You May be Owed Money from Paypal in Class Action Settlement for Improper Holds, Reserves, and Suspension of Paypal Accounts

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If you had or have a Paypal account that was active between 2006 and 2015 (and who hasn’t?) you may be entitled to money from Paypal under the settlement of a class action lawsuit against Paypal. The lawsuit against Paypal, Moises Zepeda v. PayPal Inc. (case number 4:10-cv-02500-SBA, the full Zepeda v. Paypal complaint is below), was filed back in 2010, and is finally settled.

In a mass email that went out today from Paypal, Paypal explains that “A settlement has been reached in a class action in which the plaintiffs allege, among other things, that PayPal improperly handled disputed transactions on PayPal accounts and improperly placed holds and reserves on accounts or closed or suspended accounts.”

Paypal, of course, disputes this.

However, dispute it or not, there has been a settlement reached – in fact a $3.2 million dollar settlement with the Zepeda class for basic claims, and Paypal has earmarked another $800,000 for alternate claims (more on that below) for a total of $4million.

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This week’s notice from Paypal goes on to explain:

You are a member of the Settlement Class if you had an active PayPal account between April 19, 2006 and November 5, 2015. Certain Settlement Class Members who had a hold or reserve placed on their account and/or who had their account closed or suspended by PayPal are eligible to receive a monetary payment upon submission of a valid claim form.

This action arises from the fact that PayPal closes its users accounts without reason to believe that the users engaged in any activity prohibited by PayPal, uniformly holds fund in the users’ accounts for 180 days without regard to whether the hold is reasonably needed to prevent liability, and fails to refund interest earned while the users are denied access to their accounts.

So who is Moises Zepeda, and why did he sue Paypal on behalf of the represented class, in a class action lawsuit?

Moises Zepeda sold gift cards on eBay. According to the Zepeda v. Paypal complaint (see below for the full complaint), Moises Zepeda (who is the ‘Plaintiff’) opened a Paypal account to process the payments he received on eBay. (Remember that in 2002 eBay acquired Paypal, and owned and controlled them until 2015.)

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Says the Complaint:

When opening the account, Plaintiff read and relied on statements made on PayPal’s website that PayPal offers quick and easy access to the payments processed by PayPal. While Plaintiff operated his business on eBay, he received no complaints and had 100% positive feedback from his customers.

In January 2010, Plaintiff logged onto his PayPal account and received notification that his account was limited. Plaintiff followed the instructions offered by PayPal on how to reinstate his account. This included faxing proof of ownership of the gift card he sold on eBay. Soon after Plaintiff faxed the information requested by PayPal, PayPal informed Plaintiff by email that his account was being closed.

PayPal stated that, “For the safety and security of the PayPal network, we often review accounts for potential risks. After reviewing your account, we have decided to close it because of security issues.”

PayPal then offered Plaintiff two “Disbursement options.” The first option was that he could issue refunds to any of his buyers. As Plaintiff had no complaints from any buyer, he owed no refunds.

The second option was: “Option 2. Money in your PayPal account will be held for 180 days. After 180 days, we’ll email you information on how to receive your funds.” Had Plaintiff known that PayPal would automatically hold the funds in his PayPal account for 180 if PayPal decided to close the account, he would not have used PayPal’s services.

This is of course not an unknown situation. Back in 2009 we wrote about how Paypal was witholding funds from eBay sellers (some of the more than 100 comments on that article are very eye-opening).

The bottom line, says the complaint, is that “This action arises from the fact that PayPal closes its users accounts without reason to believe that the users engaged in any activity prohibited by PayPal, uniformly holds fund in the users’ accounts for 180 days without regard to whether the hold is reasonably needed to prevent liability, and fails to refund interest earned while the users are denied access to their accounts.”

With the settling of this lawsuit, any Paypal user who has ever had a hold or reserve put on their account by Paypal, or who has had their account suspended or closed by Paypal, between April 19, 2006 and November 5, 2015, may be eligible for a (almost certainly small) piece of the Paypal settlement pie.

To submit your claim, go to the link below. It’s a fast, relatively easy process; you will need to provide your Paypal address, mailing address, and telephone number.

Then you will be given the option of submitting a ‘basic claim’, or an ‘alternate claim’ (for which Paypal has set aside that $800,000).

If you answered “Yes” to Question 1, do you wish to submit a Basic Claim, which, if valid, will result in a fixed payment based on the amount and length of the longest hold or reserve placed on your account or to submit an Alternate Claim based on the amount of documented damages, up to $2,000? You may select either a Basic Claim or an Alternate Claim, but not both.

