PayPal Surcharge

I have noticed alot of people add a (3% or so) PayPal fee to their items and I wonder if everyone is aware, that is against the user agreement. It seems that PayPal looks at sellers as "merchants". This is cut from the Paypal website:

-No Surcharges. Under Visa, MasterCard, Discover and American Express regulations and the laws of several states, including California, merchants may not charge a fee to the buyer for accepting credit card payments (often called a "surcharge"). You agree that you will not impose a surcharge or any other fee for accepting PayPal as payment. This restriction does not prevent you from imposing a handling fee in connection with the sale of goods or services, as long as the handling fee does not operate as a surcharge (in other words, the handling fee for transactions paid through PayPal may not be higher than the handling fee for transactions paid through other payment methods). Nor does this restriction apply to Pound-denominated transactions by sellers residing in the United Kingdom listing items for sale on a UK-based website.
I guess we will now have to offer a 3% discount for other forms of payment!
If you, as a seller, accept only PayPal as a method of payment, then you should be able to charge whatever handling fee you want, as it will not be higher than the handling fee for any other method of payment that you accept.

Am I reading that cut from the PayPal website correctly? They don't actually use the phrase "that you accept". Is it implied? I think so, but I'm not sure.

Even if a seller accepts other forms of payment (such as money orders), couldn't he/she effectively make up a 3% handling fee for that payment method (based on time and distance to the bank to cash and/or deposit the cheque)? Then a 3% handling fee for PayPal transactions would still be acceptable by PayPal standards.

I am not advocating, I am merely posing questions.
Well said Thsalmon! I fail to see why the seller would have to absorb this charge when Paypal is chosen by the buyer as the method of payment. If the buyer doesn't want to absorb the Paypal charge then he just has to go with another payment method. My answer would differ though if Paypal was the only method of payment accepted by the seller or if the seller insisted on Paypal being used for payment. In any event, there is a very simple solution to your problem: simply ignore the ads where the seller is asking the buyer to assume the Paypal charge or just don't use Paypal for payment.
Geez Dill, I'm impressed. I didn't think anyone actually read that boilerplate. Figures that California would be leading the charge as usual into making one more free market choice bite the dust, thus once again screwing everyone in the name of protecting them.

Since we as sellers can't control whether a buyer pays via credit card or via bank transfer (both options in paypal), I can't see how this is enforceable. Besides, as thsalmon points out, you can always offer a discount for cash or equivalent.
I've noticed that, on Ebay, this restriction has always been more strictly monitored. My guess is that, in the end, this restriction is really geared more for those whom have made it a business to sell online, rather than for those of us simply selling off personal merchandise.

But, since I'm a buyer most of the time, I'm with Thsalmon... 3% discounts!!! I don't know why sellers just don't factor the fee into their pricing, and as Thsalmon notes, simply offer a discount for other methods of payment. This way, the Buyer would at least believe he's getting a deal.
Thanks for your post. My gut reaction when I see the Paypal surcharge in an ad is problematic, nickel-dime seller. It becomes especially ridiculous on items priced under a couple of hundred bucks.

Credit card processing is an arcane and labyrinthine set of rules and procedures. Believe it or not, but compared to merchant services companies who impose monthly statement fees, monthly minimums as well as hefty interchange fees for sub-optimal transactions, all on top of their own 2 - 3% discount fees, Paypal is an amazing bargain for the occasional seller.

In my experience, no matter how fair a listing is, most buyers jostle for a deal. Competition works. Our transactions are already complicated with haggling over price, shipping and insurance. Streamlining the process by eliminating the upcharge issue makes good sense. If a seller offers the convenience and timeliness of Paypal up front, he/she ought to take the fee on the chin as a cost of facillitating trade.
I am a PayPal member. You can register yourself to receive payments into your checking account only. There is no 3% charge assesed to anyone. It is totally free. If you register to accept credit cards as payment, the 3% fees are then charged to the seller.
PayPal has no jurisdiction here. Who cares if they say you can't add a surcharge? They're not monitoring emails about classified ads- are they? Sellers can say whatever they want, and in Audiogon's classified ad dominated sales culture, we can all agree on whatever terms we want with buyers and sellers. PayPal trying to dictate this to us is ludicrous.

