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Interactive Demand Letter Generator

A comprehensive tool is located below this guide that creates professionally-drafted demand letters and arbitration demands tailored to your specific Stripe situation.

⏱️

30 Days

Required Notice Period

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$1,700+

AAA Filing Fee

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SF, CA

Arbitration Location

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120 Days

Typical Chargeback Window

Critical Issue: Thousands of merchants have had funds suddenly frozen by Stripe with vague explanations about "risk" or "policy violations." What begins as a productive business relationship often turns into a financial nightmare when merchants discover their hard-earned money held hostage, sometimes indefinitely.

⚠️ The Stripe Fund Hold Problem

Common scenario involves Stripe abruptly terminating a merchant's account while citing "risk" concerns, then holding funds for an indeterminate period. Merchants are told their funds will be released within a specific timeframe—typically 5-7 days or 90 days—only to find that deadline continuously extended without explanation.

What the contract says: Section 6.1(b) of the Stripe Services Agreement (SSA) allows Stripe to "terminate this Agreement (or any part) or close your Stripe Account at any time for any or no reason." However, this provision does NOT authorize indefinite fund withholding.

Your legal leverage: The implied covenant of good faith and fair dealing requires Stripe to exercise discretion reasonably, even when the contract grants broad powers.

🎯 What This Guide Provides

Common patterns and practices in Stripe fund holds
Exact legal strategies proven successful in releasing funds
Step-by-step demand letter generator (located below)
How to navigate Stripe's mandatory arbitration process
Specific SSA provisions to leverage in your case
Timeline and cost breakdown for arbitration

Key Insight: A simple demand letter often fails. The combination of a formal demand letter PLUS a draft arbitration demand signals both the seriousness of your intent and your understanding of the dispute resolution process. This combination approach has proven far more effective in prompting Stripe to release withheld funds.

Indefinite Fund Holds

Stripe terminates account citing "risk," holds funds for indeterminate period. Merchants told to wait 90-180 days, only to have deadline repeatedly extended with no clear end date or payout schedule.

Shifting Timelines

Payout dates keep changing with minimal explanation. Common to be told funds will release after waiting period, only to receive last-minute extension. Some merchants report 90-day extensions repeating indefinitely.

Retroactive "High Risk"

Stripe suddenly designates business as "high risk" after processing payments, despite no disputes, chargebacks, or red flags. Label applied retroactively after account has operated normally for months.

Communication Blackout

Once funds are held, effective communication ceases. Merchants describe canned responses or silence, with some reporting Stripe disabled their ability to call or live chat, leaving only email—which often goes unanswered.

🔍 Risk Factors That Trigger Reviews

High Risk Sudden transaction volume increases (e.g., jumping from $500/day to $15,000/day)

High Risk Cross-border transactions from countries with higher historical fraud rates

Medium Risk High complaint volumes or negative reviews mentioning product quality

Medium Risk Extended shipping times not clearly disclosed at checkout

Elevated Risk Business model evolution not disclosed to Stripe during updates

🔄 The Chargeback Loop Trap

Vicious feedback loop where Stripe's hold on funds triggers customer disputes—which then makes Stripe even more likely to continue holding the account.

How it happens:

Step 1: Initial Hold

Stripe freezes account due to "dispute rate" concern

Step 2: Unable to Fulfill

Merchant can't access funds to fulfill orders or issue timely refunds

Step 3: Chargebacks Increase

Customers file chargebacks because orders aren't fulfilled

Step 4: Further Restrictions

Rising chargebacks give Stripe more reason to keep account frozen

📜 Key Stripe Services Agreement Provisions

Section	What It Says	Legal Limitation
6.1(b)	Allows termination "at any time for any or no reason"	Does NOT authorize indefinite fund withholding
6.2(i)	Permits suspension based on "unacceptable level of credit risk"	Risk assessment must be reasonable, not arbitrary
5.4	Can "change the Payout Schedule or suspend payouts"	Discretion limited by good faith obligation
13.2	Requires binding arbitration in San Francisco	Cannot file lawsuit in court (with limited exceptions)
13.3(a)	Requires 30-day notice before filing arbitration	MANDATORY - failure results in dismissal

Implied Covenant of Good Faith and Fair Dealing: Under California law (which governs the SSA per Section 13.1), every contract contains an implied covenant requiring parties to act fairly and in good faith. Even when a contract grants broad discretion, this covenant prevents exercising that discretion in a manner that frustrates the other party's reasonable expectations or deprives them of agreement benefits.

⚖️ Effective Legal Claims Against Stripe

Breach of Contract Stripe failed to process payments within stated timeframes or withholds funds without contractual authority

Conversion Wrongful retention of your property (the funds) beyond any reasonable period for risk management. Can lead to punitive damages in egregious cases.

