UPDATE: In a somewhat surprising move for PayPal, it has finally decided to release Regretsy’s frozen funds!

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Accepting charitable donations online through a third party can be a tricky business. It often requires that you provide reams of documentation to this third party that you are a non-profit or that the money is going directly to a non-profit. For two years, the folks at Regretsy.com, had been accepting donations (which were then handed out to various causes) using the “Buy Now” or “Shopping Cart” buttons. But for its Secret Santa campaign, Regretsy made the mistake of using the “Donate” button, and now PayPal is making the site refund all donations (while it keeps the transaction fees, of course).

“Because I used the wrong button, they have made me send them everything from bank statements to Articles of Incorporation to affidavits and notarized statements, even though I have been a verified business customer of theirs for 10 years,” writes Regretsy’s owner.

And after all that paperwork, she received the following from PayPal:

We appreciate that you have chosen PayPal to accept payments for your organization and thank you for your patience during this review process.

PayPal permits the donation button to be used by verified non-profit organizations. PayPal also permits donations to the accounts of individuals or organizations that are authorized to fundraise on behalf of verified non-profit organizations.

It appears that your PayPal account belongs to a corporation, and not a non-profit organization. Please refund the donations that you have collected.

So now Regretsy must manually refund hundreds of $2 donations. It would have been much worse had PayPal not made this demand until after thousands of dollars had already cleared. This means that most of the children who would be receiving the gifts from Regretsy’s Secret Santa campaign will not be affected.

And of course, the PayPal policy is that even though Regretsy must return the money that was being held up, PayPal keeps the fixed fee. And if people whose money is refunded choose to donate again, that means PayPal gets paid twice. Not a bad gig.

While we understand PayPal’s insistence on refunding the money because Regretsy is not a non-profit, could it not have worked out a way for that fee to be waived?

F*ck You, Paypal [Regretsy.com]

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