This happened to me with one of my sites about 18 months ago, I spent nearly a full day sending emails back and forth to their management and the replies and response I was receiving back from them was nonsensical, I thought maybe they just have a poor management team, however looking at the bigger picture and knowing that they had already shut down at least a dozen other business accounts in our community I figured they have an agenda they don't want to share or talk about and so instead of accepting it as the paypal slap I accepted it as a blessing and glad to be free from such. Onward and upward.
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Yeah it's insane. No reason at all and just one swoop they basically took away income from 3 families. No regard at all. If we did something they didn't like, all they had to say was 'change this'....You'd think after 17 years we were owed at least that much.
I would have never expected these kind of actions from a well established company and the fact that you can't recover your funds is shocking. By the way they never held my funds or anything they just asked me to remove the api and paypal logo from my site. I still have an account with them which I no longer use. I would look at the paypal agreement because the agreement protects both sides (usually). I don't think they have the right to keep or confiscate your funds.
They have this fancy part of their terms that states they can do whatever they want with your account. Shut it down at their own discretion.
Problem is, we agree to it when we sign up.
But you'd think after 17 years...A simple email to let me know what made them SO UPSET would have been the least they could do. But nada...Nothing. Just we're done and I can't do a thing.
It's a blessing in disguise though. We've already moved forward and while it's going to be rough, we have plans in place. Never doing business with PayPal or Ebay ever again. And will make sure I spread the word on how little they are to be trusted.