February 2018 Complaint Roundup: Stripe Reveals How It Decides To Hold Funds

What Are Other Merchants Saying?

Stripe Pulls Back The Curtain

Sandi's February 5 comment on our Stripe review consists of a copied-and-pasted email conversation with a Stripe representative:

Hi Roy,

I apologize in advance if this response seems ignorant. I am just trying to figure out this issue.

I understand everything you’ve noted below, however you are not giving me specifics as to why I am high risk.
I have received 0 chargebacks or disputes for over a month now, the full life of my account with you thus far.

The 90 day payout date from the time the first order was placed on January 23 2018 is April 23 2018, not May 5th.
Will each payout from then be in separate payouts to my bank account, or will it be in one lump sum? According to you, it would be in one lump sum much later than they are due. That should not be the case, they should be paid out according to when they were received in +90days. Correct?
In 45 days to re-eval will be: March 9th.

I absolutely will not refund my customers as I have already shipped ALL orders as I have noted in email many times. Why in the world would I allow a customer to receive an item for free? What benefit would that be to me? Why would you suggest that?

Stripe breached your end of our contract by not releasing payment to me starting on January 30th.
I am requesting the name of your banking partners besides Sillicon Valley Bank Partners? If what you just said in email below that they require you to hold funds for 90 days, WHY ISN’T THIS TOLD TO the Merchants when opening an account?
Please point out to me exactly where on your terms that it says all payments will be held for 90 days before processing a payout.

I am not a fool, Stripe does have the ability to payout without holding as a reserve. Claiming there is “no way around it” is a cop-out. Stripe is the one “investigating” businesses, not Visa/Amex/Mastercard/Sillicon Valley and so forth.

Your explanation of allowing payments to go through BEFORE checking into a business is absurd and unheard of. Stripe knows exactly what they are doing here. Illegally withholding funds without reason.

Since my legal team is the State of Pennsylvania Department of Securites and Banking, they will not contact Stripe via email, they will contact via phone, fax and registered snail mail.
Even though you have no phone listed, which is very odd, the State Department will locate the number.

I have requested many times via email as to why you are holding funds and you have offered no explanation other than your general wording of my business being high risk. Prove that to me. Its your burden to prove that to me and my burden to seek my earned monies from you, which I am doing so but slightly losing patience.

Roy, you have to admit, this is getting ridiculous. You have my bank account information. If there is a chargeback or dispute, Stripe pulls it from my account. There is no risk on your end as I intent to keep up my end of the contract and allow you to do so if needed.

Looking forward to your reply. These should be easy questions to answer.

PS. The hundreds and hundreds of complaints regarding Stripe online are severely if not exactly the same issue I am having. Whether or not you are making money, this is wrong and illegal.

From: Stripe Support
Reply-To: Stripe Support
Date: Monday, February 5, 2018 at 12:28 PM
Subject: Re: Payout date

The following addresses are subscribed to this thread:

Hi Sandra,
Thanks for getting back to me. Please allow me to explain the situation with your funds and your account, please bear with me as this email will be a bit longer than normal.

Just to clarify the situation, we normally allow our users to process a certain amount of charges before we reach out for more information or make a decision in regards to their account. The way our review process works is that instead of bombarding you with requests when you sign up with Stripe or making a hasty decision, we want to give you time to get to use Stripe and it also gives us time to see how you interact with your customers and gives us a clearer impression of how your business works.

To provide some context, Stripe is required by law to complete what’s called a KYC (Know Your Customer) review for every business that signs up with us. This involves completing in depth reviews, including what you’re selling, how you intend to sell it, your own description of your products and services, your website, and a variety of other factors. We use all of this information to determine how risky a business is.

We’re under strict regulations from our banking partners that dictate the exact level of risk for future disputes we’re allowed to support. During the in-depth review of your account and business, we came to the realization that your likelihood for future chargebacks exceeds the rate we’re legally able to support based on those regulations. I’m afraid we can’t offer much in the way of specifics regarding our review process for the sake of security, but please rest assured that we did a thorough review of your business and tried our hardest to continue working with you.

Stripe’s financial partners state that we’re required to hold onto all remaining funds for the industry standard chargeback window of 90 days (5th of May 2018). That hold helps protect ourselves, our banking partners, and your customers from potential fraud or disputes. We simply have no way around these regulations and have to create a reserve. Once that period is over we’ll deposit all remaining funds into your bank account automatically. You have agreed to this reserve when you signed up for Stripe as this is part of our terms of service, Section C part 8, which you can find here:

We would greatly prefer to transfer all funds to you as quickly as possible. We simply have no way around these regulations and have to create a reserve. That said, I would encourage you to write back in after 45 days (21st of March) and if there has been no chargeback activity, we may be able to release your reserve early.

