December 24, 2019

Stripe's 210 Day Hold Practices (yes you read that right)

VF

Hi guys,

So a bit of background. I started a small startup in the infoservices space back in June of 2018. I ran some ads, had a big launch, and Stripe suddenly decided to hold all funds due to perceived risk. This was after I paid about $10k in Google AdWords alone, plus countless other startup costs related to the launch, so I had to eat those costs.

So Stripe emails me saying it'll hold all funds for 90 days against the risk of disputes. Cool. I wait 90 days patiently for my funds to be sent to me. What happens in 90 days? I get another, generic, boilerplate email saying that Stripe is holding my money for 90 days. No, this was not phrased as an extension. It was simply a duplicate of the earlier email. I go in the panel, and the date is indeed pushed back 90 days.

Cool. So I wait another 90 days, again, patiently, for my money. At the end of the (now second) 90 day period, I contact Stripe, and great, I get an email saying my reserve has been reviewed and is now lifted! I check my account, and indeed the reserve is lifted. I patiently wait for my funds to arrive.

But wait, it doesn't end there! Three days later, instead of receiving any sort of payout, I get an email saying "we need to extend your reserve for another 30 days due to the elevated dispute risk here. if we perceive there to be less dispute risk at the end of this period, we will release the funds." This brings the total hold to 210 days. And notice how they aren't even guaranteeing the funds after 30 days -- they're only going to release them if they PERCEIVE a lessened dispute risk, which is totally subjective.

Don't believe me? Go to Stripe's BBB page. It's literally filled with hundreds of complaints of arbitrary fund holds that last for indefinite periods of time. Even PayPal (yes, even PayPal) caps their holds at 180 days. This is because the maximum timeframe a customer can dispute in is 180 days. So Stripe is holding my money against "elevated dispute risk," when customers can't dispute anymore even if they wanted to.

On top of this, Stripe recently asked me to provide them with my driver's license, bank statement, and then refused to review any of them in a timely matter. These still aren't reviewed to this day. So not only does Stripe use the "elevated dispute risk" excuse to steal your funds (even when no dispute risk exists), it also hides behind federal regulations like KYC (know your customer) and the Patriot Act as a justification for requesting more documents, bogging you down in red tape, and hoping you'll go away so they can keep your money.

I submitted a BBB complaint, and the Stripe response merely quoted a paragraph in their Service Agreement that allows for funds to be held for ANY REASON and ANY DURATION OF TIME. That's right. Stripe can hold your funds FOREVER, FOR ANY REASON. And get this: the funds you process on Stripe aren't even LEGALLY YOURS. Stripe owns the rights to ALL of these funds, and only releases them at their sole discretion.

Run away from Stripe, and run away fast. I love their API like the rest of you here, but their customer support is AWFUL. They put so much emphasis on their "fraud detection systems and models" that they completely de-prioritize human customer support. Every time I emailed in a response (in the same email thread), I received a NEW Stripe representative, who had no idea what had just gone on previously. And the whole extraordinary encounter with the customer service representative who lifted the hold -- only to later be counteracted by another customer service representative absolutely at random, with no trigger whatsoever, is just laughable and extremely telling. There is not only communication breakdown across departments at Stripe, but WITHIN THE SAME DEPARTMENT AND EVEN THE SAME JOB FUNCTION.

Using Stripe is like willfully subjecting yourself to the Sword of Damocles conundrum. If their automated system THINKS you're POTENTIALLY a risk based on hundreds of data points (and by the way, these bots are constantly evaluating your account in real time), you'll be shown the door. And to make things worse, if the bots think you're a risk and shut off your account, there's a chance that Stripe will add you to a Terminated Merchant File just for closing your account, in which case you'll never be able to process payments ever again, anywhere.

Apply to a direct merchant account and use Authorize.net as a gateway. Next day payouts into your business bank account, no hassle, no arbitrary fund holds, and actual humans you can speak to over the phone that can transfer you to people with the authority to act on your account and your concerns.

As for Stripe, I have virtually no hope in recovering the $31,829.65 they still owe me. They have collected thousands in fees on money that was never even disbursed to me. They will keep their processing fees, plus the entirety of the processed amount. The best I can do will be to pursue binding arbitration or sue, and bring this to the attention of regulators. Fortunately I work with Office of the Comptroller of the Currency regulators in my day job working as a financial technology consultant for a large US bank, so I will be sending this whole fiasco to their direct emails and following up over phone calls once the holidays are over.

Please, please do not use Stripe. Let this be a warning to all of you.

Happy holidays!

  1. 4

    (I work at Stripe.)

    We're handling this with VF over email.

    1. 3

      Can confirm that I've received an email from Patrick stating that my situation has been referred to some with decision-making power.

      I will update here with Stripe's final decision on the matter.

    2. 1

      Hello Patrick,

      This is very kind of you to offer your services in assisting this customer. When I first read about this 220 day hold period I was a bit worried that the same situation could happen to me.