As for sellers being nickel-and-dimers if they say they want the buyer to pay, that's a matter of personal opinion. We're all (well mostly) adults, do the math and decide if it's still worth it to you to sell or buy the item if you have to eat the surcharge.

Personally, I see idiots emailing sellers to ask "how much to ship to me?" or "will you include shipping in the price" !without! including their zip code in the message or having the brain cells to click the link to shipping costs so thoughtfully included by Audiogon as a much bigger annoyance.
Rockvirgo, you took most of the words out of my mouth. I agree that when a seller offers Paypal as an option, he or she should be the one absorbing the fee, not the buyer. This is strictly enforced on eBay, where I have made a number of Paypal purchases.

Other forms of payment are more time consuming and have the potential for additional headaches - especially for the seller. Since the final selling price of an item is almost always negotiable, it would follow that seller should just factor Paypal fees into his/her negotiations.

The 3% discount idea makes me smile, though!
I would not get hung up on it. For a fixed priced classified or an auction, just build in the 3% if it bothers you so much. For a "or best offer" advert: if they offer a certain $$ amount and paypal payment, then that is their "best offer". Take it or counter offer.
PayPal would have no standing whatsoever to challenge a seller's application of a 3% fee. If they somehow tried to, anyone who wanted to take PayPal would just figure out what they wanted to get for an item (say, $500), then add 3% ($15) and just charge $515. If a buyer said they wanted to pay cash, the seller would just offer to sell it for $500 even. There is no way that PayPal could establish legal standing in such a case, and it's even more impossible for PayPal to somehow "regulate" such activity.
Hey, if PayPal is so damned worried about seeing the "+3%" notation, they should stop charging it.
I believe it has nothing to do with Paypal. I don't think any retail store can charge a surcharge on a credit card payment, period. It might be in the VISA, Mastercard, Etc, agreements that vendors sign....

The same reason some stores "don't take American Express" as the VISA advert goes. AMEX fees tend to be higher, and the stores cannot pass the extra cost on to the buyer.
Plenty of stores do in effect add a surcharge by saying, "well, I can give you this (hot deal) if you pay cash, but otherwise it will be (hot deal + 2%)". Regardless of what some unenforceable contract says about it, it happens and will continue to happen in the real world and on the internet.
Sugarbrie is right on it. In general, I'm all for venting about injustice but why whine about Paypal on the surcharge deal? They are simply protecting their ability to accept Mastercard/Visa which, like it or not, sets the rules of the credit card game. Likewise the seller who appreciates Paypal will do what he/she can to protect their service.

Btw, thanks to Jetkitty for possessing such a keen intellect :^)
Preferences aside, PayPal runs the disclaimer because it just happens to be illegal. Whether anyone likes it or not is beside the point. Of course PayPal doesn't care one bit what people do as long as they use their services and someone pays whatever fees they, or the credit card companies, charge. They make folks agree not to pass along the fee so that they can say to any authorities who may (or may not) investigate their compliance with the law, "hey, we told them it was illegal, we told them not to do it, and they agreed -- don't look at us." This will likely serve as enough of a complication to diffuse any interest in enforcement against PayPal, and there is certainly no political will, advantage, or practical feasability in enforcing it against individual users (...yet, with more high-volume or institutional users, I guarantee this will change).

Consequently, whether or not folks insist on passing this fee along to purchasers is a question of nothing more and nothing less than their own integrity. In fairness, most individual sellers likley don't realize what is at issue. Notwithstanding, no one who insists on passing a surcharge for a service they have selected for their own convenience is someone I would elect to do business with -- and the fact that they do so illegally and in clear breach of an express covenant only drives it home further. I don't think it's worth getting particularly exercised over, just not transactions I need to be a part of. As in all things, the choice is yours.
As both a buyer and a seller, using PayPal comes at a great advantage to me. As a seller I can get paid more quickly and will attract far more buyers who may otherwise not consider an item (those who may be buying on credit). As a buyer I can pay quicker which would follow that I get my item sooner. Also I can buy something using a credit card from an individual, when I may be temporarily cash poor and otherwise miss the purchase. Bottom line is that it is an advantage to both sides so why not split the cost? Ultimately it seems like, as has been pointed out, it is really up to the individual seller since PayPal is not going after, or suspending priveliges of individuals for violations. The seller has the item and can sell it for whatever they choose, it is up to you as the buyer as to whether you are willing to pay their price. I don't really get the idea behind limiting a seller to bear the burden of the fees of accepting PayPal.