Breach of Implied Covenant Stripe exercised discretion arbitrarily or used shifting standards to justify continued withholding

CA Bus. & Prof. Code § 17200 Unfair business practices including systematically withholding funds without authority, making false timeline representations, or profiting from interest on improperly withheld funds

📋 What Makes a Strong Demand Letter

Clear identification of account details and amount withheld
Specific timeline of events with dates and promised release dates
Reference to specific SSA provisions Stripe may have breached
Explicit statement serving as 30-day notice per Section 13.3(a)
Clear demand for fund release by specific date
Statement that you will proceed with attached arbitration demand
Citation of specific legal claims with supporting facts

🗺️ Step-by-Step Action Plan

Step 1: Document Everything

Gather complete account history, transaction records, all Stripe communications, evidence of compliance (low dispute rates), and documentation of damages from withholding

Step 2: Draft Demand Letter + Arbitration

Prepare comprehensive demand letter stating it serves as 30-day notice per Section 13.3(a), include draft arbitration demand, set specific response deadline (10-14 days)

Step 3: Send Via Certified Mail

Mail to Stripe Legal Department, 354 Oyster Point Boulevard, South San Francisco, CA 94080. Also email to complaints@stripe.com for multiple delivery channels.

Step 4: Use 30-Day Notice Period

Finalize arbitration demand, prepare supporting documentation, arrange AAA filing fees, consider attorney consultation if not already engaged

Step 5: File for Arbitration (If Necessary)

Submit to AAA with filing fee, provide copies to Stripe, prepare for preliminary conferences. Remain open to settlement throughout process.

Critical 30-Day Notice Requirement: Section 13.3(a) requires notice specifying the date arbitration demand will be filed, which must be at least 30 days after notice date. Failing to provide this notice can result in procedural dismissal, forcing you to restart the entire process.

📄 AAA Arbitration Filing Requirements

Required Documents:

AAA Commercial Arbitration Rules Demand for Arbitration form
Copy of arbitration clause from SSA
Appropriate filing fee payment
Comprehensive statement of claims with factual background
Clear statement of relief sought

Filing Methods:

Online via AAA WebFile system, or mail to:

American Arbitration Association
Case Filing Services
1101 Laurel Oak Road, Suite 100
Voorhees, NJ 08043

Stripe's Address (required on form):

Stripe, Inc.
354 Oyster Point Boulevard
South San Francisco, CA 94080

⚡ Expedited Procedures for Claims Under $25,000

Section 13.2(b) of SSA references Section E-6 of AAA Expedited Procedures for claims under $25,000. Key features:

Decision based primarily on documents, not in-person hearings
Streamlined process with shorter timelines
Lower overall costs compared to standard procedures
Typically completed within 60-90 days
Single arbitrator appointed by AAA

Cost Warning: Arbitration is significantly more expensive than court filing. Federal court filing is approximately $435, while AAA filing fees range from $1,700-$2,900 depending on claim size, PLUS arbitrator fees and other costs.

💰 AAA Filing and Administrative Fees (2024)

Claim Amount	Initial Filing Fee	Final Fee
Under $75,000	$925	$800
$75,000 to $150,000	$1,925	$1,375
$150,000 to $300,000	$2,900	$2,200

AAA also offers "flexible fee schedule" with lower initial fees but higher overall costs paid in three installments.

💵 Arbitrator Compensation

Typical Rates:

Hourly $300-$600 per hour

Daily $1,500-$2,500 per day

Cost Estimates by Case Type:

Document-Only $3,000-$5,000 in arbitrator fees

With Hearings $10,000+ depending on complexity and duration

Arbitrator fees are generally split between parties unless arbitrator decides otherwise in final award.

📊 Total Cost Breakdown

Expedited Process (under $25,000):

AAA filing fees: $1,725
Arbitrator fees: $3,000-$5,000
Attorney fees (if represented): $5,000-$10,000
Total estimate: $9,725-$16,725

Standard Process (larger claims):

AAA filing fees: $1,925-$5,100
Arbitrator fees: $10,000-$20,000+
Hearing room rental: $500-$1,000/day
Attorney fees (if represented): $10,000-$30,000+
Total estimate: $22,425-$56,100+

Settlement Reality: Approximately 70% of Stripe cases settle after arbitration is filed but before the evidentiary hearing. The mere act of filing often prompts meaningful settlement discussions, potentially avoiding most arbitration costs and shortening timeline to 2-4 months instead of 6-12 months.

💸 Recoverable Damages Beyond Principal

Interest on withheld funds: Typically 10% per annum for contract claims in California
Consequential damages: Lost profits, emergency financing costs, vendor/supplier losses
Arbitration costs: Filing fees and arbitrator compensation
Attorney's fees: If provided by statute or arbitrator's discretion
Interest earned by Stripe: Potentially recoverable under Bus. & Prof. Code § 17200

All claimed damages must be thoroughly documented. Speculative or undocumented damages will likely be rejected.

How long can Stripe legally hold my funds? ▼

The SSA doesn't specify a maximum time limit, creating significant ambiguity. While Stripe often claims they can hold funds for 90-180 days to cover potential chargebacks, indefinite holds likely exceed what's reasonable under contract law. The implied covenant of good faith and fair dealing requires Stripe to exercise discretion reasonably. For card payments, maximum chargeback period is typically 120 days. Funds held beyond 180 days without specific evidence of ongoing risk can be effectively challenged through the legal process outlined in this guide.

