I recently sold some items on ebay, and was payed through Paypal. I didn’t get around to transferring those funds to my checking account for a few weeks, and it got me thinking: what are the rules governing Paypal’s use of its customers’ funds? Are they allowed to dip in every once in a while, provided that they don’t use “too much,” or provided that they make sure and have the money in place in the event its customers decide to withdraw?
Does anybody know if Paypal would be breaking any laws if they operated with a “fractional reserve”?
Edit:
This question is based on almost zero knowledge about Paypal and its various services. For example, is it considered a bank, or something more akin to a Western Union? I know it is a highly respected, secure service which I have used a number of times. It does seem to me that, given the high volume of funds passing through its accounts, Paypal would have ample opportunity to “put the money to work.”
The funds in your PayPal account are kept in bank accounts at banks such as Wells Fargo. So, when you transfer money from your bank account to your PayPal account, you’re simply transferring money from your bank account to PayPal’s bank account.
paypal is a pseudo bank. It’s a bank out of luxemburg, but not recognized as such in the U.S. (i think because of securities laws)
paypal owns a mutual fund in the USA
it is a deposit institution, but does no lending (to my knowledge, it doesn’t expand credit per se, but you can float payments through it (as i do frequently, just like floating checks)…very suspicious that they allow that.
It is owned by eBay and is basically a globalist operation. If at any point they ‘suspect’ you of ‘something’ they can freeze your account. and there is VERY LITTLE recourse unless you submit to thier requests.
he asked about paypal. i use paypal constantly and have done a little inquiry on my own.
"Peter Thiel, the founder of PayPal, has stated that PayPal is not a bank because it does not engage infractional-reserve banking.[46] Rather, PayPal’s funds that have not been disbursed are kept in commercial interest-bearing checking accounts.[47]
In the United States, PayPal is licensed as a money transmitter on a state-by-state basis.[48]PayPal is not classified as abankin the United States, though the company is subject to some of the rules and regulations governing the financial industry including Regulation E consumer protections and the USA PATRIOT Act.[49]
Commencing 2 July 2007, as PayPal (Europe) S.à r.l. & Cie, S.C.A., PayPal moved its European operations from the UK to Luxembourg. As a Luxembourg entity, it is since regulated as a bank by the Commission de Surveillance du Secteur Financier (CSSF) and provides PayPal service throughout the European Union.
In Europe, PayPal is registered as a bank in Luxembourg under the legal name PayPal (Europe)
PayPal is not directly regulated by the U.S. federal government, because it serves as a payment intermediary.[61] ((((((((The law is unclear as to whether PayPal is a bank, narrow bank, money services business or money transmitter.)))))))))) PayPal could also be subject to state regulation, but state laws vary, as do their definitions of banks, narrow banks, money services businesses and money transmitters"
my emphasis. i don’t know, did i read it? did you? tool.
i signed up for this forum because i figured the people we’re smarter than at NYT or infowars. But, alas, they are just as narrow-minded with an unreasonable sense of intellectual superiority as the establishment wants. You hear (or see) keywords and it clicks “conspiracy theory” or fringe or unresearched or hearsay and you don’t know how to critically think. You imply that i am wrong in my statements, but your posts only serve as…well…
Simplification (Stereotyping):
Simplification is extremely similar to pinpointing the enemy, in that it often reduces a complex situation to a clear-cut choice involving good and evil. This technique is often useful in swaying uneducated audiences. When faced with simplification, it is often useful to examine other factors and pieces of the proposal or idea, and, as with all other forms of propaganda, it is essential to get more information.
I guess Nock really is right. Not all are educable.
Why didn’t you highlight “PayPal’s funds that have not been disbursed are kept in commercial interest-bearing checking accounts.”?
Where do you think those interest-bearing checking accounts are, within PayPal? They are obviously with another financial institution. Otherwise, why would they pay interest to themselves. After all, it’s not as if PayPal pays interest to regular PayPal account holders*.
*The mutual fund that you are referring to most likely has to do with the PayPal accounts that have been opted into the mutual fund.
Or this: “PayPal is licensed as a money transmitter on a state-by-state basis.”?
Money transmitter does not equal bank. Although PayPal’s operations in Europe may be as bank, they are not so in the USA. You had oversimplifed legal structure.
is that any different than the Ron Paul sense? PayPal is an international bank. I harbor suspision on its activites/investments/data collection/management same as JPM or GS.
“I don’t know who else you’ve engaged in this forum. Are you basing your judgement solely on me? If so, then that would be a hasty generalization.”
based on all of the responses and topics that i think are interesting or relevant.
I was pointing out what the founder claimed (it has changed since then)
I don’t know exactly where the interest bearing accounts are. I have wondered it myself. And, either way, they are taking my money, giving me digital demands against it, and transferring the money to another institution and i do not earn interest on it… It is a grey area and referred to on a state by state basis because it has some federal regulation or at least federal laws around it.
I did include the indentification of “money-transmitter” twice. I didn’t bold it cause i was focusing on the ‘grey area’ of which ‘money transmitter’ is a part.
and actually, i did
“PayPal is not directly regulated by the U.S. federal government, because it serves as a payment intermediary.[61] ((((((((The law is unclear as to whether PayPal is a bank, narrow bank, money services business or money transmitter.)))))))))) PayPal could also be subject to state regulation, but state laws vary, as do their definitions of banks, narrow banks, money services businesses and money transmitters”
and yea i guess i was only considering the mutual fund for regulatory reasons not paying out interest…although that should depend on the returns of the fund too. The traditional incentives for holding money in an interest bearing account are not there. People use paypal out of convienience not because they can earn returns on their holdings. My guess is the money sits in PayPals account at JPMorgan Chase and Chase leverages against it, hence the transfer times.
Thanks for the info, guys. Apparently I’m too lazy to go to Wikipedia myself.
I would have to say that there doesn’t seem to be much gray area when it comes to keeping its funds in commercial interest-bearing checking accounts. Those have got to be fractional reserve (how else could those institutions afford to pay interest on a checking account?)
Well, I suppose that all this time it was a matter what was meant by “bank.”
Btw, I completely understand your point about PayPal being able to take your money away from you whenever they’d like. But, like everything else, there is always risk.