PayPal sued for holding a Knox County woman’s money for over a year

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KNOXVILLE, Tenn. (WATE) — A young Knox County woman is suing PayPal as she wants to know why the online payment company froze her money for over a year. The money sent directly to PayPal was from her unemployment benefits, earned at the beginning of the pandemic because she couldn’t work. So far there have been two preliminary hearings in this case and more are scheduled.

Some people don’t have a checking account — instead, they set up a direct deposit account with PayPal, they receive a debit card and use it like a checking account. That’s what Sheena Small did last year. She had two jobs, but because of the virus they were both cut, and, at the time, she was expecting a baby. Well, not long after taking out the PayPal account, it was unexpectedly frozen.

Sheena Small says she’s lived on the edge financially for more than a year. In the spring of 2020, she lost her job due to the pandemic. She was eligible for state and federal unemployment but had no checking account. That’s when she saw an ad from PayPal.

“Use direct deposit for government and payroll payments,” she said. “You didn’t have to wait for it, it just got directed in there. You could use it right away.”

Shortly after applying and being accepted last year, she received a debit card from PayPay and within a few days more than $7,000 in unemployment money was loaded into the account, and she started using it. “It seemed fast and easy until they froze my account on July the 5th. They never gave me an explanation of why they did it.”

Small said for weeks she sent texts and called PayPal asking when will the account be freed up, “I never heard from anybody. What was the reason they were holding my funds, why was my account frozen? And then a message came through that they were going to hold my funds for 180 days.”

With no access to her money and her baby about to be born, her bills were mounting. To make ends meet Sheena reluctantly took out a title loan with very high-interest rates. Then in January of this year, PayPal informed Sheena they’re freezing her account for another 180 days.

“I said ‘what for?’ They said ‘we don’t have that information in front of us.'”

In early July, she hired Knoxville attorney Bennett Hirschhorn. He filed a lawsuit against PayPal claiming a breach of fiduciary duty and breach of contract. Within days of filing the lawsuit, PayPal deposited $4,400 into Small’s new banking account with TVA Credit Union.

In sessions court last week, a preliminary hearing for the case established that PayPal’s attorney will be able to testify remotely by video. Ms. Small’s attorney says he wants PayPal to answer some questions regarding his client’s deposit.

Hirschhorn said, “How the account was handled? What policies allowed them to hold the funds for over a year? What policies, if any, allowed them to hold the funds without giving the reasons why they were being held or how you can have them released?”

WATE 6 On Your Side contacted PayPal, we were told the company does not comment on pending litigation. In court, PayPal’s attorney told Judge Chuck Cerny, the company will need time to gather documents. A jury date has not been set.

Small and her attorney are not trying to break the bank with PayPal, they’re suing for $25,000. If she wins it would be enough money to pay for fees and court costs and to pay off her debt to the title loan company.

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