Online Payment Firm Hits Better Business Snag

"They have taken this very seriously," Sharon D'Amico, president of the Silicon Valley BBB, told the E-Commerce Times. She said that she was "very, very pleased" with the results of a Wednesday meeting with the Palo Alto, California-based company.

The BBB's latest report on PayPal said that the unsatisfactory rating is due to "a pattern of complaints alleging that accounts are being opened without the consumers' consent and by third parties."

D'Amico said that the BBB receives from 30 to 40 complaints a month about Palo Alto, California-based PayPal, which lets consumers transfer money via e-mail. Other complaints received by the BBB about the company include allegations that PayPal is too slow to respond to customer complaints.

Turnaround Time

PayPal also expressed satisfaction with the outcome of the meeting. Spokesperson Vince Sollitto told the E-Commerce Times that the meeting was positive and productive.

Although complaints to the BBB have said that PayPal froze accounts without notifying users, Sollitto said it was PayPal's policy to notify account holders when accounts were frozen.

The BBB's D'Amico said that it was not unusual for companies to receive an unsatisfactory rating and that she hoped that PayPal and the BBB would be able to resolve the issues that led to the rating.

Hot Model

By all accounts PayPal is one of the fastest growing financial services on the Web.

PayPal has garnered approximately 6 million customers since its launch 14 months ago and currently processes approximately 150,000 transactions a day, many of them from anxious auction buyers eager to pay for their goods immediately.

However, with growth has come added complaints. D'Amico said that because PayPal "expanded so rapidly," the company was just not able to keep up with the volume of complaints that the increased business generated.

No Guarantee

The company has already taken efforts to improve its customer service, according to Sollitto. Improvements include the addition of 200 customer service representatives at its Omaha, Nebraska customer service center and enhanced procedures to deal with complaints.

Although D'Amico could give no guarantees about when the company would win its satisfactory rating back, she said the BBB was pleased with the progress the company had made so far and that "when and if" the BBB saw improvement, it would reconsider its rating.

Friend Indeed

Despite the customer complaints, there are signs that PayPal's methods work. Last month, after receiving a complaint from PayPal, the Fountain Valley, California police department launched an investigation into a Web site called Gametek that allegedly took orders from 2,500 customers for PS2 systems and never delivered them.

Because PayPal security representatives froze the account, the company was able to return most of the money to consumers, according to Sollitto.

Priceline's Path

PayPal is not the first dot-com to run afoul of the BBB. In September, the Connecticut BBB expelled "name-your-own-price" e-tailer Priceline after reportedly receiving more than 300 complaints about the company, ranging from misrepresentation of services to failure to make promised refunds.

Priceline was reinstated into the BBB in December after taking action to improve customer services and after producing a site redesign that now tells consumers up front the total amount they will be paying for their ticket, including all taxes and fuel charges.

The Norwalk, Connecticut-based e-tailer also said that it had named Robert Abrams, a former New York State Attorney General, as a customer relations advisor, in order to "provide ongoing feedback on the company's products and practices."