I haven't seen a situation like this in a very long time - if ever. PayPal is holding eBay seller funds when buyers pay with eChecks. But neither company has publicly announced the problem, adding to the natural tension between buyer and seller in eBay transactions where trust is crucial. The problem is over a week old and is ongoing.

It is surprising that the State Attorneys General have not looked into PayPal's recent policies of holding seller funds (and we're hearing it's not just the seemingly inexplicable 21-day holds, we hear PayPal is also instituting 5-percent, 90-day holds on certain high-volume sellers unless they put up a PERSONAL guarantee) - and now this glitch with eChecks. What recourse do buyers and sellers have when PayPal holds funds, whether by policy or due to a glitch?

Glitches happen, but it is inexcusable not to acknowledge the problem to your own customers. I spoke to PayPal about this problem on Wednesday, and they said they would get back to me on Thursday. I followed up, with no response.

Acknowledge and explain the nature of the problem;

Place the missing funds in sellers' accounts;

Allow sellers to ban eCheck payments;

Communicate with buyers;

Automatically reverse any negative buyer ratings for sellers involved in eCheck payments over the past 2 weeks.

PayPal also needs to compensate sellers for "borrowing" their money interest-free, and they need to do a much better job of explaining eChecks to buyers. Most buyers don't even realize PayPal is funding their transactions via eChecks, a whole separate issue!

You can read the full story in AuctionBytes Newsflash, and let us know if you've been affected by the problem.