      In my case my account was terminated with stripe due to a higher than average refund rate. My company has a customer satisfaction policy that we will refund up to 90 days after the purchase. With this refund policy, our refund rate was around 2% of our total charge volume. At the time we did not understand that a standard refund could negatively affect our account, we only assumed that a "charge back" would hurt our risk score, but apparently refunds are treated in a similar category.

      When our account was terminated, we were told three things:

      1. The the funds would be held for a 90 day period in the event of a charge back.

      2. We would not be able to place refunds to our customers if they requested them.

      3. That we should apply for another credit card processor referred to us by the stripe agent.

      Our response to the three points were:

      1. We understand and would wait 90 days

      2. What do we say to our customers that request a refund?

      3. We would look into the recommended option.

      The agents at Stripe were empathetic and kind given the situation. We were directed by a different Stripe agent (As you know you will never get the same agent when contacting Stripe support.) that we should tell our customers to file charge backs if they wanted a refund, as we would not be able to process customer refunds with a inactive account.

      We followed the directions from the stripe agent ( I am more than willing to share with you the email that we were sent that prove this.) and I fear the directions that we were given by the stripe agent made the issue worst, as now our account looks like there were multiple charge backs. If we had been given the chance to refund the customer, this would not have happened. In fact, if we were given better advice as in to send the customer a bank wire, IBAN, P2P payment we would have.

      As of today's date funds have not been released, and it have been 243 days after.

      I understand the hold, I understand precautions, I didn't understand the directions to advise the customers to "charge back" against us, however I followed the directions, but what I do not understand is after 243 days of patiently waiting and following directions that we are still without any progress on the remainder of the funds in our account.

      I saw in the past that you reached out to this customer with your email address, as you believed that the situation could have been handled better.

      I am attempting to reach out to you to see if there is anything that can be done. I have tried contacting Stripe multiple times by email with the attached previous emails of their statements, but it appears that my emails will not reach the original employees that promised us the 90 day hold period.

      All of the funds have been cleared and we have paid for all fees, as they were deducted from out balance. We would really like to put this behind us and move on as we have waited patiently and have followed Stripe's support instructions exactly.

      *********************************************************************************
      Additionally I am adding a mode of precaution to the rest of the users that see this post. Stripe has policies that your business model may or may not agree with. There is a possibility that your account can be dismissed for any reason they choose. This is in the TOS and is a fact of the contract. However, this does not a company of keeping their promises. I was promised that the funds would be returned after 90 days and now it is day 243. BEWARE of the underestimated hold times, they are far from accurate or the truth.

    3. 1

      Patrick, would you be able to provide some sort of commentary on why Stripe's terms have to be so clearly immoral, if what we read here is true? Does Stripe ever claim ownership of the funds at any point between receiving and paying out? Why is Stripe not providing a clear process and timeline for resolution of such ambiguous situations?

  2. 4

    I guess I can understand why they might do this, but only to a point. Why not come right out and say "we're going to hold it for 180 days." But then they should follow it up with taking great care of you, if everything checks out, such as "if the charge back rates are the same or lower than our system average, then we'll release your funds and set your account payout to the normal 2-day cycle from that point onward, as long as chargebacks remain within our normal limits."

    I've used them for many years, to the tune of hundreds of thousands of dollars, and had no problems like this whatsoever. Support has always been great and helpful. Also, they wouldn't keep winning if they treated too many businesses this way. You'll get your money at some point.

  3. 2

    It's hard going through this, though I don't believe you've presented your issue wholly in good faith. I've made use of their software for online transactions with my business for a good few years.

    Don't get me wrong, I've had some pretty big hiccups with the company. It was a lot harder to illustrate your point until last Summer when they brought in their callback system. I'm aware their compliance department aren't on calls so that is tricky.

    It's not illegal for them to hold funds against future disputes. It'd be in your best interest to accept that chargebacks happen and prevent rather than cure. Or budget for dealing with them. The logic for these are to protect against disputes.

    You didn't mention in your post, however whenever I've had fund holds, it was always in response to an influx of disputes. Have you definitely not encountered any further?

  4. 1

    So I have this same problem. They are holding close to $7,000.00 of my money with no explanation and not firm date when I can receive my funds. What can I do? Please help.

  5. 1

    -VF

    I just got a email from Stripe as well tonight April 18 2020 saying they are going to hold 50% of my money coming in, in a reserve for 90 days. But when I look at 2 of my current transactions suppose to hit my bank April 20 and 22nd it is still showing my risk is Normal... Will it hold these funds before it hits my bank or should I be ok with these 2 coming in? Is it just talking about future payouts from here on? I have over $15K coming and I need my money in this Coronavirus pandemic times and plus it is for my Construction business to buy material with? Thanks for your help...

  6. 1

    Very disturbing
    My business uses stripe's amazing services

    But.... I cannot afford risking my funds held (no matter what risk/reason) disputes are part of the business world.

    Need to rethink.... Hmmm

    1. 1

      For what it's worth, you'd still owe the funds for disputes even without Stripe. Realistically, as a business owner, you should be prepared to accept that these losses can happen instead of nuking Stripe.

