My story about mass domain registration with paypal and Chinese

Briefly about yourself and the country - the hoster / registrar of domain names in Estonia, about 5% of the local domain market. Small company (three people). 10 people are enough for an average company in our country, and 50 for a large one. More than half of the companies contain 5 or less employees (the size of the company will play a role). Speaking of domains, .ee domains are meant.

It all started unpretentiously. He lived, worked, sometimes fixed a primus. No more than 40-60 domains are registered throughout the country per day, of which 2-3 are with me. Plus hosting, server delivery.

The story began in December 2015. I woke up, walked over, checked the mail. He rubbed his eyes - about 100 domains were ordered per night, all were paid by the Chinese through paypal, hieroglyphs through one, funny names. The first thought is fraud.

Checked, payments from different people are not recalled. Domain rules require additional checks, processed everything in a couple of hours. I began to look for where the activity came from and noticed that almost all the names are “two-sign”. I note that for a long time the .ee domain was available only to "local" ones, the restriction was lifted in the winter of 2015, and as a result, the joyful Chinese squatters together sorted out the tasty. The next day, the number of orders increased, which became alarming.

The fact is that the selling price of a domain is 10 euros, the purchase 9. The profit when selling through local banks is 1 euro, and the Chinese pay through paypal, they have no other option. Prior to them, 98% of payments went through local banks, 1% in cash and 1% other options (including paypal). Therefore, the loss on paypal did not interest me at all. They charge 34 cents + 5.4% for payments from China, simple arithmetic makes the income from the sale of one domain at 12 cents. When buying a dozen or two, income increased to as much as 32 cents!

And the situation was aggravated by several factors:

1) Sale to the Chinese is not taxed, while I buy the domain with VAT. As a result, I buy it for 10.80, sell it for 10. Of course, I can return the tax, but a couple of months later.
2) The cash withdrawal turnover with paypal had (and has) hard limits of 500 euros / day by card and up to 10,000 per week by other methods.
3) Only two registrars in the country had a normal site in English and adequate paypal reception, so the whole load fell on them.
4) During the night, the entire prepayment amount at the main registrar ended, the domains went into the queue, and once 4 people ordered one name at a time. As a result, there were relatively many returns.

Domain turnover already exceeded 1,000 euros per day and tended to grow.
The most interesting thing began in a week. Seeing the situation, I raised the price, but late ... the Chinese got a taste. Record - 1000+ domains per day. As a result, over 2,000 domains were registered in 2 weeks. And I would happily drink mojito and count the profit, if not for the news from paypal.

On December 21, paypal announced that it needed information based on money laundering laws. It doesn’t matter, I thought and provided all the documents. Although, to be honest, it’s not easy to find paper phone bills or “bank statements” in the IT country.

On December 22, paypal imposed a limit on the fact that I will receive money in 21 days. Think about it - a small company, these days the turnover with paypal exceeded the annual salary fund. It is logical that I will not be able to work on such conditions. I wrote them a request.

December 22 the answer came:
Dear Roman Ivanov,
Thank you for contacting PayPal regarding your payments received being
held on your PayPal account.
We have reviewed your account and it shows that you are selling a
service and payment related to a service should not be held. The new
seller hold program is applying on sale related to tangible goods.
After reviewing your transactions, we can see that they are marked as
“Goods”. As you are using a PayPal button on your website, this button
is set up in order to mark ant payment received as "Goods" instead of
"Service" and that is why all your payment received are held by our

They claimed that I was a “fool” and my system was set up to sell goods, not services. And 21 days are needed for the client to get the money back. I immediately wrote those. paypal support and received a response

on December 23 :
thanks for contacting PayPal Technical Assistance.

Please note that there is not a way in PayPal Standard products, from a technical / integration point of view, to specify if what you are selling is a product or service.

In other words, the technology disowned. I again wrote to paypal, phoned them and hallelujah! Bans removed. My joy knew no bounds. Victory. He began to withdraw money. But it turned out that the cloud was ahead.

On December 27, a letter arrived and the account froze:
Dear Roman Ivanov,

As a part of our commitment to providing the best experience for buyers and sellers, we perform routine reviews on merchant accounts. Your account is currently under review and to support your business we need to clarify your business activity. We've temporarily limited your account until we receive more information about your business.

Please answer our questions and provide all information we ask for to restore your account as soon as possible.

Business Model Information:
- What is the reason for the recent increase in payments received?
- Give a projection of the volumes you expect to receive each month for the next 6 months (specify currency).
- Give a full description of the items sold or services provided.
- Provide the name and address of your main suppliers.
- Provide details of any other sales venues you use (physical store / showroom, website ... etc.)
- Provide the terms and conditions of sale (refunds / cancellations).
- Do you offer weekly / monthly / yearly subscriptions?
- Provide a breakdown of the different options / products offered
- How long does it take for the service to be delivered / completed?
- How is the service provided (venue / platform)?
Financial Information:
To make sure that your company can support the volumes currently being processed through our system, provide your company most recent:
- Balance Sheet
- Profit and loss accounts
- Management accounts
- Audited accounts
- How can you check that the domain name is available?
- Why do you refund some transactions?

Also two different workers from paypal called, answered them all the questions.
That day I canceled orders for 9,000 euros. They were returned "with frozen" money. Later I realized that I did the right thing, for

December 28th . Key day. Received a letter from paypal:
Dear Roman Ivanov,

We tried to call you on 12/28/2015 to discuss your account but we couldn't reach you.

We were calling to let you know that we've placed reserves on your PayPal account due to the following:
- Increase in volumes processed

An account reserve is an amount of money set aside in your PayPal account to help make sure that you're able to meet any liabilities you may incur from a chargeback, claim or bank reversal, where no other money is available. The reserved amount still belongs to you, but is unavailable for use (including withdrawal).

The use of reserves in this way is common across the payments industry, and you'll find more information about it in the PayPal User Agreement, section 10.4.

Based on a review of your account, we've decided that reserves will be applied as follows:

- Rolling Reserve: 30% of the funds you receive each day will be held for 90 days in your 'pending balance' and will be added to your 'available balance' for your use or withdrawal after this period has elapsed. This process will continue on a daily basis. This rolling reserve will be eligible for review 180 days from the date of this email.
- Collateral Reserve: The collateral reserve amount of: € 14,448.26 EUR has been applied temporarily to your account. This amount will be eligible for review 90 days from the date of this email.

In fact, they called and I didn’t hide. But worse than that. 14448 euros are frozen, 30% of the proceeds are kept for 90 days.

For a company of THREE people. The situation is three days before the new year. Catastrophe. It’s good that I quickly found working money for six months (on credit).

Next was a series of requests and responses, here is one example:

April 7, 2016
Dear Roman Ivanov,

Thank you for contacting PayPal about the reserves added to your

Due to your request for a Reserve Review we've conducted a full
analysis of your business model and your performance.

After a comprehensive review of your account, we can't approve what
you've asked for at the moment for the following reasons:

If you contact PayPal 180 days from Dec / 25/2015 we'll conduct a review
of your reserve settings again .

Six months later, I was able to get money from them. 30% for 90 days they refuse to withdraw to this day. In total, the turnover with paypal for December exceeded 50,000 euros. My minimum damage (due to a loan, cancellation of orders, etc.) is not less than 4000 euros, this is without “lost orders,” because on the hottest days I just had to turn off their payment gateway.

I will add on my own behalf - call them. Without a call, almost all letters fall into the black hole. Better not use if possible.

And here is paypal with a limit:

Thank you for your attention.

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