As any regular reader of Consumerist knows, PayPal is a company that’s not exactly known for admitting its many failings. But not only has it opted to release the Regretsy.com funds it had frozen because that site had used a “Donate” PayPal button without being a non-profit charity, it has also confessed that it should not have put that money on lock-down in the first place.

Regresty.com owner Helen finally spoke to a sensible PayPal rep, who admitted, “The information you were given about using the donation button was definitely incorrect, and at the end of the day, it was an error in judgment on the agent’s part.”

The problem, it appears, arose when Regretsy’s Secret Santa campaign, which accepts $2 donations from readers and then uses that money to buy gifts for children in need, was so successful that it triggered some sort of “look at me” alarm in PayPal’s underwater laboratory.

“The normal protocol would have been for the agent to tell you that once you reach a certain threshold, your account is triggered for a review,” the PayPal pal told Helen. “And when the agent looked at your account and made a subjective decision, he made a very, very incorrect one.”

Helen says that PayPal has indeed unfrozen both the Regretsy account and her personal account, which was frozen earlier this week.

“It’s a nice gesture, but I’ve already refunded thousands of dollars in donations, so they’ve basically just given me access to money that wasn’t in issue to begin with,” she writes. “They have also offered me the opportunity of doing unlimited business without fees through the end of the year. It’s really the only way I’d use them at this point, since they won’t be getting anything from me.”

The biggest issue here — and the reason we’ve been covering the story — is that once again PayPal’s policies are vague and byzantine, and apparently malleable to the whim of a single employee.

And as Helen points out, while PayPal may try to foist this screw-up on the shoulders of one rogue staffer, more than one person at the company told her she was mistaken:

I also got that information in two separate emails from Paypal. And that means that Paypal’s donation policies are so poorly worded and vague that even the people who work there don’t understand them.

That’s not just bad for me, it’s bad for anyone who uses Paypal. Because as long as policies are this ambiguous, people will come up against this kind of crap and see their assets frozen. How many of them are going to be able to ratchet up the public shaming that was handed out in the last 24 hours?

And I think we all know that Paypal’s apologies and reversals were motivated by the intense scrutiny they’ve been subjected to. If I were Sally’s Soap Shack, I would be waiting out that six month hold right now and wondering how to make Ramen noodles taste like Christmas ham.

Sooner or later you’ll pay, pal [Regretsy.com]

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