PayPal Halts Crowdfunding Payments To Skullgirls Dev

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PayPal Halts Crowdfunding Payments To Skullgirls Dev

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PayPal says it was not willing to take the risk that backers of the Skullgirls crowdfunding campaign would demand refunds.

Remember the heartwarming story of the Skullgirls crowdfunding campaign on IndieGoGo? Developer Lab Zero asked its fans for just $150,000 in order to develop a DLC character for the popular fighting game, and ended up raising over $800,000. Happy smiles went all around, the devs raised their money, fans will receive five new DLC characters for the game, and the whole story was a poster child for crowdfunding.

But every Christmas miracle has an Ebeneezer Scrooge, and in this tale, the role of the villain is played by PayPal, for refusing to pay out the majority of the crowdfunding campaign's funds on the basis that it was not willing to take the risk that backers would demand refunds. The majority of backers to the campaign opted to pay through PayPal, which means the popular payment service was sitting on $700,000 of the $829,000 raised. This left Lab Zero games unable to pay its staff, and may have affected the projected release schedule of the DLC characters.

PayPal offered to unfreeze the funds if Lab Zero agreed to take on the burden of providing refunds if necessary, but CEO Peter Bartholow refused. He said that the point of its crowdfunding campaign was to provide money for development costs, and Lab Zero should not be accountable for refunds.

The good news is that after venting his frustrations on the NeoGAF forums, Bartholow convinced PayPal to unfreeze the account, on the condition that it withholds $35,000 as collateral. He has filed a complaint with the Consumer Financial Protection Bureau, saying that none of PayPal's rival payment services, such as Amazon, have ever stooped to this level of scummyness.

This is not the first time small-time devs have had a run in with PayPal. Minecraft's Markus "Notch" Persson found himself in almost the exact same situation several years ago, and there are plenty of recent tales of PayPal trying to "Scrooge" its consumers.

Source: VG24/7

Permalink

I need to find an alternative to this service and I need to do it fast.

Congrats, Amazon Payments; you just got a lot of new customers
(myself included; should have permanently switched after the Wikileaks fiasco)

I've grown to despise PayPal ever since the eBay horror stories began to surface, about how buyers would merely request their payment back and PP would comply, no questions asked.

I don't sell on eBay myself, but I know people who effectively make a living off've it, so I can't condone this shitty behaviour.

Given how much they take for processing the transactions, PayPal should cover these things.

Zombie_Moogle:
Congrats, Amazon Payments; you just got a lot of new customers
(myself included; should have permanently switched after the Wikileaks fiasco)

I don't know what Amazon Payments is like, but I know selling through Amazon they do something similar to sellers. For instance, indie authors are subject to a week long return period. Wherein anyone can just return any book they bought for a full refund. Considering the popularity of shorts and novellas in many of the most popular genres, this is absurd. Return rates for indie authors all report being at a solid 10%, which says to me there's just a consistent degree of abuse with people reading then returning books.

People still use Paypal? I thought we all knew they were scummy.

Steven Bogos:

PayPal offered to unfreeze the funds if Lab Zero agreed to take on the burden of providing refunds if necessary, but CEO Peter Bartholow refused. He said that the point of its crowdfunding campaign was to provide money for development costs, and Lab Zero should not be accountable for refunds.

This is confusing me. It sounds like all Paypal is asking for is for Lab Zero to be responsible for refunds. If they unfreeze the account (as in give Lab Zero all the money) shouldn't that money be used if people demand refunds? Would Lab Zero really take all the money and then leave Paypal with the bill if customers demand refunds? That sounds really shitty in itself.

Am I missing something here?

Everytime I see someone accepting paypal payments I feel bad for them.

Maybe I'm just looking at this rationally, but why shouldn't the developers be the ones to be responsible for refunds? If I was Paypal I sure wouldn't want to be stuck holding the bag if the game ends up sucking.

I've used Paypal for years and never had an issue with them. The only issue I've had was with EA and Origin, and that's because they were too stupid to take my money when I was waving it in their face. Paypal was involved in that transaction and they handled it fine.

Krantos:

Steven Bogos:

PayPal offered to unfreeze the funds if Lab Zero agreed to take on the burden of providing refunds if necessary, but CEO Peter Bartholow refused. He said that the point of its crowdfunding campaign was to provide money for development costs, and Lab Zero should not be accountable for refunds.