Alternatively, if the funds are required immediately, you do have the option to refund those charges to your customers and secure payment through an alternative means. It’s good to know that when you issue a refund through Stripe, we return all fees associated with the charge. I’ve added a link here to your payments if you’d like to issue any refunds:

Should you wish to continue with official action, you can direct your legal team to submit any official legal notices in the following link:https://www.stripe.com/notices

I know this isn’t the response you wanted, but hopefully, I have shed some light on this matter. Please let me know if you have any questions or if there’s any way I can be of help.

All the best,
Roy

On Feb 5, 09:01, wrote:

Hi Roy,

Thank you for your response.

I understand you do not want to do business with me going forward, but why did you accept and process payments for me for 2 weeks, and it would have been longer had I not noticed the payout issue. I am very concerned because I have read hundreds of complaints of Stripe doing the same thing to other merchants, and in the end, ruining their businesses. Is this Stripes “M.O”?

I have contacted the BBB, knowing that there will be no outcome from that side of things, but I have no choice but to contact the PA Department of Banking and Securities as well as the Attorney General.

There is no excuse for NOT checking into a business BEFORE accepting thousands of dollars worth of payments for them. Absolutely no excuse.

I have read your terms and policies from start to finish. Your list for known high risk items, none of my items I’m selling fall under those categories. I sell housewares, bikes, electronics which 99% are refurbished and other small items. I’ve given all info requested and have a wonderful track record with the site I have been selling on for years.

As soon as I noticed the “payout” issue, I have switched payment processors and they also do not deal with “High Risk” clients, I am not high risk.

I request that you at least release ½ of my due Payout and I will gladly await the remaining ½ for the 87 remaining days. If you cannot and refuse to release money that is due to me, by law, because I have shipped the items and have not been paid for them, then I will have to go forward and send off my messages off and see what they can do for me. I would not be pressing this issue if I had not shipped all the orders.

I put my faith and trust in you guys, shipped all items because your system stated it was ok to ship as the payments passed your inspections, and now I ended up with $0 for items that I shipped.

I am looking forward to your reply.

On Feb 5, 03:14, Stripe Support wrote:
Hey Sandra,

Thanks for contacting us here at Stripe. Please bear with me while I shed some light on our decision. I’m afraid we’re unable to reverse our decision.

To be clear, I can assure you this decision was not based solely on the 23 charges you already processed through Stripe and I completely acknowledge that you haven’t received any chargebacks at this time. However, after a thorough review of your account and business, we came to the realization that your business has a high likelihood of receiving disputes in the future.

Our banking partners analyze certain characteristics of your business to see if they match their own processing criteria. These criteria are created based on decades of risk management data surrounding certain business types. Because Stripe has to work with credit card networks and banking partners to allow us to process payments, we have to follow the restrictions these partners/networks place on us. If we didn’t follow these regulations, we wouldn’t be able to continue providing our services. It is for this reason that our hands are truly tied.

I’m sorry that we can’t do better for you right now, and I wish you the best of luck in all of your future endeavors. If you have any other questions regarding Stripe, please don’t hesitate to write back, and I will get back to you as quickly as I can.
All the best,
Roy

This exchange more or less confirms one of our primary criticisms of Stripe since the company's inception: that Stripe, like Square and other merchant account aggregators, does not take adequate steps to filter out prohibited business types before approving them for merchant accounts. In fact, the company freely acknowledges here that it prefers to “allow our users to process a certain amount of charges before we reach out for more information or make a decision in regards to their account.” In other words, Stripe knowingly allows businesses to open accounts and process payments without first conducting a full assessment (a “KYC”) of those businesses' risk levels.

At first glance, this may seem like a merchant-friendly approach. After all, it's very frustrating to be denied for a merchant account based simply on your business type. At least Stripe gives you a chance to process payments before making a decision, right?

Well, as Sandi's comment reveals, a merchant can have zero chargebacks while processing through Stripe and still have their account shut down and funds withheld. As the customer service rep explains, “this decision was not based solely on the 23 charges you already processed through Stripe and I completely acknowledge that you haven’t received any chargebacks at this time. […] Our banking partners analyze certain characteristics of your business to see if they match their own processing criteria. These criteria are created based on decades of risk management data surrounding certain business types.”

This raises an obvious question. If Stripe will close a merchant's account for “characteristics” that have nothing to do with the merchant's actual processing behavior, then why doesn't it screen for these characteristics before allowing merchants to open an account? Giving merchants the green light to process payments and then unexpectedly freezing their funds puts them in a terrible position. As Sandi states, she wouldn't have shipped her products if she knew that her funds would be held.

Based on the information shared by this customer service rep, merchants should assume that their accounts aren't fully approved until at least a month after opening their Stripe accounts. Merchants are advised to plan for the possibility that Stripe will freeze their funds after conducting their full KYC assessment. If you are a Stripe user, you might want to inquire as to whether this KYC is complete for your business before continuing to operate.

Wrath Of The Agent

Neil Patel's January 16 comment on our TransNational Bankcard review states the following:

I used TransNational for almost 2 years (2015-2016) and I never had any issues with TransNational and their reps until NOW.

