds via a real-bank credit card account; that way your credit card-issuing bank will be the final arbiter of any transaction dispute; further, by using PayPal you forego the usual statutory protections that apply to credit card transactions. Conversely, sellers should never accept payment via PayPal for goods that are going to be picked up by the buyer; PayPal offers sellers zero protection from scammers in such circumstances.

    In May 2015, PayPal was fined $10 million over its “Bill Me Later” service, in part for unfairly charging some customers deferred-interest fees. The company was also required to return $15 million to consumers who used the service, which is now called PayPal Credit.

    PayPal’s one-time adoptive parent, eBay, is likely the most unscrupulous commercial entity operating on this planet; but, have no fear, eBay is an equal-opportunity fraudster; demonstrably, they will knowingly aid and abet the defrauding of buyers by unscrupulous eBay merchants who bid on their own auctions, and, conversely, of honest sellers by unscrupulous buyers—as long as there is a financial benefit in such fraud for eBay.

    And if anyone thinks that the clunky “PreyPal” is any more scrupulous than eBay—given their equally poor customer service and lack of any mediation of transaction disputes by human beings, which effectively results in a hard-wired bias towards buyers/payers that they now necessarily have to pander to—good luck to all you small online merchants who may get burned in the process.

    For a detailed analysis of the ugly reality of eBay’s demonstrable, calculated, facilitation of endemic shill bidding fraud on consumers on its auctions marketplace—Google “Shill Bidding on eBay: Case Study #5”

    Goodbye clunky PayPal—it’s not been nice knowing you—Google “Retail Payments: The Reality”, and …

    • EllaFino

      You are comparing apples and oranges. Amazon owns a majority of the products sold at its site while EBAY acts only as go between sellers and buyers. Looking only at share price would mean Amazon is more valuable than Apple which of course is not the case.

      • If only you had a clue what you are talking about …