Operating a business in the firearm industry even if you don't sell guns, comes with complications and risk. This article is part of a series of articles I'm publishing about various online platforms, merchant providers, and tools that have policies related to the firearm industry.
PayPal is a merchant provider that enables small businesses and helps them accept credit card payments online in a secure way. In addition to being its own payment gateway and merchant provider, PayPal also has the benefit of being an online bank where you can keep a balance. You can get a PayPal debit card, send money to/from other PayPal users and transfer funds back and forth with other bank accounts.
What Is PayPal's Gun Policy:
“You may not use the PayPal service for activities that: relate to transactions involving … ammunition, firearms, or certain firearm parts or accessories, or (k) certain weapons or knives regulated under applicable law.”
Not exactly specific is it? Virtually everything my business sells MIGHT fall into their list of prohibited items. Or it might not because who is to say WHICH certain firearm accessories are on the PayPal naughty list?
I called PayPal. They were unable to provide me with a list. I was told explicitly that “holsters, bags, and tactical gear” are all ok. Many years ago I also had a PayPal representative explicitly tell me firearm training and classes are ok. Beyond that nobody knows. I'm not even sure if PayPal knows from one day to the next what is prohibited.
The most troubling thing is the lack of consistency. I know several businesses that only sell training classes and have had PayPal delete their account. I know at least one company that only sells holsters and yet PayPal froze their account.
Further, they don't seem to be educated enough to enforce their own policies. For example, they restricted my company's account because of a transaction for “dummy ammo.” Dummy ammo is very obviously not ammunition and is in fact a safety product that renders a gun safe but even after a phone call PayPal's compliance team couldn't reconcile the possibility that anything with the word ammo wasn't against their policy that prohibits ammunition.
What Can You Expect From PayPal:
An important clarification you need to note about PayPal. Different from other merchant providers; when a customer places an order on your website and checks out using PayPal the list of items by title, that make up that order, is sent to PayPal.
If someone purchases a holster on my website and pays with a traditional credit card merchant that merchant provider will only get an order number or whatever I've programmed for them to receive. Something like “Concealed Carry Inc Order #5555555. PayPal on the other hand will get the exact title of the holster being purchased. In my opinion, this level of data transfer to PayPal is a HUGE privacy concern for my business and our customers.
PayPal appears to conduct audits from time to time on accounts looking for keywords against a “naughty list” of keywords. Since the actual product names show up in a PayPal transaction this is something they can do.
*Note: Based on my interviews with companies who have dealt with these issues as I have, I suspect that PayPal might only conduct these audits on accounts that either have high balances or a volume of activity that is higher than normal for that account.
PayPal has different types of account restrictions they can apply. If for example, they see just one product you sell that is in violation of their “policy” they might put a restriction on your account only until you remove that product and stop selling it. However, if they think your core business is fundamentally in violation of their policy they might fully delete your account.
Is there an appeal process? Not really. You can contact PayPal customer support via phone and get a supervisor on the phone but their ability to help you is very limited. They can't tell you what is or isn't prohibited and at best they can “add notes to the account for the compliance team to review” but that isn't likely to have any impact on anything.
If your account has recently been restricted I suggest you do whatever they request in order to be compliant. My rule of thumb is to always play by their rules to avoid potential issues.
What Are Your Options – Should You Leave PayPal?
This is a difficult one. As a general rule, I prefer to not work with companies that don't have clear rules or a way to appeal when you feel you have been restricted regardless of following those rules.
Sadly however PayPal isn't just another behind-the-scenes merchant provider that will process a credit card charge. They have worked hard to build a brand that many consumers equate with trust and security. Customers like PayPal because they feel it is more secure than giving their credit card info to some random website.
As a large eCommerce company that processes millions of dollars each year on our website, we have the opportunity to conduct experiments in real-time with a substantial amount of traffic. Those experiments have shown that offering PayPal as an option at checkout increases the conversion rate by about 10%.
Thus removing PayPal as an option would be the last resort that would almost certainly cost us as much as tens of thousands of dollars each year.
My Suggestions to Any Firearm Industry Company Relating To PayPal:
- If you sell guns, ammunition, knives, or firearm parts that replace OEM parts on a firearm I strongly suggest you do NOT use PayPal. Perhaps on the checkout page, you put a note to the effect of “We do not offer PayPal as a checkout option because PayPal specifically prohibits the sell of our products on their platform.” Such a statement might lessen the negative impact of your conversion rate.
- If you think your business fully complies with PayPal's policy you need to acknowledge the possibility that at any point they may choose to shut you down. There may not be any rhyme or reason. Just expect it as an eventual inevitability.
- Setup a dedicated bank account to tie to your PayPal account. This is valuable for a number of reasons. First, you limit PayPal's access to all the funds in your business's primary bank account. Second, if your account gets shut down and you decide to open a new PayPal account you will be unable to do so using a bank account previously connected with a PayPal account that was restricted or shut down.
- Maintain a low balance. Pick a balance number that is appropriate for your business that you want to maintain there for whatever working balance reasons and frequently transfer anything over that dollar amount out of PayPal. I suggest that working balance never be more than $2500.
- See if there is a way with your eCommerce solution to restrict the data being sent to PayPal or even block certain products from being paid for with PayPal. Perhaps you too sell dummy ammo and don't want to trust PayPal compliance officers with knowing the difference.
- On your website, if you accept PayPal, you should be able to add a note on the checkout page to the effect of “While we do accept PayPal to meet the demands of many customers please note we don't recommend paying with PayPal. PayPal will receive all the data about the products you are purchasing which we feel is an invasion of your privacy. Further, PayPal has proven to be against the second amendment and we don't suggest patronizing companies that don't respect your constitutional rights.”