About a year ago, I switched to BOA processing because I was receiving better rates. At the time of the switch, I gave TransNational every opportunity to meet or beat BOA rates but they were unable to come close so the decision to save on processing fees and make the switch to BOA was a no brainer, plus I received $1000 to make the switch.

Last week, my old TransNational rep came to my business and with a loud piercing tone, she yelled and embarrassed me in front of my employees for making the switch to BOA, which occurred over a year ago. Her statement “You were receiving the best rates through me, anyone giving you better rates has hidden fees.” I mentioned I saved money on the rates and I received $1000 for making the switch. Her response was “there is no such thing as a free lunch.”

After explaining to the TransNational rep that I’m the customer and I need to save money where I can, I asked the the TransNational rep to leave my business premise.

One week later, the TransNational rep writes a 1-Star google review about me being rude on my businesses page because I switched to better processing rates??

So I ask, who is the customer here? Me or the Rep? The TransNational rep came to me asking me for my business and when I said no, the TransNational rep writes a bad review on my business.

There’s something morally and ethically wrong about this situation. I never asked the TransNational rep to come see me, she came to my business on her own. Then she proceeded to loiter and solicit, and finally when asked to leave the premise, she writes a bad review about me.

I’m shocked and appalled how TransNational and it’s representative’s have treated me because I switched processing companies. I would never recommend TransNational to anyone because of what I just experienced.

This is an extreme example of what happens at companies that employ independently contracted sales agents. After boarding a new account, independent agents are often encouraged to hand the merchant over to the customer support team and never check in with the merchant again. This means that the merchants lose contact with the person who sold them the account, and the agents only realize that their merchants are dissatisfied when they suddenly lose a chunk of their monthly residual. This particular relationship apparently deteriorated to such a degree that the agent thought it was acceptable to storm into Neil's store a year later and berate him. It's easy to imagine that this could have been avoided if the agent had been more hands-on and active before Neil terminated his account.

Incidents like this illustrate why we generally award higher ratings to companies that employ in-house, W-2 sales agents. In the event that a company uses independent contractors, it should encourage those agents to maintain periodic contact with their merchants as a best practice. In this particular case, we would expect TransNational Bankcard to discipline or terminate this sales agent, as this behavior is extremely damaging to TransNational's reputation.

Charged If You Do, Charged If You Don't

Kim Bate's January 23 comment on our WorldPay review states the following:

I was a customer for years and Worldpay kept charging me “non compliance” and “compliance” fees at the same time. When I asked what I was not in “compliance” with I was at first told I was in “compliance”. When the fees continued, I contacted Worldpay again and they could not tell what I was not in “compliance” with. It appears that their Compliance Department is part of their own company. Worldpay has not responded to my complaint with the BBB. WHAT A SCAM!!

We've briefly addressed this phenomenon in other complaint roundups, but it bears restating: you can be charged for PCI compliance and PCI non-compliance at the same time. It's a frustrating quirk of the industry, but it's more common than you would think. The reason for this is that these two fees are charged for different reasons. PCI non-compliance fees are charged as a penalty to merchants who have not completed their annual PCI validation. PCI compliance fees, on the other hand, are charged to cover a merchant account provider's costs of helping its merchants maintain PCI compliance, whether through special third-party software or in-house assistance. PCI compliance fees are usually charged regardless of whether a merchant is compliant, so a non-compliant merchant will be subject both to PCI compliance fees and non-compliance fees.

In this particular instance, Kim rightfully questions why WorldPay is charging these fees when it has its own in-house compliance department. As a large company, WorldPay likely does not need to rely on a third-party service to validate its merchants for PCI compliance, so it could theoretically use its resources to actively help non-compliant merchants become compliant. If it did that, though, it wouldn't be able to charge two fees per month, would it?

Crossed Wires

Travis's February 13 comment on our Square review states the following:

I was recently contacted by a stranger that let me know for about 2 years he has been getting my receipts sent to his phone. After 2 years he was able to track me down and let me know. I have tried to contact square to get this resolved and there is no way to contact them? no phone and I am not a customer of theirs. I buy things and my information is sent ot some random person!!!!

We see complaints like this come in every so often, and it seems that Square does a pretty bad job of anticipating this problem and educating users. In Travis's case and so many others, the most likely cause is that he entered his email address incorrectly into a merchant's Square reader, and the person who is getting his receipts is the owner of the misspelled email account. Square saves your email address the first time you enter it and attaches it to your card number, so the company will continue to send receipts for your card purchases to that email address unless you take steps to correct the information that Square has on file.

Of course, Square's customer support is notoriously slow and unreachable, which makes it hard for the average user to sort this problem out. And although this error is likely related to something as simple as a typo, it's entirely possible that Square's system could occasionally malfunction and send out a receipt to the wrong user. In general, this issue causes alarm among enough cardholders that we are surprised that it hasn't damaged Square's reputation more severely.

Have you had an experience that you would like to share with these commenters? Reply to their comments and you may be featured in next month's complaint roundup!