PayPal freezes out other groups, who turn to WePay

08.13.10 - 5:38 pm | Steven T. Jones

PayPal has lost customers and credibility after freezing the accounts of Burning Man's Temple Flux - a story we broke this week that triggered an overwhelming response that caused the company to back down - with many of them flocking to the more community-based alternative WePay.com. But the publicity has also unearthed even more stories of nonprofit groups getting their assets frozen by PayPal.

Groups ranging from the National Association of Injured Workers to Burning Man camps Comfort and Joy and Black Rock Diner tell the Guardian they've recently had their assets frozen without warning by PayPal, a multinational company owned by eBay that reported $2.2 billion in revenue last year and makes its profits mostly from interest and other returns from the money it holds for others.

"There was never a time they said this was going to affect our ability to access our funds," Temple of Flux treasurer Colinne Hemrich said of the group's fairly impersonal dealings with PayPal, which froze the group's funds just as it was leaving for the playa to build the project. Under public pressure, the company freed the funds, letting Temple members know "they were doing us a big favor," project manager Catie Magee told us, yet the delay soured these burners and others on PayPal.

But smaller groups haven't been so lucky. "It's not on the same scale as the Temple, but proportionately and to us, it's still a really big deal," Michael Williams said of his Black Rock Diner camp, which is in final preparations for heading to Burning Man and said PayPal recently froze their account, also because they weren't able to prove their nonprofit status.

"It's just people in our camp who have been using PayPal to send us dues, so this is very frustrating," he said. "I'm never going to use PayPal ever again."

Sam Gold, founder of the National Association of Injured Workers, a nonprofit that helps workers navigate the complex system for filing nonprofit claims, has been fighting PayPal for months since it froze the group's account, in the meantime learning more about their business practices and preparing to file a lawsuit.

"There are all sorts of people they're doing this to, thousands and thousands of people... And it's all about collecting interest of their money," Gold said, citing stories on websites such as PayPalSucks.com about how the company falls through the cracks of serious regulation by any government agency and routinely settles legal claims before they grow into larger problems for the company.

"PayPal is taking small charitable nonprofits and making them jump through all kinds of hoops and face long delays to get their money. They can get away with it because nobody knows who's supposed to be regulating these guys," Gold said. "I want to see their dirty wash on the public clothesline because only then will [Attorney General] Jerry Brown and the district attorneys take note of this scam."

PayPal spokesperson Anuj Nayar, who spoke to the Guardian earlier this week as the company decided to release the Temple funds, couldn't be reached for comment on the latest allegations and told us he couldn't go into detail on why they freeze accounts, saying only "we are under certain regulations."

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