This is confusing me. It sounds like all Paypal is asking for is for Lab Zero to be responsible for refunds. If they unfreeze the account (as in give Lab Zero all the money) shouldn't that money be used if people demand refunds? Would Lab Zero really take all the money and then leave Paypal with the bill if customers demand refunds? That sounds really shitty in itself.

Am I missing something here?

This is a crowdfunding situation. They're not really selling a product so customers asking for refunds makes no sense. They're investing, not purchasing. Even if we went out on a limb and pretended the people investing were really just paying to receive DLC characters then a refund makes even less sense. When was the last time someone asked for and got a refund on some DLC? Most publishers will tell you to take a hike.

I do agree that if Lab Zero got people asking for refunds they should be the ones dealing with it though. I'd be surprised if Paypal wouldn't be well within their rights to tell someone asking for a refund to fuck off and go bother Lab Zero.

Krantos:

Steven Bogos:

PayPal offered to unfreeze the funds if Lab Zero agreed to take on the burden of providing refunds if necessary, but CEO Peter Bartholow refused. He said that the point of its crowdfunding campaign was to provide money for development costs, and Lab Zero should not be accountable for refunds.

This is confusing me. It sounds like all Paypal is asking for is for Lab Zero to be responsible for refunds. If they unfreeze the account (as in give Lab Zero all the money) shouldn't that money be used if people demand refunds? Would Lab Zero really take all the money and then leave Paypal with the bill if customers demand refunds? That sounds really shitty in itself.

Am I missing something here?

Thank you!

Paypal is protecting the CONSUMER here.... Heaven forbid we make sure the consumer is taken care of. We should all switch to another payment company that will just throw our money at any company and not take any precautions with it. So if protecting the people who are buy the service and not the company raking in money is terrible..... Well
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slash2x:

Krantos:

Steven Bogos:

PayPal offered to unfreeze the funds if Lab Zero agreed to take on the burden of providing refunds if necessary, but CEO Peter Bartholow refused. He said that the point of its crowdfunding campaign was to provide money for development costs, and Lab Zero should not be accountable for refunds.

This is confusing me. It sounds like all Paypal is asking for is for Lab Zero to be responsible for refunds. If they unfreeze the account (as in give Lab Zero all the money) shouldn't that money be used if people demand refunds? Would Lab Zero really take all the money and then leave Paypal with the bill if customers demand refunds? That sounds really shitty in itself.

Am I missing something here?

Thank you!

Paypal is protecting the CONSUMER here.... Heaven forbid we make sure the consumer is taken care of. We should all switch to another payment company that will just throw our money at any company and not take any precautions with it. So if protecting the people who are buy the service and not the company raking in money is terrible..... Well
image

It's an issue of Paypal deciding what people are allowed to spend their money on. Crowd-funding is inherently risky; anybody that doesn't know that doesn't deserve a refund.

As stated in the article, Paypal has been known to crown itself arbiter of internet spending on occasion. I'm beginning to think that might be why Kickstarter uses Amazon Payment (which are not subject to refund after it ends)\

Think before you spend, people

Well then it seems to me they should get a better refund policy. Wasn't PayPal the one that froze accounts simply because they grew too quickly?

Loop Stricken:
I've grown to despise PayPal ever since the eBay horror stories began to surface, about how buyers would merely request their payment back and PP would comply, no questions asked.

Oh how I wish I was in that lot. Instead I got screwed over by the guy I bought from and Paypal just refused to do anything for several months.

OT: Well, if I needed another reason to avoid Paypal, I got one.

Paypal is one horrible service indeed...

I have to laugh at the people who say they are scummy because they are looking out for consumers...

OT: Its good they worked out a deal.

One of the many, many, reasons my once-heavily-used Paypal account is now in the "used because they don't accept anything else" category.

Desert Punk:
I have to laugh at the people who say they are scummy because they are looking out for consumers...

OT: Its good they worked out a deal.

