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On another matter, while I understand the right of a merchant to decide not to allow selling of a certain kind of product, I which someone would challenge PayPal legally for refusing to transact such. Because if buying and selling guns is legal, and U.S. currency is legal for "all debts public and private," and PayPal transactions are denominated in U.S. currency...then maybe they can't be allowed to discriminate.
They are, after all, not the venue for the purchase...just the transaction mechanism. So if PayPal can say no, then what are we to do if JP Morgan or Bank of America suddenly say they won't process a check written for a gun purchase, or won't allow use of a debit card for it? ...
-- NDG
I just got done working on a case involving a company - what I'll call a "merchant-hosting company" for lack of a better name - that worked with PayPal as a "payment processor". PayPal is one of the largest of the payment processors.
A "merchant-hosting company" factors between individual small merchants and the internet, providing the merchants with a place for their selling websites to reside and a website platform for them to build their sales site on.
Basically, the payment processors have contracts with the credit card companies (and banks) and those contracts specify what kinds of goods and services can and cannot be paid for with the credit cards through the payment processors. In turn, the payment processors have contracts with the merchant-hosting companies (and places like EBay) that do the actual transactions. These contracts impose the same conditions and prohibitions on the merchant-hosting companies and EBays as the credit-card companies impose on the payment processors. The credit card companies require that.
The prohibitions are enforced in two ways. First, the credit card company can cut off the payment processor. Second, the credit card company can fine the payment processor. These fines start in the tens of thousands of dollars and can go into the mid-six figures. The payment processors can do the same thing to the merchant-hosting companies. Individual merchants are usually just cut off. The payment processors require the merchant-hosting companies to keep large sums of money on deposit with them to cover potential fines (as well as chargebacks and such).
The credit card companies have decided - usually for legal reasons but sometimes for political ones - to ban certain goods and services. These include porn, electronic gambling, drugs (legal and illegal), bride catalogs, escort services, pyramid schemes, work-at-home scams, get-rich-quick schemes and weapons. Most of them are covered by either one or more federal statutes or treaties - remember that the internet is international. So, a little reinterpretation of some law or another and the processors decided dealing in firearms was too risky, financially, to them to allow it to continue.
It's a complicated system, but some of the most fearful people on earth are bankers and financial people and a little nudge from the government is all it takes to get them to close the doors to legitimate people. Regardless of any other considerations - all they care about is their bottom line.
