Upheld: account limitation and funds retention; application of liquidated damages clause complaint against PayPal UK Ltd

Decision detail

Summary

Mr A, a sole trader, complained that PayPal took over £16,000 from his business account (T) and refused to refund it for several years after determining T breached the acceptable use policy. PayPal initially held the money for 180 days then took it as liquidated damages. Mr A sought legal advice in 2023 but did not formally complain to PayPal until 2025. When the complaint reached FOS, PayPal agreed to refund the money plus £7,800 interest and £1,000 compensation. Mr A sought additional compensation for legal fees, representation costs, and alleged reputational damage from PayPal contacting his landlord. The ombudsman upheld the complaint, accepting PayPal's settlement as fair given Mr A's limited pursuit of the matter over nearly five years and rejecting additional claims as either unsupported or Mr A's own choice.

The Ombudsman's reasoning

The ombudsman found PayPal fairly decided T breached the acceptable use policy based on confidential review findings treated as security information. While PayPal held a substantial sum for considerable time, the ombudsman noted Mr A left large gaps between contact attempts (2021-2023, then 2023-2025) and did not complain to PayPal until nearly five years after the account was blocked. The ombudsman considered PayPal's offer of full refund, £7,800 interest, and £1,000 compensation fair given the circumstances and Mr A's limited pursuit of the matter. The ombudsman rejected claims for legal fees (as Mr A's choice to use paid services) and reputational damage (insufficient evidence PayPal contacted the landlord).

How this compares

Source

Read the original decision on the Financial Ombudsman Service website