Except that they're not quit looking out for the customers. First off this was donations (i.e. something you're giving of your own free will and goodwill) and PayPal is worried about people requesting refunds (which should already start to give you an idea of what kind of people we're dealing with). What the article doesn't mention is why this is happening. That would be that the extra money that Skullgirls got from their donation drive was supposed to go to the development of other characters as voted on by the fans over several rounds of elimination voting. What has (allegedly) been happening is that people whose favorite character got eliminated from consideration are filing chargebacks for the money they donated. It's also worth noting that since anyone who donated $1 or more was allowed to vote that this could theoretically lead to a huge number of minor nuisance chargebacks. Normally I'm all for consumer protection but in this case I would really call the people who're causing these issues consumers.

Zombie_Moogle:

It's an issue of Paypal deciding what people are allowed to spend their money on.

Isn't the owner/founder some major libertarian? Amusing.

Doesn't effect me, I've never liked Paypals and donated through Amazon.

Steven Bogos:
This left Lab Zero games unable to pay its staff, and may have effected the projected release schedule of the DLC characters.

Not entirely sure, but I think that should be affected, not effected.

slash2x:

Krantos:

Steven Bogos:

PayPal offered to unfreeze the funds if Lab Zero agreed to take on the burden of providing refunds if necessary, but CEO Peter Bartholow refused. He said that the point of its crowdfunding campaign was to provide money for development costs, and Lab Zero should not be accountable for refunds.

This is confusing me. It sounds like all Paypal is asking for is for Lab Zero to be responsible for refunds. If they unfreeze the account (as in give Lab Zero all the money) shouldn't that money be used if people demand refunds? Would Lab Zero really take all the money and then leave Paypal with the bill if customers demand refunds? That sounds really shitty in itself.

Am I missing something here?

Thank you!

Paypal is protecting the CONSUMER here.... Heaven forbid we make sure the consumer is taken care of. We should all switch to another payment company that will just throw our money at any company and not take any precautions with it. So if protecting the people who are buy the service and not the company raking in money is terrible..... Well

From kickstarter terms of use:
"Kickstarter does not offer refunds. A Project Creator is not required to grant a Backer's request for a refund unless the Project Creator is unable or unwilling to fulfill the reward."

Each of the rewards includes the game, so as long as they create something resembling the promised game, they've fulfilled it. How does paypal at all become responsible for this? They're a payment method, not a store. Why would they choose to even get into that position?

Another possible motive for PayPal to do this sort of thing is that while those $700,000 are sitting in PayPal's coffers it's also collecting them a lot of interest (assuming their coffers are bank accounts somewhere). The longer it takes to "work things out" with the final recipient the more PayPal has made extra in interest.

In other words PayPal gets their usual processing fee + extra. The longer it takes to resolve the issue the bigger that extra gets.

dunam:

slash2x:

Krantos:

This is confusing me. It sounds like all Paypal is asking for is for Lab Zero to be responsible for refunds. If they unfreeze the account (as in give Lab Zero all the money) shouldn't that money be used if people demand refunds? Would Lab Zero really take all the money and then leave Paypal with the bill if customers demand refunds? That sounds really shitty in itself.

Am I missing something here?

Thank you!

Paypal is protecting the CONSUMER here.... Heaven forbid we make sure the consumer is taken care of. We should all switch to another payment company that will just throw our money at any company and not take any precautions with it. So if protecting the people who are buy the service and not the company raking in money is terrible..... Well

From kickstarter terms of use:
"Kickstarter does not offer refunds. A Project Creator is not required to grant a Backer's request for a refund unless the Project Creator is unable or unwilling to fulfill the reward."

Each of the rewards includes the game, so as long as they create something resembling the promised game, they've fulfilled it. How does paypal at all become responsible for this? They're a payment method, not a store. Why would they choose to even get into that position?

Because they provide refunds, it is part of the Paypal service. Many people myself included, use Paypal because they will get you your money back if someone tries to screw you over on a purchase. In the case of the kickstarters Paypal may not be a good choice because they are a round peg trying to fit in a square hole. All they see is that the kickstarter did not hit goal so they should not pay.... Right or wrong that is the service that they offer, if you do not want protection on your purchase use another funding source.

slash2x:

-

I never knew. Thanks for setting me straigth.

DVS BSTrD:
Well then it seems to me they should get a better refund policy. Wasn't PayPal the one that froze accounts simply because they grew too quickly?

