PayPal permanently limited my account with $27K — recovery options?

Running a dropshipping business for about a year. PayPal was my only payment processor (stupid, I know now). Yesterday got the dreaded "Your account has been permanently limited" email.

They're holding $27,412 for 180 DAYS. That's essentially my entire operating capital. I have suppliers to pay and orders to fulfill. This is going to destroy my business.

The email says I violated their Acceptable Use Policy but doesn't say what I did. I sell home goods - nothing remotely prohibited. Zero chargebacks, 4.8 star seller rating.

What are my realistic options here? Is there any way to speed up getting my money? Or am I just screwed for 6 months?

Same thing happened to me last year with $19K. Let me tell you what I learned the hard way:

The 180 days is mostly non-negotiable BUT you can sometimes get a partial release. File a CFPB complaint immediately - PayPal has to respond within 15 days and it gets escalated to a real person.

Also email executiveoffice@paypal.com with your full documentation. Sometimes the executive team can authorize early partial releases.

Dropshipping triggers PayPal's algorithm constantly. The longer shipping times from overseas suppliers look like delivery failures to them. Even if customers are happy, PayPal sees 14-21 day delivery windows and panics.

Did you recently have a spike in volume? That's usually what tips it over.

@DropshipDan Yes actually - had a really good Black Friday. Did about $12K in 4 days which was way above my normal $3-4K/week. That must have triggered it.

Going to file the CFPB complaint right now. What documentation should I include?

Here's the documentation checklist for your CFPB complaint and executive escalation:

• Business registration/LLC documents
• Tax returns or bank statements showing legitimate business
• Supplier invoices proving you have real inventory/orders
• Tracking numbers for all pending orders
• Screenshots of positive customer reviews
• Your complete transaction history showing low dispute rate
• Any correspondence with PayPal

For the CFPB complaint, be specific about the harm: "PayPal is holding $27,412 of my funds without specific explanation of policy violation. This is preventing me from fulfilling customer orders and paying suppliers, causing business harm."

If you're in California, New York, or other states with strong consumer protection, mention you're considering small claims court. PayPal's arbitration clause has carve-outs for small claims in some states.

We have a demand letter template at /Demand-Letters/Platforms/ that covers the key points.

While you're fighting to get your funds back, you need to set up alternatives ASAP or your business is dead anyway:

• Stripe: Easy to set up, but can also freeze (less common though)
• Square: Good for some businesses, but they also have sudden terminations
• Shopify Payments: If you're on Shopify already, use this
• Traditional merchant account: Takes longer to approve but way more stable. Look at Helcim, Stax, or a local bank

Honestly for dropshipping specifically you might want to look at processors that cater to ecommerce - they understand the model better and won't freak out about delivery times.

Jumping in because I actually won in small claims against PayPal in California last year. They held $8K for 180 days, I sued for the funds plus damages for business interruption.

PayPal's arbitration clause specifically excludes small claims court. Filed in my county, they sent a lawyer, judge ruled in my favor. Got my money plus $2K in damages.

Downside: takes time and you need to be in a state where small claims limits cover your amount. California is $12,500 max so your $27K wouldn't fit. But worth looking into if you're under the limit.

Update for anyone finding this later:

Filed CFPB complaint on Dec 3. Got a call from PayPal "Office of Executive Escalations" on Dec 8. They reviewed my documentation and agreed to release 50% ($13,700) immediately. The remaining $13,700 is on a 90-day hold instead of 180.

Not perfect but I can at least pay my suppliers and keep the business running. The CFPB complaint definitely got their attention - regular support was useless.

Already set up Stripe and Shopify Payments as alternatives. Never putting all eggs in one basket again.

Found this thread googling my situation. Just got limited with $11K held. Filing CFPB complaint now based on the advice here. Will update.

The lesson I'm taking from this whole thread: NEVER use a single payment processor, and sweep funds out daily.