The company, which appeared on the stock market again free from Ebay for the first time today, has been blocking some users from spending their money.
It is flagging transactions as being problematic and refusing to let them go through. The user gets a message suggesting that they should try later. However, waiting never improves anything, the account is blocked.
We noticed the problem about six weeks ago and it was hinted to us that the problem was caused as engineers tried to liberate PayPal from its eBay overlords.
Paypal customer support did not know what to do and is blaming all of Paypal's suppliers as security risks. Ironically it has also been saying that eBay transactions have been security risks. Initially customer support suggested that payments were sent out to email addresses but then the unfixed security feature started blocking these too.
What is also alarming is that the security blocks cannot be overridden manually, in fact, most users will not even know they have been blocked.
Customer support seems to have faith that the security system and has no interest in referring the problem to someone with technical expertise:
" the reason as to why your payment using your account is being stopped is because according to our Internal Security System it may fail or there are potential problems linked to it.
Please be advised that I do not mean you, as the user or the seller or even your card/bank account has triggered our internal security system but what happened here is that when each and every payment is made through PayPal our Internal Security system will analyse each one of them.
I hope you understand that our system will analyze all factors involved in the payment being made, not just those making the payment or receiving or what is being used. It could possibly be that items or services of a certain category has had a history of failing or being done fraudulently or that the item or service is not suitable according to the Acceptable Use Policy. These are a few examples of what could have triggered our Internal Security system and it completely objective and analytical to prevent any negative outcomes to a transaction.
You may at the moment view this as protection but in actual fact this system we use has helped reduce losses for both buyers and sellers, as we only have your best interests in mind. A smooth transaction is an ideal transaction and we wish to straighten out any wrinkles for you from the start so that once an exchange of money and item or service is done, you need not worry about it anymore."
Obviously automatically freezing people's accounts does prevent the money from being stolen, but it equally reduces the usefulness of your service.
We asked PayPal to comment about the problem and if it was aware of the security problem it was facing. We even offered access to our accounts so they could see the problem in action. We are waiting to hear back.
UPDATE COMMENT FROM PAYPAL:
PayPal works to stay at the forefront of security systems and technology to protect our customers and keep their accounts secure from evolving security threats. Unfortunately a few weeks ago one of our technical updates resulted in some merchants having difficulty processing payments for a short period of time. We identified and resolved the problem quickly. We never intended to give our merchants the impression that we viewed them as potential security threats. We regret if this was miscommunicated in any way. We’ve fully resolved the situation and have communicated directly with any merchants affected by this issue.