The issue is that they generate the need for you to take out a loan with them by securing &quot;the appropriate balance of funds.&quot; If they did not hold the 20k, his business would not need a 20k loan. Would paypal be on the hook if the business withdrew the 20k and they were hit by a bunch or refunds? Sure, but thats the risk they take by being a &quot;bank.&quot; They make interest off your capital. Thats the exchange they agree to. This is them trying to make double interest off your capital by locking your funds and offering a loan for the same amount.<p>Put another way, would you be okay with your bank holding 20k to make sure you can pay for housing&#x2F;bills, and then offering you a 20k personal loan that generated them interest? No, because that would be unreasonable. Its your money. If they think you are a risky client, they should stop working with you.<p>Its a conflict of interest, and a blatant one that could be heavily abused.