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Comment by URSpider94 | Hacker News Reader

See my separate comment -- a hold plus a loan is not the same as just not holding the money, from a risk point of view. Although it would look the same to your bank balance, the two look nothing alike to PayPal's accountants and auditors. If you think there's a potential liability between two parties, it's much better to formalize it as a loan agreement than to just carry it as a risk.

This is why, for example, the cable and cell phone companies show up on your credit reports. When you pay them in arrears for your service each month, you are in effect borrowing money from them.

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Interesting point. From that perspective, you could argue that giving a loan against the collateral is a way to account for some of the risk on Paypal's side while still giving us some funds.

Still, we've been with Stripe since then and have had no problems.

Exactly. To give another example, I was at Lucent in the late 90's, just before the telcom collapse. Ultimately, Lucent stock collapsed by 90% and the company was bought by Alcatel (which was just bought by the remaining parts of Nokia that Microsoft didn't grind into dust, but I digress). A big part of what brought Lucent down was not just that sales of communications equipment plummeted, but also that Lucent had extended financing to its customers so they could buy more equipment, and then those same customers defaulted on their loans.

Ultimately, it's important to make sure that a loan-granting organization is run separately from your core business, to avoid people making poor-quality loans just to goose sales numbers.

Still, we've been with Stripe since then and have had no problems.

yet ...

There was a recent article on how hoverboard sellers have suffered massive fraud losses, that specifically talked about how Stripe is trying to chase people to recover hundreds of thousands of dollars in chargebacks. That can't happen too many times, given the thin margins of payment processing, before they have to do something to protect themselves.

I just googled that:

>In one case, hoverboard vendor IO Hawk had a reported $900,000 negative balance. Stripe’s documents call it “one of our largest losses ever.”

You'd think there'd be some way to delay shipping for a couple of days while someone checks if the card is stolen. Maybe they could have some way of just calling the card owner and asking if they ordered a hoverboard?

So now Stripe has that risk on their books? Don't you think they'll eventually need to do the same as Paypal did?

Maybe Stripe won't freeze your assets first, but they could notify you that they will only support a certain transaction volume unless you take a loan.

> If you think there's a potential liability between two parties, it's much better to formalize it as a loan agreement than to just carry it as a risk.

Such a clear and excellent point. This is the basis of the idea people are thinking when they tell someone to "get it in writing."

I have never seen a cable, cell phone, or utility account reported on my credit, other than the initial credit check to open the account. But it seems everyone around me thinks paying a power bill late will affect their credit.

Do companies in other areas typically report such accounts to the credit agencies?

In the US, yes. Almost all utilities except perhaps the water company can report delinquent payments to the three credit agencies.

I don't know. For a while, I'd forget to pay my electric bill every other month or so, and SDG&E never did anything but send a polite reminder with my next bill.

Usually takes a chargeoff (you never pay the delinquent amount) for it to hit your credit.

Utilities generally consider your account to be in good standing so long as you don't fall more than two or three payments behind. They may use a late fee and/or a deposit return agreement to incentivize on-time payments, but they're not going to go after you (such as disconnecting service) until usually the 3rd month that you fail to pay, sometimes (especially for municipal utilities) much longer.

Essentially, accounts paid late just aren't a big deal for them. They almost always get the money anyway.

Do companies in other areas typically report such accounts to the credit agencies?

Generally the companies themselves do not report to credit agencies. However, once the account is turned over to a collections company then that company will nearly always report the delinquency to the credit agencies. So from the consumer point of view, the statement "If I don't pay my bill, it will show up on my credit report" is true, but there is a middleman in the process.

It's basically a secured credit card. And you get the primary holders SSN (credit report) to have a credit relationship with. It actually makes a lot of sense.

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