December 24, 2019

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

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

      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

    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.

  5. 1

    Having a similar issue. What did the automated email say? If you could copy and paste it so I can compare with mine. This is frustrating.

    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. 2

            Wow. Merry Christmas from stripe right?! I am now very worried if my hold will release promptly.. Greatly appreciate the insight and good luck.. Keep us updated!