Upon submission of your claim, you will be given (and emailed) a claim confirmation code.

zepeda paypal claim confirmation code

Here’s the link to submit your claim:

[Page no longer available – we have linked to the version instead]

You can read the Zepeda v. Paypal lawsuit complaint here:

Read the Zepeda v. Paypal complaint

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11 thoughts on “You May be Owed Money from Paypal in Class Action Settlement for Improper Holds, Reserves, and Suspension of Paypal Accounts

  1. I’ve repeatedly been robbed by paypal in several different ways I’m done dealing with them I’m going to find alternative ways to conduct business with my money

  2. I have been trying for several months to get access to my funds (over $ 5,000). PayPal hasn’t even notified me that my account is frozen. I have a 100% positive feedback score on eBay , not one single complaint. No explanation from PayPal, instead of telling me what to do I am getting automated messages referring me to the “Terms and Conditions” I sued them in Small Claims court and their answer was “Defendant does not owe Plaintiff anything….” What they are doing is a breach of their settlement agreement (Zepeda vs. PayPal). Exactly the same issues: Holding funds for no reason without any explanations and no instructions in regards to how to solve the problem. Hopefully, there is going to be another class action.

  3. I to have stopped using PayPal i have taken them off all my websites and online marketplaces as a payment option they put my account on hold so i refund all the orders that were on hold and asked them to transfer my balance to my bank and they said that they could not do that so now that they want to play games i am stating a class action lawsuit against them i guess they like being sued.

  4. I noticed on my bank account today that PayPal has been taking small amounts from my bank acct that is attached to my PayPal account. In the past day they have taken 1)$.22 (2)$.40 (3)$3.35 (4) $.60 this is 4 transactions that were not made by me,and I’m the only person with account access. On top of that ,when I try to access my account activity it won’t show it to me,today is 8/22/2019 and it won’t show me anything for the past few months.when I punch in show me the past year, the first transaction it shows me is April 9th 2019. I use PayPal when I make a purchase from eBay. But I’m poor and I know these amounts don’t seem like much, but if they are doing this to me, can you image if they took just $1 from half or a tenth of their customers. This is theft plain and simple. What’s so upsetting is I live off of $330. per month and I was down to my last $6.87 and they took most of that. And I still have another week before I’ll have any more money. Their actions have real word consequences. Be Warned, It’s best to just unlink/remove your Bank Card from your PayPal account, before they steal from you too.

    1. PayPal has gone too far. I have a sellers account with eBay. Ebay seems to steer payments to PayPal. Class Action? How else do you pay for an item you purchase on eBay? Not fair eBay not fair PayPal. I add a bank account to my PayPal account to access my funds, what does PayPal do? They start drawing money for eBay out of my bank account without my permission.

    2. Exactly they are getting away with theft I’ve lost hundreds of dollars and nothing seems to be done about it they just keep getting away with a crime most people would be in prison for I woke today to a -$98.22 balance I’ve tried for past few hours to contact them with no luck I’m contacting attorneys right now I too am to poor to be letting a multi million dollar company steal from me.

  5. My paypal account is currently on hold for too much deposit and withdrawal activity on my account. I sold 2 items on ebay and received 2 deposits. The postage for the 2 items were paid for via paypal through the shipping feature on paypals website. I tried to transfer funds to my paypal prepaid debit card and the website rejected the transfer saying the card was ineligible and my bank doesnt allow transfers from paypal… To my paypal debit card???? I then did a transfer of $10 to test my banks ability to accept transfers, it was successful. Then i get a urgent pop up announcement that my account is put on a limitations hold. Meaning it will still receive deposits and payments in but will not process any outgoing transactions. DUE TO TOO MANY WITHDRAWALS AND TRANSACTIONS? and my account will remain on hold until i submit a list of known transactions for the current week and a pdf copy of my bank statement as well as a copy of my photo ID. Submitted all of that in minutes. Still on hold. Called them.. Takes 72 hours to review submitted docs before hold will be lifted BUT it could take up to 5 days and sometimes as long as 30 days to review the account and lift the hold. I stopped using paypal and ebay several years ago because of these illegal practices. Apparantly they learned nothing from the previous lawsuit

  6. I’m during paypal. They have done nothing but rip me off. Paypal you will pay me back every dime you and ever who or whom you let steal my money. Your sorry as hell. You should be lock up. God will see you burn in hell. I want my money and you have a choice.

    1. Have found 3 pay pal with same number 4029357733 netfordson EB money taken out of my account April21st 189 dollars98 cents
      June 20tg smileyhoney same number 69 dollars 98 cents
      June 24th mercuryreta EB
      June 27th datelineimpv113 dollars 8o cents
      What can I do about it

  7. They froze my account once. Would not let me withdraw my money and refused to say why or what i had to do to get my money. I learned quick that if i sent hundreds of emails to each customer service email,and if i was very insulting and rude, they would help me. Each person i called fat stupid and lazy, would only fix one small part. I never left money in the account after that.

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