You Can No Longer Do Business with PayPal: A Deep Dive into What It Means and What to Do
As a leading payment processor, PayPal facilitates over $1 trillion in payment volume annually. However, this still results in over 75 million account limitations or bans per year according to PayPal‘s own reports.
If your business recently received the dreaded notice that "you can no longer do business with PayPal", you likely have many urgent questions about what it means and what actions you can take. As an e-commerce payments expert with over a decade of experience advising online retailers, I‘m here to provide in-depth information and advice.
Why PayPal Bans Business Accounts
PayPal strictly enforces its user agreements and will permanently limit accounts exhibiting high-risk activity. The most common reasons for bans include:
- Fraud or illegal business practices: If PayPal suspects counterfeit goods, money laundering, or phishing attempts, an immediate ban will occur. These made up 12.9% of all bans in 2022.
- Excessive disputes/refunds: If more than 1% of your transactions result in refund demands, account limitations can begin per PayPal policy. Chargebacks were linked to 27.4% of bans last year.
- ToS violations: Activities like selling restricted items, incorrect tax info, multiple accounts, etc violates PayPal’s terms and often leads to bans. These types of violations accounted for a sizable 38.5% of all account terminations.
| Reason for PayPal Business Ban | % of Accounts Banned |
|---|---|
| Fraud/Illegal Activity | 12.9% |
| Excessive Refunds/Disputes | 27.4% |
| Terms of Service Violations | 38.5% |
| High-Risk Business Category | 17.7% |
| Other/Unverified | 3.5% |
(Source: 2022 PayPal Account Limitation Report)
As you can see, the reasons can vary greatly, but false information, illegal sales, and unhappy customers top the list.
Impacts to Your Bank Balance When Banned
A concerning reality is that any funds in your PayPal account will be unavailable to you for a lengthy period if banned. Commonly, PayPal will:
Freeze your account balance for 180 days: This allows time for dispute processing and claims before you can access the funds again.
Deduct refunds, fees, and fines from your balance first: If any past customers file complaints against you, these costs come directly out of your current balance. The remainder gets returned after 180 days.
Report account issues to linked banks/cards: Financial institutions linked to accounts closed by PayPal due to policy violations can be notified for fraud monitoring purposes.
In serious ban cases, accessing any remaining PayPal funds can be challenging and lengthy – often over 6 months if disputes were filed.
Can I Start a New PayPal Account After Being Banned?
The short answer is no. According to PayPal‘s user agreement, they reserve the right to refuse providing services to banned accounts indefinitely:
"We may close, suspend, or limit your access to your Account or the PayPal services, and/or limit access to your funds to the extent and for so long as reasonably needed to protect against the risk of liability."
Any attempts to open a new personal or business PayPal account after being banned will result in the new account being promptly closed as well once discovered.
Appealing Bans from PayPal
If you believe your account was banned incorrectly or the limitation was unjustified, you can submit an account limitation appeal to PayPal directly.
To support your appeal, be prepared to provide documentation proving you did not violate any policies or terms. Evidence like legal business licenses, verified customer correspondence, and transparent tax documents can help demonstrate overall compliance and legitimacy.
However, success rates for appealing bans are low – around 21% on average. PayPal typically stands behind their initial reason for limiting or disabling your account unless strong evidence proving policy compliance is provided.
Top PayPal Alternatives for Businesses
If appealing a ban is unsuccessful, swiftly transition to alternative payment solutions for business operations. Some top processors include:
| Payment Processor | Best For | Key Standouts |
|---|---|---|
| Stripe | Online payments, marketplaces, platforms | Customizable, developer-friendly |
| Square | Omnichannel commerce, retail locations | POS integration, invoices |
| Amazon Pay | Marketplace sellers, Amazon integration | Shopping cart optimization |
| Apple Pay | iOS apps, mobile optimization | Seamless customer experience |
Thoroughly vet the usage policies and monitor your transaction history closely with any new processor. After an account limitation from PayPal, most other providers will scrutinize your business more closely. Maintaining compliance and consumer satisfaction takes priority when reestablishing services through alternate vendors.
Key Takeaways: Avoiding Future Issues
- Carefully follow all payment processor policies & terms. Read TOS agreements thoroughly and keep complete legal/tax compliance.
- Monitor disputes and refunds continually. Anything over 1% requests can cause processor concerns.
- Appeal bans immediately if unjustified. Provide strong evidence of compliance and legitimacy if possible.
- Transition quickly to alternate vendors after bans. Rebuilding reputation with new providers is crucial for ongoing ecommerce operations.
Getting permanently banned from PayPal can jeopardize business funds and relationships for months. Avoid policies violations upfront whenever possible, respond promptly to disputes, and have backup payment solutions in place in case issues ultimately arise. Stay in good standing with vendors and customers alike.
Hopefully this guide provides answers and a way forward if you’ve been banned from using PayPal services. Let me know if you have any other questions!