      Speaking from experience I did something similar a few years ago with Square and moved to Stripe. The cost of repurposing my site to accommodate their API and agreements were challenging. However, I've found Stripe to generally be reasonable (especially in comparison to Square). I'm the type to comb over the TOS, so TBF I was aware of their holding policies to guard against disputes.

  7. 1

    This comment was deleted 5 months ago.

    1. 1

      Hi {NAME},

      Thanks for using Stripe!

      Unfortunately, we will only be able to accept payments for {BUSINESS} for a bit longer. Stripe can only support users with a low risk of customer disputes. After reviewing your website and account information, we've found that your business presents a higher level of risk than we're able to work with.

      As noted above, your service will not end immediately—we understand that moving away from Stripe can take time. To help with the transition, we are able to provide you five additional days (beginning today) to switch to a new provider. Because of the elevated dispute risk here, your account balance will be placed on reserve for the next 90 days, the industry-standard period during which most payments are disputed. During this time, the reserved funds will help cover any disputes or refunds on your account. The remaining balance will transfer to your bank account at the end of this period[1].

      If you need an alternative payment processor, we recommend considering PaymentCloud, which works with businesses with a higher level of risk than we're able to support: https://paymentcloudinc.com/stripe.

      We're sorry that we can't offer you ongoing service and wish you the best of luck with your business.

      Best,
      {STRIPE REPRESENTATIVE}

      [1] https://dashboard.stripe.com/balance/overview

      1. 1

        I received the above email 2x, once initially, and then another after the first 90 days expired. Then, on 12/20, I received this email:

        Hi {NAME},

        Thanks for your patience while my team and I looked over your account; I really appreciate it.

        After reviewing this reserve, I’m happy to say that we have been able to remove the reserve from your account! With that taken care of, it looks like we just have one more step to getting your payouts flowing.

        Looking over your account, it seems you may have missed an important update on your payouts that we sent you on September 26th. I understand how easy it can be to lose something in a busy inbox and sometimes our messages find their way into spam or junk folders, so I'll be happy to explain what it said here.

        Essentially, we were reaching out to let you know that we're still having trouble confirming the bank account you have provided to us for payouts. To help solve this, we will need some additional documentation from you before we can resume payouts to your bank account.

        To confirm your bank account and resume your payouts, we need to review a document that confirms the legal owner name and account number of the bank account that we have on file. This account number ends in {LAST4}.

        Type of document: Proof of bank account ownership (IE a bank account statement or voided check)

        You may upload your document by logging into your Dashboard through the link below and responding to the prompt we've enabled there.

        https://dashboard.stripe.com/b/acct_{NUMBER}?destination=%2Faccount%2Fdocuments

        Once we have this information, my team and I should be able to get your payouts flowing. In the meantime, if you have any other questions that I may be able to help with, please don't hesitate to shoot me an email. I'll be happy to be of service.

        Best,

        {STRIPE REPRESENTATIVE}

        1. 1

          Three days later, 12/23, I received this email, randomly reversing the earlier removal of the reserve, placing an new arbitrary reserve on the account:

          Hi {NAME},

          We hate to follow up with more bad news. Unfortunately, because of the elevated dispute risk here, your account balance on reserve will be extended for an additional 30 days. During this time, the reserved funds will help cover any disputes or refunds on your account. Should we see a decline in dispute risk, the remaining balance will transfer to your bank account at the end of this period[1].

          Please let us know if you have any questions—we're happy to help.

          Best,
          {STRIPE REPRESENTATIVE}

          [1] https://dashboard.stripe.com/transfers/overview

          1. 1

            So guess what - you are not the only one!
            I recently signed up with stripe for my Uk based ecommerce retail store. We took 10 payments in first week and suddenly stripe declared 'Unfortunately, your business can't use Stripe because it doesn't meet our Terms of Service. If you think this may be a mistake, please contact us.'
            Now of course I assumed it was a mistake because we simply sell low risk, low cost retail fashion accessories. we took around £1000 in our first week on stripe from 10 customers.
            I tried to message stripe support - chat and phone options were removed, so tried email. 3 emails and 1 week later and they simply refuse to reply!
            Now Stripe have (without explaination) refunded all the orders to my customers - so we lose that money because we already delivered their products and of course we are unable to use Stripe in any way.
            We have since onboarded with another merchant account/ gateway provider - which was very simple because we are just a vanilla low risk business.
            But I really cant understand what on earth caused stripe to treat us like Pariahs - to refuse to even reply to an email (a polite and logical request for help) is incredibly unprofessional and makes no sense no matter how 'unacceptable' they found our business to be.
            Obviously we had zero disputes and no reason to distrust my account, we had done some marketing in Spain and had a number of foreign customers but that is normal for us as we ship worldwide.
            If anyone from Stripe is reading this - firstly what happened? and secondly get in touch so you can try to resolve this because there is something seriously wrong in your organisation if you have to treat a profitable new customer like this!

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            This comment was deleted 5 months ago.

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