Yeah, that's the thing. Paypal's business plan is to handle large amounts of money, then find any excuse they can come up with to keep it. Today, that excuse happens to be "we want to protect the consumer." Other days, it's "we find your huge amount of money suspicious. Give it."

Keep in mind, a large part of Paypal being worried about people demanding refund is because people are acting like children, and whining that they're going to demand their money back if the character they want in the game doesn't make it through the vote that's going on.

It's shitty on Paypal's side, don't get me wrong, but it's understandable to assume people are going to demand refunds when people actually have started saying they're going to demand refunds.

Keep in mind that I'm no business or financial expert, but with all the people whining about wanting a refund, can't Paypal just tell them to fuck off? I wouldn't think there would be any legal reason for Paypal to hold someone else's money OR be obligated to offer refunds on something like crowdfunding. I've never had any issues with Paypal, but I'll probably restrict my use to my WoW subscription.

DVS BSTrD:
Well then it seems to me they should get a better refund policy. Wasn't PayPal the one that froze accounts simply because they grew too quickly?

I set up an account several years ago so I could receive payment for work I had done for someone several states away, only to have PayPal refuse to transfer the money into my bank account. I've got about $1000 sitting around out there in cyber limbo that I'll never see.

Learned my lesson with that whole fiasco. Never use PayPal and don't do any work for anyone who can't hand you cash in person.

Paypal is not stupid. They get nervous if large sums get transfered. They can't afford blowback in case something goes wrong with a non-loaded client. It is just not worth it for them.

Sure, sucks balls, no question. They do this kind of shit and it looks bad, but only because they are scummy, not sleazy like normal banks. I seriously prefer the former.

Also they can use that money for a few days longer... win/win?

*head desk* really? not seeing why this should be an issue. or do they not get how crowd funding works....

dunam:

slash2x:

Krantos:

This is confusing me. It sounds like all Paypal is asking for is for Lab Zero to be responsible for refunds. If they unfreeze the account (as in give Lab Zero all the money) shouldn't that money be used if people demand refunds? Would Lab Zero really take all the money and then leave Paypal with the bill if customers demand refunds? That sounds really shitty in itself.

Am I missing something here?

Thank you!

Paypal is protecting the CONSUMER here.... Heaven forbid we make sure the consumer is taken care of. We should all switch to another payment company that will just throw our money at any company and not take any precautions with it. So if protecting the people who are buy the service and not the company raking in money is terrible..... Well

From kickstarter terms of use:
"Kickstarter does not offer refunds. A Project Creator is not required to grant a Backer's request for a refund unless the Project Creator is unable or unwilling to fulfill the reward."

Each of the rewards includes the game, so as long as they create something resembling the promised game, they've fulfilled it. How does paypal at all become responsible for this? They're a payment method, not a store. Why would they choose to even get into that position?

Evidently Paypal does offer refunds. That's probably why paypal is not supported by Kickstarter. The fact that people fund kickstarter through paypal is completely not tied to paypal itself.

I don't really see Paypal as that big a bad guy here. They've seen other people take the money and run on kickstarter, why would they want to be in the middle of some 700K lawsuit or whatever.

Lunar Templar:
*head desk* really? not seeing why this should be an issue. or do they not get how crowd funding works....

http://www.inc.com/eric-markowitz/when-kickstarter-investors-want-their-money-back.html

I think they have more idea than most of us given that their money and their business is on the line.

Sectan:
Keep in mind that I'm no business or financial expert, but with all the people whining about wanting a refund, can't Paypal just tell them to fuck off? I wouldn't think there would be any legal reason for Paypal to hold someone else's money OR be obligated to offer refunds on something like crowdfunding. I've never had any issues with Paypal, but I'll probably restrict my use to my WoW subscription.

Not necessarily. Under Utah state law (and I think Paypal is actually based here) I can insist on a refund for an electronic payment in the case of fraud up to 4 years after the fact, or a year after the fraud is uncovered (whichever is later), so in the specific case of crowdfunding if it came out that the devs had no intention of ever producing a product (simply failing to produce results wouldn't be fraud) then the payment processor *might* be on the hook, I'm not sure how to interpret the law.

However, there's a claim that Paypal draws interest off frozen accounts, and that it pulls shit like this to make money, as demonstrated by the frozen account, rather than just not taking the backers' money in the first place.

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