PayPal, BBB come to terms on customer service rating

PayPal and Silicon Valley's Better Business Bureau have agreed to improve their lines of communication and conduct a series of high-level talks in an effort to improve how PayPal handles customer complaints.

The two sides met Wednesday after the watchdog agency labeled PayPal's customer service record "unsatisfactory" based on the 30 to 40 PayPal complaints it said it receives every month. Most of the complaints claim PayPal is too slow to respond to questions and too quick to freeze accounts if it believes fraud has taken place, according to Erin McCool, a customer service representative for the San Jose, Calif., chapter of the BBB.

PayPal spokesman Vince Sollitto said that the BBB, which had forwarded complaints to PayPal by traditional mail service, agreed to start sending them via e-mail. The two companies also agreed to a series of meetings between executives in coming weeks.

"We certainly wished they had not given us the label they did but we are committed to improving our service," Sollitto said.

One of the fastest-growing financial service Web sites, PayPal has amassed almost 6 million customers in the 14 months since its launch, Sollitto said. It's gone from performing one transaction a day to facilitating 150,000.

To speed up its response time, PayPal has increased the number of customer representatives to 500 at its Omaha, Neb.-based service center. It has assigned an executive to act as a liaison between the company and the BBB.

"They have made a real effort to respond to each of the complaints," McCool said. She added that listening to the complaints is not enough, however.

"They know what the complaints are," she said. "But they have failed to eliminate the causes of the complaints."

One target is PayPal's policy on freezing accounts when it suspects illegal activity, McCool said.

If, for instance, PayPal suspects that someone has used a stolen card number to buy goods, the company will put a hold on the transaction until it investigates. Likewise, if a merchant is accused of taking money without producing the goods, PayPal will stop any further sales and freeze the merchant's account.

The practice paid off in a case last month involving a Fountain Valley, Calif.-based company claiming to have the popular PlayStation 2 video game consoles for sale, Sollitto said. PayPal security personnel investigated, and that led to a hold put on the account. PayPal eventually returned much of the money to customers.

But customers have complained that PayPal often doesn't inform people that their accounts have been frozen or explain why they have been frozen.