PayPal Square terminated my account — Dispute Resolution

I'm in a difficult situation and trying to figure out my next steps.

Square terminated my account. I've been dealing with this for about 12 months now and the situation isn't improving.

The amount being held/disputed is approximately $5,814. I have tried contacting customer support 6 times with no resolution.

Do I have a strong case? What should my next steps be?

I practice in this area. Here's my take on the legal issues.

The legal framework here involves both federal and state law. At the federal level, Regulation E. Your state may provide additional protections.

You should consult with a local attorney who handles these cases. Many offer free initial consultations.

I went through almost the exact same thing.

The biggest mistake people make in this situation is hiring an attorney to send the initial letter. I'd recommend being patient with the process instead.

I work in this industry and unfortunately this is very common. The good news is that when people actually push back with legal representation, companies usually settle.

I've seen this play out several times in my field.

In my case, it took about 4-8 months to resolve. The key was filing with the appropriate government agency.

Square terminated my account without warning. I'm a licensed massage therapist. Their email said my business falls under their "prohibited activities" list. I suspect it's because massage therapy gets flagged as "adult services" by their automated system. I have a state license, a professional website, and zero chargebacks in 2 years of use.

This is frustratingly common for legitimate massage therapists, CBD sellers, firearms dealers, and other lawful businesses that get caught in payment processors' broad risk categories. The processors use MCC (Merchant Category Code) based screening that flags entire industries.

Options:

1. Appeal with documentation: Send your state license, business license, and proof of legitimate operation. Request manual review. Sometimes a human override fixes the automated screening.
2. High-risk payment processor: Processors like Square and PayPal have very conservative risk policies. Consider switching to a processor that specializes in or explicitly accepts your industry (PaymentCloud, Dharma Merchant Services, etc.).
3. Legal angle: If Square is holding funds, the same money transmitter law arguments apply as with Stripe. For the termination itself, you have fewer options — their TOS gives broad discretion. But some states' consumer protection laws may apply if the termination was based on a factual error.

For your funds: demand release in writing, cite your clean chargeback history, and set a specific deadline. Escalate to state financial regulator if they don't comply.