One important point which I think has not been brought up yet (sorry if I've missed it if someone has): It is not JUST the credit card companies, as has been pointed out several times here, that dictate the service charge. PayPal will also charge 3.3% to those individual sellers with a 'Preferred' seller status (meaning those individuals whose membershipe does allow them to take payments via credit card) who accept a payment from an individual with enough cash in their account. In that case presumably PayPal is profiting directly from the fee charged and NOT the credit card companies. The only transaction that I am aware of where they don't charge a fee is to a seller with a standard individual account (meaning they cannot accept credit card payments through PayPal at all), who is receiving payment from a buyer with cash in their PayPal account (they must have enough cash to cover the entire amount of the transaction). If the buyer in that case is paying using a credit card then a fee is charged.

So, althought the law they are quoting (and not enforcing) is based upon the retail practices dictated by the credit card companies themselves, they are also using the same service charges on cash transactions for the direct profit of PayPal, and dictating the same rules, in those cases, that apply to credit card transactions.

I think the charge should have no effect on the buyer...If he had to send a postal money order they charge...then you have postage... a drive to the post office...I don't mind paying 3% at all...just the convenience of paying while listning to your favorite artist is worth the extra IMHO
Anyone with a PayPal account is contractually obligated to NOT charge extra. This is part of what the user AGREED to, and to disregard it is wrong, illegal and improper. Petty self-justifications, no matter how inventive or customary they may be, do not change that fact.
Interesting thread. I've used PayPal at least 200 times as a buyer, but never as a seller. I've always sent funds via bank transfers. I was under the impression that all PayPal sellers were charged the 3% fee for all transactions! I'd be interested in knowing how much money I've thrown away on deals where I've paid a 3% PayPal "fee" when no fee was actually charged to my seller!?!? (i.e., bank transfers made to individual sellers who are not set up to accept credit card payments).
Of all the points of view brought up,nobody has brought up the fact that with paypal and you are trying to buy a hard to find item;or maybe this is the hottest price (you want it bad) Paypal can be used to lock you into the deal.--- And the shipping process gets started faster.So once in a while,Paypal is good for the buyer.
I want my 3% back from all you crooks who sold me stuff. And if you plan to use a credit card, please add 3%.

Reminds me of the "do not remove this tag under penalty of law" tags on furniture and mattresses. Rules for merchants that cannot be imposed on private parties... Hmm
But if it was the RIAA, woo-whee baby, they would be on YOUR trail and getting court orders to see all the 'goN's Email history...
Cadmaniac: Why is it illegal if it is simply against PayPal's rules? PayPal's rules are not exactly the U.S. Code when it comes to settled law. Besides, I still maintain that such a "law" would unenforceable and moot, since the seller would just decide to factor the value of PayPal into the cost of their items, if necessary.
MEZMO: What law is this you say it is against to charge 3%-- would you cite a reference of some sort so we can go look at it, please? I've never heard of such a thing and I'm pretty curious about it now. Is it part of the federal code dealing with banking or ???

CADMANIAC: I'm having a hard time hearing you, since you are way up there on that high horse. Paypal said in the beginning, when I originally agreed to their TOS, that they'd never charge a fee, because they made their money on interest on your funds while they held them preparing for transfers. Any of you other 'goners remember the explanation they had up on their site about how Paypal would work and not cost us $$? They lied, then they changed the rules, and the bottom line is, if a deal does or does not include the 3%, that's the business of exactly 2 people, the buyer and the seller, your self-righteous platitudes notwithstanding. If there is some obscure law about a surcharge being illegal, I'd love to see it for the curiousity value, but they can just try to get me.

I tend not to user paypal to settle transaction. The company simply charge too much on seller. I post and item, even have 3% funding added from buyer, I still have to lose another 3% from exchange rate difference.

Its end up to prepare 6% if getting money from paypal for my selling items. whats the point?