Can I sue Stripe in small claims court instead of arbitration? ▼

Generally, no. Section 13.2 of the SSA requires binding arbitration for nearly all disputes. While some states have laws limiting enforceability of arbitration clauses in certain contexts, courts have typically upheld Stripe's arbitration provision. The only significant exception is for disputes "principally related to either party's IP Rights," which can be litigated in U.S. District Court for Northern District of California. There's also a class action waiver in Section 13.6. Your most viable path is through arbitration following the procedures outlined in this guide.

What happens if Stripe releases my funds during arbitration? ▼

You have several options: (1) Partial settlement - dismiss arbitration in exchange for fund release, potentially negotiating coverage of your filing fees and costs; (2) Continue proceedings for remaining damages - pursue consequential damages, interest, attorney's fees even after principal is released; (3) Counter Stripe's mootness argument by showing additional damages remain unaddressed. Document exactly when funds were released versus when they should have been, calculate additional damages beyond principal, and consider whether formal settlement agreement would be more advantageous than simply accepting funds. This situation occurs frequently as Stripe often releases funds after arbitration is filed but before significant proceedings.

Will Stripe blacklist me from other payment processors? ▼

No evidence exists that Stripe shares information about merchants who pursue legal action with other payment processors. Payment processors make independent risk determinations based on your credit history, business financials, industry, business model, and card network chargeback history. The payment processing industry is competitive with many alternatives including traditional merchant accounts through banks, other payment service providers (PayPal, Square), and high-risk merchant account specialists. In representing dozens of merchants in Stripe disputes, none have reported difficulty obtaining services from other providers after challenging Stripe through arbitration. Many successful merchants maintain accounts with multiple processors simultaneously as risk management strategy.

Do I need a lawyer for arbitration with Stripe? ▼

While you can represent yourself (pro se), I recommend at least consulting an attorney experienced in payment processor disputes. The intersection of contract law, financial regulations, and arbitration procedure creates significant complexity. Attorneys experienced with Stripe disputes know which arguments and evidence most effectively prompt settlements. AAA arbitration involves specific rules challenging for non-attorneys to navigate. Stripe's legal team typically takes represented claimants more seriously in settlement discussions. For smaller claims (under $25,000), consider initial consultation to prepare demand letter and arbitration demand, proceeding pro se with expedited document-only procedures, and further consultation only if case proceeds to complex stages. For larger claims, full representation is typically justified by amount at stake and complexity involved.

How do I prove my business isn't "high risk" as Stripe claims? ▼

Compile comprehensive evidence including: complete transaction history showing actual dispute/chargeback rate (ideally below 0.75% industry standard), documentation of order fulfillment processes and timelines, customer satisfaction metrics and reviews, compliance with industry standards or regulations, evidence of full business model disclosure during onboarding, and comparisons to standard risk metrics in your industry. Include this evidence with your demand letter to directly challenge Stripe's risk determination. Many merchants discover Stripe's "high risk" designation lacks specific evidence or metrics, making it vulnerable to challenge when confronted with well-documented counterevidence. In arbitration proceedings, this evidence becomes crucial for challenging Stripe's primary defense for withholding funds.

Can I recover the interest Stripe earned on my withheld funds? ▼

Yes, potentially recoverable under several legal theories: (1) Restitution under California Business & Professions Code § 17200 allows recovery of profits from unfair business practices, including interest earned on improperly withheld funds; (2) Conversion damages - when a party wrongfully retains another's property, damages can include benefits derived during retention period; (3) Prejudgment interest - California Civil Code § 3287(a) allows recovery of interest from day right to recover arose. To maximize chances: explicitly include it in demand letter and arbitration demand, calculate approximate interest earned using average money market rates, argue that allowing Stripe to keep this interest would reward improper withholding. While arbitrators don't always award interest, the legal basis is sound and including this demand strengthens your overall position.

What are Stripe's typical defenses and how do I counter them? ▼

"High Risk" Defense: Counter with documented chargeback rates, transaction history, and industry comparisons proving your business operates within normal risk parameters. "Contractual Discretion" Defense: Emphasize implied covenant of good faith and fair dealing which limits discretion exercise, citing California precedent. "Ongoing Chargeback Liability" Defense: Present evidence that sufficient time passed beyond reasonable chargeback windows (typically 120 days), making continued withholding unnecessary. "Terms of Service Violation" Defense: Demonstrate full disclosure during onboarding and policy compliance, request specific evidence of alleged violations. "Procedural" Defenses: Meticulously document compliance with all SSA procedural requirements, particularly 30-day notice. Most effective preparation involves anticipating these defenses and preemptively addressing them in initial arbitration demand with specific evidence and legal arguments.

Need Legal Assistance with Your Stripe Fund Hold?

Sergei Tokmakov, California attorney (Bar #279869) with over 13 years of experience representing e-commerce merchants in payment processor disputes.

Schedule a Consultation