Why does Paypal unnecessarily hold refunds?

[slingblade01]

I made a purchase w/PP G&S on 4/1. The seller refunded me on 4/2. It is now 4/7 and no refund.

PP states "Your refund is pending because the sender issued a refund using an eCheck, which hasn't cleared their bank account yet. "

I sent Paypal's statement to the seller.  The seller claims that Paypal is lying and sends me a screenshot showing that the payment cleared his bank on 4/2 plus additional transaction fees as well.
I am aware of Paypal's refund policy for bank transfers of 3-5 days or 3-5 BUSINESS days or 7-10 Business days depending on where on their site you read this. 

What I don't understand is why.  It takes seconds to electronically withdraw money from your bank and the same can be done with deposits.   I can even understand that financial institutions want to reduce costs and batch these deposits. But why 3-5/7 days for EFTs?
Does anyone else find this business practice to be dishonest?

[kernowlass]

@slingblade01 

Pending refunds can only happen for two reasons.

1. The seller has issued a refund from their bank account which takes time to process. It may have left the sellers bank account but as it goes via ACH in batches it won't have hit paypal yet, allow 3-5 business days.

2. You funded the payment to the seller using bank transfer. What PayPal do here is credit the recipient on your behalf (so there is no delay in despatching your item). Then if you receive a refund in the meantime they are unable to issue this until the original bank transfer completes.

https://www.paypal.com/us/selfhelp/article/i-want-a-refund

[slingblade01]

This is not true or factual. NACHA, states that funds must be available to the RDFI ~2 hours after the ODFI sends the transfer. 
Furthermore, the NACHA states that all transfers, except unauthorized ones, MUST be settled by the ODFI with the ACH in 1 hour after the RDFI received the funds.

As an example:
Saturday-EFT is placed
Monday-ODFI is required to batch and process the EFT by 10:30AM ET

Monday-ACH is required to batch and process the EFT by 12PM ET
Monday-ODFI is required to settle the transfer by 1PM ET
Monday-RDFI is required to make funds available by 1:30PM RDFI Local Time (PT)

Any company with integrity would then:
Monday-ODFI batches and processes by 2:15AM ET
Tuesday-ACH batches and processes by 6AM ET
Tuesday-ODF is required to settle by 8:30AM ET
Tuesday-RDFI is required to make funds available anytime on settlement date.

The problem here is that a company acting as a middleman is not governed by rules or regulations on the amount of time they spend between ACH transactions.

I would highly encourage you or anyone else reading this post to familiarize yourself with NACHA rules on "ACH Schedules and Funds Availability".

[kernowlass]

@slingblade01 

https://www.nerdwallet.com/article/banking/ach-transfers#:~:text=Financial%20institutions%20can%20ch....

Financial institutions can choose to have ACH credits processed and delivered within the same day, or in one to two business days. In contrast, ACH debit transactions must be processed by the next business day...    that is the one you are mentioning.

https://www.paypalobjects.com/en_US/vhelp/paypalmanager_help/about_ach_payments.htm

[slingblade01]

Like I said read the actual rules and not some poorly written article by a self-proclaimed expert in CDs that generalizes and misquotes the rules.

Oh, and by the way, it's day 5, and no refund.

[kernowlass]

@slingblade01 

The second link is a paypal link explaining everything.

If you think all bank transfers are instant then explain how we get buyers on here confused that their seller is sending their item as the seller has been PAID but the funds have not left their bank accounts yet. 

That is because paypal have CREDITED the seller upfront and then paypal wait for the echeck ie bank transfer to process which is 3-5 business days. This means there is no delay in the despatch of the buyers item.

However they do NOT refund in advance so this time its your turn to take the wait.

Try reading the second link properly and you may start to understand how it works.