Escrow acts much better on this, though it takes longer time to have money received.
I've done a lot of trading here on AudiogoN, either as a buyer or as a seller. Regarding Paypal as a method of payment, I'd like to stress to all those who think that the seller should eat this charge that it is much more advantageous if you're a buyer than if you're a seller. As a seller, you still have to wait 4-6 business days before you get the money into your bank account. That is about the same time a MO takes to make it to me. So as a seller being paid via Paypal I have to ship the items but still have to wait about a week before I have access to the funds. But as a buyer, it considerably speeds up the transaction. Moreover, as someone already said, it avoids the buyer the trouble of getting a MO (which is not free) and having to mail it (not free either). I don't mind paying the 3% fee when I'm buying stuff and decides to use Paypal for payment.
To repeat..All credit card transactions have a fee, usually around +/-3%. The store pays it (deducted from proceeds). Has nothing to do with Paypal. If you accept credit card payments, you are no different than a store.

If you were to try to set up your own credit card account directly with VISA and Mastercard, the fixed cost alone would be a lot more than just paying PayPal.

PayPal has created a way for all of us to get the benefits of credit cards on very small transactions, with no up front costs. What is the problem here?
I've never actually used PayPal, so my info's a bit shaky. It sounds reasonable that the reason for their "no surcharge" policy is because of certain credit card laws (and, undoubtedly, their iron-clad agreements with the credit card companies themselves). For example, the California Civil Code:

1748.1. (a) No retailer in any sales, service, or lease transaction with a consumer may impose a surcharge on a cardholder who elects to use a credit card in lieu of payment by cash, check, or similar means. A retailer may, however, offer discounts for the purpose of inducing payment by cash, check, or other means not involving the use of a credit card, provided that the discount is offered to all prospective buyers.
(b) Any retailer who willfully violates this section by imposing a surcharge on a cardholder who elects to use a credit card and who fails to pay that amount to the cardholder within 30 days of a written demand by the cardholder of the retailer by certified mail, shall be liable to the cardholder for three times the amount at which actual damages are assessed. The cardholder shall also be entitled to recover reasonable attorney's fees and costs incurred in the action.
A cause of action under this section may be brought in small claims court, if it does not exceed the jurisdiction of that court, or in any other appropriate court.

Of course, there's more than one way to submit payment through PalPal, just as there's also more than one way to skin a cat ("add 3% for credit" v. "3% discount for cash"). That said, the way people now do it would seem to be proscribed by law and potentially exposes them to trebel damages -- at least for credit card transaction in CA (to say nothing of their agreement with PayPal). PayPal's unenforced (and likely unenforceable) agreement with users is pure CYA, likely more from the credit card companies than The Man. The credit card industry is closely watched and heavily regulated -- and if anyone has any doubt about how serious it is, just have a look at the $800 million verdict that came down from a CA court last month against Visa and Master Card for a "hidden" 1% surcharge for foreign currency transactions. Different law and different issues, but not so far removed....

All that aside, PayPal offers the market a valuable alternative. The more people know about how it works and how best to use it, the more valuable it will become. To me, this thread has been very valuable. As a buyer, I've always had a strong aversion to someone demanding that I incur additional costs for their convenience and protection, not my own, and I generally avoid making deals where that is required. Sometimes, though, it makes sense. And when it's to both parties benefit, at the least, seems you should split the cost. The more informed the market, the better it works. I've definitely learned something, cheers to that.
Wheee! Thanks Mezmo. From now on I will be offering 3% off for "cash" in case the buyer is in a state that prohibits surcharges. FYI, I can't find any similar language in the Oregon revised statutes, but I did find this table, a compendium of state comptrollers and how they deal with credit card fees on licensing apps:

A search for "credit card surcharge" turns up multiple instances of gripes about all types of surcharges, companies charging customers to use credit cards, etc.-- Seems like this is pretty state-dependent and not very well controlled.

A list of states that have codes against CC surcharges: California
New York

That's per:

Apparently the truth in lending act that expired in 1984 precluded credit card surcharges, but since its expiration it's been up to the states themselves.
I'll point out that PayPal charges a surcharge, so its quite ironic that the company that says "don't use surcharges" uses a surcharge.

PayPal should drop its 2.9% fee as its in violation of the same rule its trying to implement.
Like many state laws, this is unenforcable, especially out-side the state enacting it. Consider what happens if you are in a state without the law and a state with the law seeks to act.

This is much like seeking sales tax on item purchased on the internet. The states can threaten business with outlets within their state, but the reality is that the sales tax will die because of the internet. Consider how sales taxes would be gathered on purchases from Mexico based but really American firms.